Users Manual

An Edit Management Game

2005 Edit Systems Ltd.

Published by:
Edit 515 Ltd.
Holmlands,
22 Carlisle Road
Crawford,
Lanarkshire,
ML12 6TW
UK

Contacts
Dan Davidson
Phone & Fax: +44 (0)1864 502 312
e-mail: dan.davidson@edit515.co.uk
Bill Armitage
Phone & Fax: +44 (0)1236 736617
e-mail: bill.armitage@edit515.co.uk

Eighth Edition 2005, First published 1970.

Marketed by Edit 515 Ltd. under license from Edit Systems Ltd.

CONTENTS
Part One,
Part Two,

Part Three

Part Four,

Introduction
The Business Environment
paragraphs
Economic Background
1-5
Marketing
6-59
General
6-7
Business Intelligence
8-10
The Marketing Plan
11-16
Pricing
17
Research & Development
18-36
Advertising
37-41
Selling
42-51
Product Availability
52-57
Marketing Management
58-59
Production
60-99
General
60-64
Machining
65-68
Repair & Maintenance
69-71
Assembly
72-73
Production Scheduling
74-82
Guarantees & Quality
83-85
Transport & Distribution
86-91
Raw Material Purchase & Warehousing
92-98
Production Management
99
Human Resource Management
100-132
General
100-105
Labour Supply
106-120
Pay & Conditions
121-131
HRM Management
132
Finance, Assets & Accounting
133-164
Shares & Share Price
133-134
Dividends
135-136
Borrowing
137-144
Equipment & Fixed Assets
145-154
Accounting Practice
155-164
The Management Report
165-291
General & Decisions
165-173
Production
174-185
Raw Material
186-191
Personnel
192-197
Product Movements & Availability
198-207
Accounts
208-274
Business Intelligence
275-291
The Decisions & Operating Parameters 292-end
Decision Sheet
292-298
Tables of Operating Parameters
Sample Decision Sheet

PART I
INTRODUCTION
This Edit 515 game is based on a realistic business situation in which a number of
manufacturing companies, represented by the teams taking part, compete against one
another in a common business environment. A sophisticated and comprehensive
computer model simulates the interactions of the various parts of each company, the
competitive relationships between the companies and the background economic
situation.
The task facing your team is to take charge of one of these simulated companies and
manage it as if it were a real live business.
This Manual tells you how to take part. It explains the organisation of the exercise, what your team
has to do, how your imaginary company works, and how it relates to the other team companies. The
Manual is organised into four parts:
This Introduction.
The Business Environment, which explains the functions and interactions of the companies and
the market.
The Management Report which explains the contents of the computer output.
The Decision Sheet, which explains how you prepare your decisions for submission to the
computer.
The company which you have to run is complex
and although it is fairly easy to understand its broad
structure there are many subtle aspects to the way
in which it works.

There is no constraint on what technical aids you

use. If you want to write your own 'spreadsheet'
models to help you make better decisions you will
find the detailed definitions in Part Three of the
manual useful.

Part II of the manual describes the structure of the

company that you are going to run. In doing this it
looks at the four main management functions of
Marketing,
Production,
Human Resource
Management and Finance, explains how these
functions work and lays emphasis on the
interactions between them.

Control of your company is exercised through two

documents:
The quarterly Management Report, produced
by the computer, showing how your company
has performed in the period just completed.
The Decision Sheet, in which decisions you
have made about the way your company is to
operate in the next period are recorded for
transmission to the central computer.

One of the main aims of this simulation is to

illustrate these interactions and to demonstrate that
when it comes to managing a company, achieving
a proper balance is fundamental to success and that
this can best be achieved by teamwork, good
organisation, and effective communication.

So that you know exactly what is happening, it has

been necessary to describe the way in which your
company works in great detail, and this makes the
Manual look very complicated; the broad structure
of the exercise is, however, simple. You are trying
to win by maximising your company's prospects for
the future at the end of the exercise so that you
have the highest share price. This means setting up
a strategy which points you towards this long term
goal.

Your team needs to organise itself to carry out the

duties of senior management of the company it is
controlling. Precisely how you organise yourselves
is left up to you. You can set yourselves up along
functional lines, with each person responsible for
looking after one aspect of the business. You will
probably need a chairman who will ensure that
everyone's views are brought together to make a
coherent whole. Alternatively you may wish to
have a more relaxed set-up with everybody
involved in a broadly based committee.

Once you have a strategy you can work out the

business tactics to make that strategy happen. (If
you find that you are running into difficulties the
strategy can always be revised to make it
achievable)

1. The object of the exercise is for companies to

achieve the highest 'Share Price', as quoted in the
Management Report at the end of the exercise.
Since this is a forward looking concept, share price
reflects the future prospects for your company and
you should therefore try to get your company into
the best possible shape towards the end of the
exercise.
2. Some companies have been known to make
large losses during the exercise. Even so, you will
never be declared bankrupt. By permitting
companies to continue to operate on massive
borrowings which might not be tolerated in real
life, all teams taking part are at least able to reach
the end.
3. The simulation proceeds in steps of one
quarter of a calendar year. Once decisions have
been taken for the coming quarter there is no way
in which they can be altered before the next. The
exercise is made up of a number of quarters (which
will be announced before it begins), and you will
be given a timetable detailing when Decisions must
be sent in for processing on the central computer
and when you should expect the resulting
Management Report to reach you. A quarter is
taken to be twelve weeks long.
4. Management Reports are received, and
Decision Sheets submitted in the imaginary instant
of time between the end of one quarter and the
next. For clarity, quarters in the past, and in the
future, are strictly defined in relation to this
imaginary instant of time, and all references to
them in this Manual will be in these terms: Last
Quarter - the quarter just completed, to which the
most recent Management Report refers. Quarter
Before Last - the quarter before 'Last Quarter'. Next
Quarter the quarter just about to come, to which
the current Decision Sheet applies. Quarter after
Next the quarter immediately following 'Next
Quarter'. There is no such quarter as 'This Quarter'.

One approach is to consider the overall market and,

having done so, prepare a marketing plan. The
very act of doing so must imply that they are
forecasting what is likely to be achieved in terms of
volumes sold. Production makes and ships these
quantities providing it has the necessary resources
of labour and machines.
Human Resource
Management must view this with concern because
whatever is worked out between marketing and
production will affect the earnings and working
conditions of the labour force. Finally the finance
department should be vetting the whole process to
make sure that it is profitable and can be operated
with the available financial resources.
This is the basis of teamwork and the nature of its
need to compromise to find the best corporate
solution not only in the short term, but also one
that fits into the longer term strategy.
So that you can make some preliminary assessment
of how things work, you are given a brief history of
your company covering a period immediately
before the exercise starts, together with the
decisions which generated these results. When
studying this Manual it will be useful to use the
history to illustrate the points which are discussed.
The histories are identical for all the companies
taking part, as all companies start from exactly the
same position. Part III of the Manual describes the
contents of the Management Report in detail.
Many of the relationships used in the exercise are
purely arithmetic (e.g. the financial information),
but the remainder are of a kind which cannot be
derived exactly, even in real life (e.g. how many
orders are you likely to get; what will be the effect
of maintenance?). To operate effectively it is
necessary to identify and explore these imprecise
elements as the exercise develops, test their
sensitivity, and discover how they react and affect
the way your company runs. This type of analysis
will allow you to draw broad conclusions about
what is likely to happen when you make a
particular set of decisions.

During the course of the exercise the Controller

will not intervene in any way to affect its
development. Things like market trends, interest
rates, labour availability, and so on, are set before
the exercise begins. The Controller will never
arbitrarily interfere. There are sufficient random
effects created by the activities of the competing
companies, without adding more.

Having assessed the situation and decided what you

want to do, complete your first Decision Sheet and
submit it for processing, in accordance with the
published timetable. In return you will receive a
Management Report which tells you what has
happened to your company as a result of the
decisions you have taken. Use this information to
improve your knowledge of the workings of your
company and of the market, then make the next set
of decisions...and so on to the end of the exercise.

To help you make effective use of this Manual, the

paragraphs beginning from Part II onwards are
numbered serially, and are referenced in the
Contents Table. Reference to particular decisions
which are made in the general text will be crossreferenced to the appropriate line on the Decision
Sheet by an alphabetic character. Costs and other
fixed parameters are gathered together in a series of
tables at the back of the Manual, and are referenced
by a table number.

Before proceeding to the main part of the Manual

there are a number of general concepts and points
which need to be explained.

PART II
THE BUSINESS ENVIRONMENT & ECONOMIC BACKGROUND
To run a business means that you need to know something about the economic,
geographic and social background of your market, and of the people who are likely to
come and work for you.
You need some kind of research information and analysis that will tell you this. Some
will be available from national statistics, the rest you may have to buy, or gather from
your knowledge of the industry. An important source of information is how your
company has been performing in the recent past.
Only when you have this will you be able to assess the strength of the economy and
hence to plan a strategy for your company. It must be compatible with the economic
environment to succeed.

1. The business that you are going to run is a small manufacturing company, making a
limited range of consumer products and operating in competition with several similar
companies. You will be a member of the Board of Directors responsible for managing the
various functions of the company Marketing, Production, Human Resource Management
and Finance.
2. You sell in four geographic areas, each of which has a different demographic and social
mix. (Table1) These market areas are affected in common by normal economic cycles of
growth and decline. However, they cannot be assumed to reflect the present-day, real-life
economic situation; nor do real-life Government policies have any bearing or significance.
3. The economy can be static, grow or
decline, depending on the situation
presented in the Game History.
Superimposed on the general economic
trend is a strongly fluctuating pattern of
seasonal demand for the industrys
products. This is repeated each year, and
is the same for all three products in all
areas. The seasonal peak is in the fourth
quarter of the year.
4. To help you establish how the
economy is moving you are given
quarterly official statistics. These are:
Gross Domestic Product: The way this
number changes from quarter to quarter
tells you something about how the national
economy is performing. If it is rising the
economy is strengthening and you can
expect your own market to strengthen
(though not necessarily at the same rate as
the economy individual product markets

can change more or less quickly than the

underlying trend). If the economy is
stagnant you will see the GDP growth
slow down, or even fall in a recession.
Notice that the GDP figures have been
smoothed to take out quarterly seasonal
fluctuations.
Central Bank Rate : This is one of the
levers which governments use to try and
control the economy.
When there is
strong demand, there is always a surge in
borrowing which can lead to inflation. To
counter this there will always be a
tendency for bank rates to rise; if the
economy is sluggish the bank rate will fall
to encourage spending and business
investment.
Unemployment: This is another useful
economic indicator. Low unemployment
means that there are more people at work
and hence there is more money around to

be spent. As unemployment goes up the

supply of spending money goes down and
business selling to the public suffers. The

unemployment figure is smoothed to

eliminate seasonal fluctuations.

5.
An analysis of these indicators combined with a study of the previous performance
of your company should help you to establish the link between the economy and your
companys past performance, and point towards some kind of future growth strategy for
your company.

MARKETING
Your company's marketing department is responsible for creating demand for your
companys' products, and selling them successfully. To do this it must review the
market place and the competition; prepare strategic marketing plans and make
decisions to put them into operation both in the long term and short term; and
work with the company's other functional departments to make sure that sales are
profitable and that the company runs efficiently.

6. You sell directly to retailers in

response to demand from the general
public. These retailers are the target of
your marketing effort. In turn, they try to
satisfy public demand which will vary
according to the economic climate and the
marketing effort of the companies. The
retailers and the general public are also
the target of rival companies selling
similar products in competition to yours.

process.
Each product has a marketing
image which you are seeking to promote in
order to attract sales. This image is
affected by a number of factors which are
of varying importance relative to similar
factors in your competitors' products.
Some of these factors are directly under
your control and are decided by you as
part of your marketing plan. Others, such
as movement in the economy and the
activities of your competitors are not under
your control and must be taken into
account as you prepare the plan. This can
only be done by trying to forecast how
they are likely to behave in the future and
making allowance for them in your plans

7. You make and sell three distinct

products which are not specified except to
say that they are consumer products, and
all three are made of the same raw
materials and by the same production
BUSINESS INTELLIGENCE
8. To help you make forecasts certain
economic and competitive information
about your competitors' activities last
quarter is available to you, at no cost.
This consists of the kind of information
that would normally be available through
the business grapevine:
Product selling prices
Total number of employees
Assembly workers basic wage rates

you and your competitors. You have to

pay for this each quarter (Table 2). The
information gives market shares of sales
by each of the competing companies in the
various markets.
10. You can also commission research
about your competitors' activities and
products. Again, you have to pay for this
each quarter (Table 2). It gives you:

9. Apart from this free information you

subscribe to 'Audit
Research', an
organisation which monitors the sales of
each product and provides information
about how the market is divided between

Total amounts spent on advertising

Total amounts spent on product
research and development.
A consumer assessment rating of the
product design quality.

Important Details about the Information

Prices are quoted by company, by product, for each sales area.
Employees include, sales-people, machinists and assembly workers.
The basic wage rate is the rate for assembly workers, as decided by each company.

Important Details (continued)

Market Shares are based on the number of sales made last quarter (not orders received which can
be significantly different).
The value of spending on advertising and research are totals for each company. There is no
breakdown by product.
The consumer assessment rating of the design quality of your own and your competitors'
products takes the form of the award of 'stars', varying in number from five for a superlatively
designed, technically advanced, well-made product; to one star for an obsolete, shoddily made
product. This information is gathered from consumer panels and reflects the views of the general
public. Consumer assessments should be viewed with a little caution as they come from an analysis
of subjective discussion between small sample groups of consumers.

THE MARKETING PLAN

11. Using a combination of the available economic and business information, plus
any conclusions you may have drawn from the Company History and your
experience in running the company so far, you should be able to prepare a detailed
marketing plan for each of your products which sets out decision values for the marketing
parameters under your control, which are:
Pricing
Sales force policy
Product design policy
Product availability
Advertising schedule
12. The preparation of this plan must imply that you have an expectation of how many
orders you will get for each product. That expectation will in turn become your
forecast which you should use to discuss your plans with the company's other functional
departments.
PRICING
13. Each quarter you must review and
decide the price at which you will sell
your products (See Decision Sheet, line
reference C) . These are the prices at
which your products will be sold to
retailers, and they directly reflect the end
price charged to the public. Each product
has two prices, an Export Price, and a
Home Area price.
Important Details about Pricing
15. Price
reduction
only
works as a means of gaining
more orders up to a point - the

The products
are quite price
sensitive, though not equally so, with
relatively high prices leading to fewer
orders and low prices yielding more.
This will affect your ability to compete
in the market and should be taken into
account when fixing your price.
14.

public become suspicious of very

low prices.
16. If you decide not to offer
any of a particular product for

CREDIT TERMS
17. Linked to price, in the minds of the
retailers is the speed with which they are
expected to pay for products purchased
from you. Each quarter you must decide
(K) the number of days credit which you

sale, enter a zero on your

Decision Sheet. You will then
get no new orders for that
product in that area next quarter

will offer to retailers before payment is

due. 30 days is normal, though this can be
shortened if you need the money quickly,
or it can be extended. In general retailers
do not like short credit, and will tend to

buy from companies offering longer terms

of trade, all other things being equal.
However discounts, lower prices and
superior quality can be used to counter this
effect. The Central Bank Lending Rate,

the controlling factor in the cost of money,

will also have an effect, since retailers
will be even more inclined to buy from
companies offering long credit when the
cost of borrowing is high.

QUALITY
18. The quality of your products affects
your marketing image in two ways:
19. The time taken to assemble each unit
of product in your factory will affect its
reliability and finish. There is a minimum
time needed to assemble the parts made in
your factory into completed products, but
you are able to decide (E) any length of
time over this minimum to complete each
unit. The longer the time allocated, the
greater the care that can be taken, reducing
the number of sub-standard products
which are returned by the public under
your one-year guarantee,
and thus
improving your marketing image. The
immediate marketing effect of an increase
in assembly time will be diminished if you
are still holding stocks of inferior products
for sale.
20. With the passage of time the design
and technical quality of your products will
erode at a steady rate until they eventually
become obsolescent. One of the main
ways in which your company's products
hold their share of the market is by
keeping up with, or being ahead of,
competitors' developments in technology
and design. This is done by regular
investment in research and development
(R&D) of each product. This tends to
have uncertain results, so that regardless of
how much you decide (O) to spend, there
is no absolute certainty that your research
teams will contribute anything new which
will help to improve your products' image.
However, there is no doubt that the more
you spend the greater the chance of
making advances that can be incorporated
into your products, and that steady
expenditure is more effective than sporadic
spending.
The effect of R&D is
cumulative so that if you do spend, sooner
or later that expenditure will pay off.

21. Success in your company's research

effort produces either 'Minor' or 'Major'
product improvements for each product.
22. Minor improvements are reported by
your research team and are incorporated
into your products immediately and
automatically without any positive
decision being
taken by senior
management and have a
small but
immediate effect on your sales.
23. Major improvements which are
reported require further consideration
before you decide to incorporate them
into a product.
The introduction of a
major improvement to a product is of such
significance that it renders existing
models of the product obsolete. You may
wish to take time to run down stocks of
the existing product, or to build up your
marketing effort to introduce the
improved product effectively. You are
therefore given the opportunity to decide
(B) when to take up the improvement,
either immediately or at some future
quarter.
24. Your R & D department may have had
no success in the last quarter, in which
case they will have reported 'NONE'. This
in itself is not a bad thing since R&D is a
cumulative process,
and following a
success the team starts on a fresh research
project which may take two or more
quarters to come to fruition. The more
you invest the shorter this fallow period is
likely to be.
25. The effect of the introduction of
improvements to your products is to
enhance your marketing image in the eyes
of the consumers, so that your consumer
assessment rating - the number of stars
awarded as a result of discussions with the
consumer committees - is likely to go up.

26. If your research effort is small, or if

it has little success, then your products will
tend towards obsolescence,
with
consequent decline in their marketing
image and a reduction in the number of
stars awarded.
Important R&D Details
28. Each quarter the degree of
success which your R&D
department has had is notified at
the bottom of the 'Products'
section
of the Management
Report, where the
words
'MAJOR', 'MINOR', or 'NONE'
are printed.
29. You must have had a Major
improvement reported before you
can take one up. If you start the
process to take one up without
having had one reported, the
process is started and existing
stocks are sold off, but there is no
corresponding
marketing
advantage.
30. A Major product improvement is only reported once. If you
do not take it up immediately next
quarter your R&D department
will have started a new project
and gone on the report on how it
is progressing.
You must
remember
if
you
have
improvements in hand.
31. Major improvements which
are not taken up immediately do
not fade away. They continue to

27. A minor product improvement requires

no further decision to be made. If one is
reported it will already have been
incorporated into the product and have
added to the product's image.

be available until you make a

decision to take them up. If you
do not take them up soon,
however, you are likely to find
that rival companies get similar
improvements to the market
before you and seize the
marketing advantage.
32. It is possible to leave a major
improvement for so long that a
second one is reported. In this
case when you do take one up,
you automatically take both with
an increased marketing effect.
33. Taking
up
a
major
improvement has no effect on any
backlog of unfulfilled orders you
may have.
34. Following the report of a
major improvement R&D start
work on a new project from the
next quarter depending on the
level of research investment you
make.
35. The process of taking up a
Major product improvement is as
follows.
a)
Each quarter you decide
(O) to invest a certain amount of
money in R&D on one or more of

ADVERTISING
37. For each product, in each area, you
must decide (D) how much money to
spend on advertising. There are three
different media you can use.
38. Trade press which are commercial
publications
both at home and in the
export areas which keep the retail trade
informed of the newest product
developments and the best way to sell
them to the general public.
39. Providing television commercials,
material for press advertising, and so on, to
support the retailers' efforts in the short
term.

your products.
b)
After a number of quarters
this investment pays off and your
R&D department reports a Major
product improvement for one of
the products
c)
Next quarter, or in some
later quarter, you decide (B) to
implement that improvement. It
is important to weigh up the
marketing benefits an improved
product will bring against the
potential loss of sales revenue in
selling off obsolete stocks of old
product cheaply, and that will
depend on how much old stock
you currently have in hand.
d)
At the beginning of next
quarter any stocks of that product
are sold off at the valuation price
outside the normal market (Table
21).
e) Your production department
begins to make the new product
and marketing begins to sell it.
36. Once an improvement is
established
the
consumer
assessment group examines it and
may revise its star rating upwards.

40. Merchandising advertising promotes

your company and product image in each
area, in order to create long term
confidence and good-will. It is cumulative
and needs steady expenditure over a period
to be effective. It not only extends the
market for your own company's
products, but also, combined with all
advertising, tends to contribute to the
general growth of the market.
41. Advertising affects sales of products
differently in different areas.

10

SELLING
42. You must decide (P) how many
salespeople you will employ to work for
you. Each salesperson visits the retailers
and tries to maximise the number of orders
placed for your products. Each salesperson
sells all three products, and is rewarded by
being paid a salary and sales commission.
43. Once you have the number of
salespeople you want, you must decide (F)
where they will work, by allocating them
effectively to the sales areas.
Important Selling Details
46. Each salesperson is paid a
fixed allowance to cover the cost
of a car, entertainment of
customers, and other expenses
(Table 2).
47. In addition Your company's
selling effort has an indirect
cost which covers the expense
of running a sales office and
supervising your salespeople.
This is calculated as a 1% of

44. The percentage commission that you

decide (G) to pay to your salespeople acts
as an incentive for them to do well. The
higher the commission offered the better
your sales force performs (up to a point).
45. Commission is calculated on the total
value of local orders received, not on the
value of sales made. If your production
effort is not able to keep up with the flow
of orders, you could be wasting money.

the value of orders obtained in

each quarter.
48. If you decide not to sell a
particular product in an area, sales
of the other products will not
increase because of a supposed
ability of your salespeople or
agents to concentrate their efforts
on the remaining products.
49. Any decision you make to
recruit additional salespeople (K)
takes one whole quarter to put in
place. This means that they will

PRODUCT AVAILABILITY
52. Product availability has an effect on
the number of orders received, and the
ability of your production department to
keep up with orders is important.
Completed products are shipped to
warehouses in each area for distribution to
the retailers.
53. All orders are intended for delivery as
soon as possible in the same quarter in
which they are received. Consequently you
should try to keep an adequate stock of
products available in all areas so that
deliveries can be made promptly. Orders
are only converted into sales when the
goods have been delivered. Failure to meet
orders received, through shortage of
finished products, will result in a queue of
orders awaiting delivery, leading to

not start working for you until the

quarter after next.
50. Note that unless your
conditions of employment are
competitive you may not be able
to get the people you want, and
some of those that you do have
may stop working for you.
51. Commission
paid
to
salespeople is based on the value
of orders received; not on the
number of sales made.

dissatisfied customers and lost sales,

which will adversely affect your marketing
image. The greater the number of orders
outstanding, the greater this adverse
marketing effect will be.
54. It is of prime importance that
marketing works closely with the
production department, providing the best
possible forecasts of demand so that
adequate quantities can be shipped to the
areas. Problems in production which
affect availability also become problems
for marketing which must be solved by
mutual agreement. Forecasting must be
long term as well as short term, so that
production can plan its resource
requirements well in advance.

11

Important
Details
about
Availability
55. At the end of each quarter, at
least half of any orders which
remain outstanding will be
cancelled by your potential
customers, and those orders left
for you to supply in the next
quarter will be carried forward as

a backlog to be cleared as soon as

products are available.
56. If you decide (C) to raise
your price in the meantime, or to
reduce the quality of your
products in some way, still more
of your backlog will be cancelled
at the beginning of next quarter
and the number of orders
cancelled will then be greater than

half. Should you decide to stop

production of a product, any
backlog of orders which you may
have at that time will remain to be
satisfied at last quarter's price.
57. Cancelled orders will not go
directly to your competitors, but
will tend to go to them in future
quarters due to your poor delivery
image.

MANAGEMENT
58. The whole of your marketing effort depends on good management. The amount you
decide (I) to allocate to your management budget will therefore have an effect on the
quality of your sales and marketing management, and on the success of your marketing
effort as a whole.
IMPORTANT GENERAL POINT
59. Most of the marketing factors, (eg, quality, advertising, sales commission, etc.) are
subject to the law of diminishing returns, so that increased effort does not necessarily bring
proportionately increased results.

12

PRODUCTION & DISTRIBUTION

Your company's production department is responsible for making and distributing
the company's products as efficiently and cheaply as possible within the quality
standards set down by marketing.
This implies working with the marketing department to ensure that their forecasts of
likely demand can be met by a sufficient flow of products, both in the short term and
the long term. It also implies working with the personnel department to ensure that
there is sufficient labour to do the job at reasonable cost. And further implies proper
forward planning to ensure that there are is sufficient production machinery.
60. The three types of product which your
company sells are manufactured in your
own factory, from one basic type of raw
material. The products are made in two
sequential processes:
61. Machining, in which components are
made on machines, each manned by four
machinists. Shift working is possible in
the machine shop.
62. Assembly, where the machined
components are assembled into finished
products, and packed by skilled assembly
workers.
63. The minimum times taken to process
one unit of each product through each of

these stages, and the raw material content

of each are given in Table 3.
64. There is no work-in-progress, hence
the number of products that can be made
in your factory in any quarter will depend
either on the capacity of your machine
shop to produce component parts, or on
the number of completed product units that
can be put together in the assembly shop,
whichever is least. Your production
capacity will never be limited by a lack of
raw material which is purchased by default
if you run out.

MACHINING
65. The total capacity of your machine
shop in terms of productive hours, depends
on the number of machines you decide (M)
to have in the factory, the level of shift
working at which you decide (H) to
operate, diminished by the number of
hours lost through breakdown and slower
machine speeds brought about by ageing.

Important Machining Details

67. Table 5 sets out the
maximum number of hours each
quarter that are available for
production from each machine,
for each of the three levels of shift
working that you can decide (H)
to work.
68. The machining times, given
in Table 3 are for producing a set

66. As machines get older, or are used

more, they become less efficient, and take
longer to make the component parts for
each product. This process of deterioration
may be slowed or even reversed by the
introduction of a preventive maintenance
programme, but eventually each machine
will reach a level of inefficiency at which
it may be better to sell it and replace it
with a new one.

of parts ready to be assembled

into the finished product. These
are the times expected from 100%
efficient, new machines. As the
machines age or are used more
heavily the efficiency will fall.
The current % level of machine
efficiency at the end of last
quarter
is
given
in
the

13

Management Report A further

consequence of ageing is that a
machine will tend to break down
more often, and productive hours
will be lost till it can be repaired.

REPAIRS & MAINTENANCE

69. Maintenance of your machines is
carried out by independent maintenance
contractors. Each quarter you must decide
(J) how many hours maintenance per
machine you wish to contract out. There
is a fixed cost per contract hour for each
machine (Table 4) and this covers labour,
spares, materials and supervision. The
main priority of your maintenance effort
will be to repair broken down machinery,
any hours left over within the contract will
be used on preventive maintenance outside
normal working hours.

70. The more preventive maintenance you

are able to do, the fewer breakdowns, and
if a breakdown does occur the shorter the
time before the machine is back in service
again. Preventive maintenance also slows
the rate at which machines become less
efficient.
71. If the number of contracted hours you
decide is not sufficient to cover basic
repair times, any additional hours required
to meet this primary effort will be charged
at a higher rate per contract-hour (Table
4).

ASSEMBLY
72. As well as being limited by machine
capacity, your factory's output also
depends on the ability of your assembly
workers to assemble the machined
components into finished products. Table
3 gives the minimum time required for the
assembly of one unit of each product,
however the actual time taken will be
decided (E) by you as part of your
marketing policy.
The longer the
assembly times you allow, the better the
quality of your products (up to a point).
Having decided the time that it should take
to assemble one unit of each product the
numbers of each that you can make, and
the product mix, will then depend on the
number of assembly workers which you

employ, diminished by absenteeism and

industrial unrest. Assembly workers only
work on the day shift (single shift), to a
maximum number of hours per quarter
(Table 16), but there is no limit to the
number that you can employ provided that
you can persuade them to come and work
for your company.
73. All products are inspected in your
quality control department and are either
of acceptable quality or are rejected.
Rejects are sold for scrap at values given
in Table 6, and will of course reduce the
number of product units available for
delivery, though if you have sufficient
capacity, extra products will be produced
automatically, so that deliveries can be
completed.

PRODUCTION SCHEDULING
74. The main set of decisions (N) that
concerns the production department each
quarter is the production schedule. This
should be prepared in co-operation with
the marketing department because it
reconciles their sales forecast with the
production department's ability to make
products for shipment to the sales areas,
and hence to the retailers. The production
schedule is simply the number of each
product that you wish to make and ship to
each area, next quarter.

75. When planning your production

schedule you must remember to modify
marketing's demand forecasts by:
76. Adding in products orders outstanding
as backlog from last quarter, or,
77. Deducting stocks of product left unsold
in the warehouse from last quarter. Take
care not to allow for stock which can be
written off as a result of taking up a Major
Product Improvement.
78. Normally the numbers of each product
actually produced will be those scheduled
to be shipped plus the number which have
had to be re-made because the original was

14

rejected as being defective, at the assembly

stage or in quality control ( Para. 85).
79. Apart from labour and raw material
costs which are discussed elsewhere, there
are certain semi-fixed costs which are
charged to your production department.

These are: cost of supervision; fixed cost

per machine for overheads; charge per
machine hour for running costs.
80. A production planning charge for each
unit requested for delivery (Table 8 for
details of these charges).

Important Production Scheduling Detail

81. If your production schedule is properly planned production
too ambitious because you do not schedule will take into account
have sufficient assembly workers the resources available to you, and
or machine capacity, the number allow for all the factors which
of products made will be may constrain the utilisation of
restricted to whatever quantities these resources. When your
you can produce. Quality control production schedule is cut back in
will reject any sub-standard this way you will find that where
products and the remainder will your decisions are reproduced in
be shipped in proportion to the the Management Report for next
numbers asked for in your quarter, the affected numbers will
original production schedule. A be starred (*).

82. Any stock of product left

unsold in an area at the end of a
quarter will be kept in the
warehouse to be sold in the
following quarter. However, you
can take a decision (N) to return
excess stock from an area to the
factory for redistribution to other
areas, by specifying a negative
quantity on the Decision Sheet

85. Quality Control attempts to find

defective products before they leave the
factory and any defectives are rejected and
scrapped. Rejects are sold for scrap at
values given in Table 6, and reduce the
number of product units available for
delivery, though if you have sufficient
production capacity extra products to
replace those rejected will be produced
automatically, so that deliveries can be
completed.

GUARANTEES & QUALITY

83. Your company offers a one-year
guarantee with its products. Inevitably,
some will develop faults after they have
reached the customer and be returned to
the retailer under the terms of your
guarantee.
84. The servicing of products returned
under guarantee is carried out by service
agents who make a charge to the company
for work carried out. These charges are
given in Table 7.
TRANSPORT & DISTRIBUTION
86. On delivery,
completed units are
warehoused in rented space in each of the
sales areas. The number of products
shipped to each area will be as decided (N)
in your production schedule, unless your
production resources limit your ability to
manufacture these quantities. There is a
charge for warehouse space (Table 12)
87. Deliveries are made by the company's
own vehicle fleet, and/or by hired vehicles.
Standard size vehicles are used in either
case with a carrying capacity as set out in
Table 9. Export deliveries are made in
equivalent size containers. Each vehicle is
available for a maximum of 60 days per
quarter but this may be reduced depending

on the age and condition of the vehicles.

Mixed product loads can be carried.
Return delivery times to each area are
given in Table 10.
88. The size of your company's vehicle
fleet depends on the number of vehicle you
decide (L) to buy or sell. Your fleet will
deliver up to the limit of its total capacity,
delivering first to Export, then North, West
and South, in that order. Any remaining
products which cannot be carried because
of lack of vehicle space will be sent out in
hired vehicles which are brought in
automatically
by
your
transport
department to complete deliveries. The
cost of vehicle hire is given in Table 11

15

Important Distribution Details

89. The vehicle time taken to
make a delivery run to each area
is given in Table 10. The capacity
of a standard load, in terms of
product volume is given in Table
9. Mixed product loads can be
carried. The daily all-in charge
for shipping is given in Table 11.
90. Finished product units are
warehoused in each area at a cost

per unit, based on the average

quarterly holding (Tables 12 and
13). It is important to avoid
building up the levels of product
stock kept in your warehouse.
Each unit has cost money to make
and ties up funds that might be
better used in other ways.
91. Transport and distribution
costs include a charge per vehicle-

RAW MATERIAL
92. All three products use the same basic
raw material, in the quantities given in
Table 3. Material is stored in covered
space in your own factory area, up to a
maximum average quantity per quarter.
Anything in excess of this must be stored
in commercial warehouse space nearby.
Maintaining you own storage area has a
quarterly cost, regardless of the quantity
held. Outside storage is charged at a rate
per unit, based on the average quantity
held (Tables 12 & 13)
93. Material is ordered next quarter for
delivery in the quarter after next, at the
Important Material Details
95. Each raw material order
requires three decisions:
96. First, the quantity you decide
to order (R) will depend on your
forecast of what you are likely to
manufacture in the quarter after
next, less any material stock
which you may have in store at
the end of next quarter, plus any
additional quantity that you may
wish to stockpile for economic
reasons.
97. Then, there are four suppliers
of raw material, each applying
different terms of trade that are set
out in Table 14. You must decide
(S) which of these suppliers will

day for running, plus a cost per

vehicle per quarter for driver's
wages,
maintenance,
tax,
insurance and supervision. Hired
vehicles have an all-in cost per
day. (Table 11)

basic price quoted in the Management

Report at the end of next quarter. You will
therefore have to forecast this price, which
will vary according to overall demand and
current bank interest rates. Discounts are
available depending on the quantity
ordered and which of four different
suppliers you order from.
94. There is an administrative charge per
quarter for your buying department, plus a
further charge for each order placed,
which will include any order placed to
make up a shortage, as well as an order
placed in the normal way . (Tabel 'L')

offer you the best deal on the

quantity you wish to purchase.
98. Finally, when you order
from suppliers 1 and 2, you
must also decide (S) how
many equal deliveries you
want to make up your order.
The first delivery will always be
made at the beginning of the
quarter, with the rest evenly
spread
out
during
the
remaining time.
What you
decide can affect the average
quarterly holding of materials,
and hence the cost of storage.
Deliveries from supplier 0, who
is located near your factory,
will be made on a just-in-time

basis
with
no
storage
requirement. If you run short
of material because you have
not ordered enough, any
shortfall will be made up
automatically from supplier 0.
Thus, to order materials from
supplier 0, simply enter a 0 for
the quantity and for the
number
of
deliveries.
Production will never be held
up because of a lack of raw
material. Supplier 3 delivers
on a weekly basis
(12
deliveries)
spread
evenly
across the quarter, (enter 0 for
the number of deliveries
decision).

PRODUCTION MANAGEMENT
99. The success of your production effort depends on good management. The amount you
decide (I) to allocate to your total management budget will therefore have an effect on
production efficiency and product quality

16

HUMAN RESOURCE MANAGEMENT

Human resource management (HRM) is responsible for ensuring that the company
has sufficient workers to function properly, that the workforce is well motivated and
used efficiently. Workers must be found in a competitive labour market, within
which people can move from company to company seeking the best terms and
conditions. The supply of people in the labour market can significantly affect your
company's ability to operate efficiently. Human resource management implies
monitoring the labour market, working with the other functional departments in
the company to forecast what demand for labour will be and taking steps both in the
long and short term to make sure that HRM targets are met.
100. The company's labour force can be divided into five sections:
A sales force, which sells your products in the four sales areas only.
Unskilled machine operators who make the parts for the company's products
Skilled assembly workers who produce the completed products from parts made in
the machine shop.
Senior Management
Ancillary workers - drivers, store people, clerks, junior management, etc.
and poor management, all relative to
the other companies, can also have an
effect. Workers who leave do so at the
end of a quarter.
104. The company's products are made
by unskilled machine operators and
assembled by skilled workers, and are
sold (in the local market only) by a team
of salespeople. In order to meet your
delivery schedule, and to sell your
products, men and women need to be
recruited in sufficient numbers to cope
with any expansion in production which
may be planned and to counteract the
loss of any workers retiring or leaving to
work for other companies.
105. It is therefore essential for HRM
to work as part of the management team
to ensure that labour requirements are
met, and that those who are working for
the company do so under the best
conditions that the company can afford

101. In the simulation, ancillary

workers and Senior Management are dealt
with within the context of their own
department and their costs are linked
directly with departmental costs. They do
not represent a problem in the
exercise.
102. The sales force and the assembly
workers require to be managed actively as
part of the exercise and there are two
aspects specific to HRM - Labour Supply
and Motivation
103. All grades of workers, whether
machinists,
assembly
workers
or
salespeople, may leave because of
retirement, sickness or because they
have gone to work for rival companies
that seem to be
offering
better
conditions. The main reasons
for
leaving are low average earnings, but
excessive overtime working, colleagues
being dismissed, poor quality products

17

LABOUR SUPPLY
workers you employ already, and the
quality of goods which you produce, all
compared to the same factors in the other
companies..
109. Recruitment is also dependent on
the number of unemployed available in
the labour pool.
If there is high
unemployment, recruitment will tend to
be easier; if unemployment is low,
recruitment can become very difficult and
will depend on your ability to tempt
people away from other companies,
which leads to a very unstable labour
market.
110. As an alternative to direct
recruitment of experienced salespeople and
assembly workers, unskilled unemployed
people can be trained to the standard
required for these grades of worker.
Training is carried out at the company's
own training school at the factory.
Training is more expensive than direct
recruitment (See Table 15), but it does
ensure that you get the people you want
and that they will continue to work for you
for at least one quarter after their training is
complete, before they can be tempted away
by higher wages or better condition to other
companies.

ASSEMBLY WORKERS & SALES

PEOPLE
106. Experienced salespeople and skilled
assembly workers are the product of
intensive training and may be difficult to
find and recruit. Salespeople are needed
to support your company's marketing effort
in the local area, assembly workers are
needed to match the flow of parts
coming out of the machine shop to be
made up into finished goods.
107. Recruitment
for both of these
types of employee needs careful planning
in co-operation with the other functional
departments of the company. HRM
decisions (K & L) to recruit, train or
dismiss from these categories should be
taken as part of the management team.
108. To find assembly workers and
salespeople, decisions (K & L) can be
taken to try to recruit them directly,
either from the pool of unemployed
labour, or from those salespeople and
assembly workers already employed by
other companies. Trying to recruit
people does not necessarily mean that you
will get the numbers you want (you may
not get any at all!). Success in recruiting
depends on the current level of average
earnings (not the basic wage rate) of the
Important HRM Details
111. Because of the time
taken to train advertise for and
interview workers, anyone you
recruit will not begin to work for
you until the beginning of the
quarter after next. The cost of
recruitment (see Table 15)
includes the cost of advertising
and interviewing expenses.
112. Training takes place in
the company's own training
school at the factory.
This
limits the numbers that can be
trained to nine in each category
per quarter.
After decisions
(P,Q) to train people have been
taken they are brought in from
the local unemployed pool at the

beginning of next quarter,

complete the course and become
available to work at the
beginning of the quarter after
next. The cost of training (see
Table 15) covers the trainee's
wages, materials and training
staff.
113. Both assembly workers
and salespeople can be dismissed
by making the appropriate
decisions (M,N). The decision
to dismiss implies that notice is
given at the beginning of next
quarter, and that the workers
continue to work for the
remainder of the quarter before
leaving at the end of it. Those
who are dismissed are given a

18

lump
sum
compensation
payment (see Table
15).
Dismissing people tends to make
the remaining workers restive,
and some may leave to find work
elsewhere.

114.

The
same
general
causes which influence people to
go and work for other companies
will also create discontent
among those assembly workers
who remain, leading to unrest
and perhaps strikes in the
assembly shop. Official strike
notice from the trade union is
given at the end of one quarter,
determining the length of the
strike in weeks, which then

takes place at the beginning of

the next quarter regardless of any
changes you may make to
improve wages and conditions,
and involves all your assembly
workers. Machinist workers do
not belong to the same trade
union and are content to stay at
work while benefiting from any
wage increases of improvements which may be won by the
skilled workers.
Salespeople

are poorly organised and do not

go on strike.
115. When
assembly
workers take industrial action the
total number of hours which can
be worked is reduced by 49
hours per person, per strikeweek (35 hours basic + 7 hours
on Saturday at 50% additional
wage rate + 7 hours on Sunday
at 100% additional rate)
116. The number of hours of
work from a given size of force

119. Because
there
are
always
unskilled workers available in the local
pool
of
unemployed
labour, any
requirement for new people is handled
automatically at a lower level of
management in the company, and does
not need active decisions by senior
management.
When more people are
needed the shift supervisor will always
be able to find the numbers required from
the pool of unemployed, at the start of next
quarter.

MACHINISTS
117. Each machine owned by your
company requires to be manned by four
unskilled machine operators on each shift.
Any change in the number of machines
you have, or in the level of shift working,
will mean that more or fewer machinists
are needed.
118. As with assembly workers and sales
people, machinists can leave if they feel
that working conditions in your factory are
not as good as can be found elsewhere.
These people will need to be replaced
Important HRM details
120. Reductions in the
number of machines or in the
shift level means that you will
have
surplus
machinists.
Because of a trade union
agreement only half of these
workers can be dismissed at the

can also be reduced by

absenteeism. In the case of
salespeople
and
unskilled
workers this has no apparent
effect, but it does affect skilled
workers and hours can be lost in
the assembly shop because of
genuine sickness, disaffection
caused by too much overtime,
and low motivation brought on
by poor quality products and
poor management.

beginning of next quarter. Any

surplus still remaining are given
labouring jobs around the factory
and paid the same average
earnings as those machinists who
are still operating the machines.
Half of this surplus will then be
dismissed at the beginning of the
quarter after next; and so on

until all have gone,

or an
increase in the number of
machines or shift level enables
them to go back to work.
Machinists who are forced to
leave are paid compensation (see
Table 15).

PAY & CONDITIONS

121. As well as ensuring that you have
enough workers HRM must manage the
cost of the workforce while at the same
time trying to keep them happy.
Although decisions are available which
directly control wage and salary rates, the
way in which the workers are used can
also have a significant effect on their
take-home pay, and your costs. The way
you operate the Marketing and

Production Departments directly affects.

overtime, shift payments and
the
commission paid to salespeople;
so
labour costs can only be managed
effectively in the context of current
economic conditions and what the other
departments are doing.
The workforce
will only remain happy as long as their
rewards and conditions are at least as
good as the rest of the industry.
19

ASSEMBLY WORKERS
122. Skilled assembly workers are paid
at a basic hourly rate decided (G) at the
beginning of each quarter. This basic rate,
is subject to an agreement with the trade

union which does not permit wage rates to

be reduced. An increase in the basic wage
rate is implemented at the beginning of
next quarter.

MACHINE OPERATORS
123. You can change the capacity of
your machine shop by installing more
machines, or selling machines off (M); or

by changing shift levels (G). Changes of

these kinds will directly affect working
conditions and pay.

SALES FORCE
124. Salespeople are paid a salary plus
an optional commission. The tendency for
salespeople to leave, or stay with the
company depends on the total of salary
and commission, and also the mix of the
two. If salary is high and commission low,
they will tend to be more loyal and
experienced but have lower motivation

than those earning high commission

with a low basic salary, all relative to
the same factors for salespeople in other
companies. The latter work more
productively but under more stressful
conditions and tend to leave the job after a
relatively short period of team, and may
need to be replaced.

Important HRM details

125. Assembly workers and
machine operators are paid up to
a maximum number of hours per
person, per quarter at a basic rate
of pay which you decide (K).
Thereafter the rate is increased
for additional hours worked on
compulsory
overtime
on
Saturdays which is paid at 50%
more than the basic rate; and on
Sundays which is paid at 100%
more than the basic rate. No
decision needs to be taken on
overtime working,
which is
applies
automatically
in
accordance with a trade union
agreement.
Basic hours are
applied first,
then Saturday
working, then Sunday working
up to the limit. After that no
further work can be done, even
although your delivery schedule
calls for a larger number of
products to be made than your
labour force can produce. For
this reason the size of your
assembly work force and needs
to be well managed, based on
strategic forecasts of demand
worked out in co-operation with
the other functional departments.
126. The assembly workers
operate only one shift, but they
can work overtime up to the

limit shown in Table 16. They

are paid only at the single shift
rate. There is no guaranteed
minimum number of hours
worked for assembly workers,
but a trade union agreement
requires that the average weekly
earnings of assembly workers
(based on the number of weeks
worked out of twelve) should not
be less that that paid to the
machinists,
and that any
deficiency that occurs is made up
by a parity payment.
127. If you decide to work
double or treble shifts, all of
your machines are staffed fully
on all of the shifts, and the rates
of pay for all machinists are
increased by a shift premium
(see Table 14). Machinists are
paid at a rate which is set as a
fixed proportion of the basic
assembly rate (see Table 17)
128. Table 16 sets out the
maximum hours which each
person can work and the rates
paid. Machinists are paid for
hours worked, but each quarter
there is a guaranteed minimum
number of hours that per
machinist (see Table 17).
Machinists are paid for the time
that machines are broken down
and under repair, but not for

20

maintenance time which is

carried out when the factory is
not working.
129. Salary is the same for
all of the company's sales force,
and is reviewed each quarter,
when a decision (L) can be taken
to alter the salary, subject to a
minimum (see Table 17). Salary
can be raised or lowered; a rise
is implemented at the beginning
of next quarter, but a decrease
has to be preceded by one
quarter's advance notice. This
means that a decision to reduce
salespeople's salary will have no
apparent effect next quarter, and
will only take effect from the
quarter after next if you persist
with the decision in that quarter.
130. Sales people are paid a
commission, the level of which
is decided (G) at the beginning
of each quarter. Commission
changes
are
implemented
immediately, and can be raised
or lowered. The amount paid is
calculated as a percentage of the
total value of orders achieved,
divided equally across the sale
force.

ANCILLARY STAFF
131. The cost of other workers in your
company is included in the various costs
associated with the departments in which

they are employed. These include senior

management, accountancy staff, buyers,
warehouse staff, drivers, researchers, etc.

SENIOR MANAGEMENT
132. Your team assumes the role of the
company's Board of Directors and can
consist of a Chief Executive and executives
responsible for Marketing, Production,
HRM and Finance. You decide (I) and
share a management budget which
determines the level of expenditure on
outside services and expertise and support
staff. The management budget influences

the general quality of management and this

in turn has an effect on all parts of the
company.
There is a minimum
management budget allowed (see Table
17).
Any increase is implemented
immediately, but a reduction requires one
quarter's advance notice and operate in the
same way as reductions in salespeople's
salary

21

FINANCE, ASSETS & ACCOUNTING

The Finance Department is responsible for ensuring that the company's funds are
managed efficiently in line with corporate strategy. This implies a variety of roles
which include monitoring profitability, managing borrowings,
managing the
companies' fixed assets, taxation, and dividend policy. Importantly it must work
closely with the management team to maximise the company's share price against
which performance is judged
133.
The company is financed by shareholders' capital, consisting of shares with a value
of one pound (1) each, to the amount shown on the company's balance sheet.
134.
The company's shares are quoted on the Stock Exchange, and the latest share prices
for all companies are quoted each quarter on the bottom line of the Management Report.
Share price is influenced by several factors which include:

The company's net worth

Profitability
Dividend performance
Liquidity
Ability to pay interest charges

Use and availability of resources

Market and product potential
Ability to obtain orders and satisfy
them promptly

SHARE PRICE AT THE END OF THE EXERCISE IS THE CRITERION BY

WHICH COMPANIES' PERFORMANCE IS JUDGED.
DIVIDENDS
135. Every first and third quarter of each
calendar year you must decide (K) the
percentage of the share capital to be paid to
your shareholders as dividend. Regular,
predictable and competitive dividend
payments will have a positive effect on
share price.
Erratic and low dividends
have a negative effect.

136. Dividend payments are made at the

beginning of next quarter. The total
dividend paid in any one quarter may not
exceed the company's Reserves as shown in
the Balance Sheet, last quarter. No dividend
may be paid if Reserves were negative or
less than 1% of Share Capital.

BORROWING - OVERDRAFT
137. Additional finance is available in
the form of an overdraft (ie, a flexible
bank loan). Your bank sets a maximum
limit for overdraft next quarter based on

your company's assets and liabilities as

shown in your balance sheet for last
quarter (Table 19). Interest rates are
given in Table 20.
points above the current Central Bank Rate.
Unsecured loans will continue to be granted
even although you might, under normal
circumstances be considered to be
insolvent. No one is declared bankrupt in
the simulation, though your share price
may crash.

BORROWING - UNSECURED LOANS

138. If you need more funds than your
overdraft limit permits, you company will
continue to be funded by loans provided by
finance houses, without security. These
loans are available in unlimited amounts
but at an annual interest rate ten percentage

22

Important Financial Details

139. At the beginning of
next quarter the value of your
overdraft and any unsecured
loans as shown on last quarter's
Balance
Sheet
will
be
immediately adjusted to take
account of cash movements
resulting from payment of
dividends. The flow of cash into
and out of your company for all
other reasons is assumed to be at
a steady rate across the rest of
the quarter. Interest on overdraft
and unsecured loans is then
calculated on the average of the
revised opening balances and the
level of overdraft and unsecured
loans at the end of next quarter.
Averages are calculated as
shown in Table 13.
140. Any surplus cash which
your company generates is
automatically invested at a rate
2% below the annual rate
announced by the Central Bank
Rate for next quarter.

141.

The overdraft limit is

calculated as shown in Table 19.
The
maximum
overdraft
available to you next quarter is
shown in the Management
Report
for
last
quarter.
Additional
funds
available
through your overdraft will be
automatically credited to your
account as needed to cover the
balance
of
your
funding
requirements,
up
to
the
maximum allowed.
142. Interest on overdraft is
charged at an annual rate four
percentage points above the
Central Bank Rate given for the
quarter. The amount of interest is
then be added to the overdraft
itself.
143. Unsecured loans are
provided automatically to cover
any remaining gap in your
funding after other sources are
exhausted. Interest on unsecured
loans is calculated at ten

EQUIPMENT & FIXED ASSETS

145. Fixed assets consist of property,
machines and vehicles. While the value of
property is fixed and unchanging,
machines and vehicles can be bought and
sold, and their depreciated value is logged
in the company's Balance Sheet.
146. Vehicles for your company's
transport fleet can be bought or sold to
match the growth of the company, or to
replace ageing and inefficient vehicles..
There is no credit restriction on the number
of vehicles that you can buy.
Important Fixed Asset Details
148. The cost of a new
vehicle is given in Table 18, and
the decision (L) to purchase one
or more is acted on immediately
so that they become available for
use at the beginning of next
quarter.
149. The value of a vehicle
depreciates by the decreasing
balance method at a rate per
quarter given in Table 18.

percentage points above the

Central Bank Rate and is added
to the loan itself.
144. Both overdraft and
unsecured loans are issued
automatically as your cash
requirements dictate, un-secured
loans being granted last and
repaid first. No decisions are
needed.

147. Machines can be bought at a price

given in Table 18. The process of buying a
machine, is fairly complex, and needs to be
planned several quarters in advance ( detail
below) before you actually take the
decision (T) to do so. You may not be able
to place orders for all of the machines that
you want unless your company's financial
position is sound.

150.

. When a decision (L)

is taken to sell a vehicle the
oldest is sold first at the
beginning of next quarter at its
depreciated value at the end of
last quarter
151. The cost of a new
machine is given in Table 18. A
decision (T) to buy one or more
machines takes two quarter's to
process. Using information from
last quarter's balance sheet, the
machine supplier checks your

23

ability to pay by calculating your

credit-worthiness,
which
is
defined as your Overdraft Limit
for next quarter, less any
payment
outstanding
on
machines already ordered but not
yet installed (see Para. 140
below),
less any Overdraft
outstanding at the end of last
quarter. If your credit-worthiness
is at least equal to the total price
of the machines you want, the
supplier will take your order,

together with a first payment of

half of the purchase price (Table
18). If your credit-worthiness is
less than the purchase price the
supplier will only take orders for
that number of machines which
your credit-worthiness covers
(which may, of course, be none).
152. If your order is
accepted, the machine is

delivered and installed in the

quarter after next, at which time
a second payment of half of the
purchase price is made. The
machine becomes available for
use in the quarter after that. The
installation of machines already
ordered will not be affected by
any fall in your creditworthiness
during the installation period.

153.

During its life the value

of a machine depreciates by the
decreasing balance method at a
quarterly rate given in Table 18.
154. When a decision (J) is
taken to sell a machine, the
oldest is sold first at the
beginning of next quarter, at its
depreciated value last quarter.

ACCOUNTING PRACTICE
155. Depreciation of the company's
machines and vehicles is calculated each
quarter, at a quarterly rate given in Table
18 by the decreasing balance method.

types of purchase that can be made and the

timing of respective payments. Creditors
cannot be manipulated to assist your cash
flow.

156. Stocks of finished products held in

the area warehouses at the end of a quarter,
are valued in the balance sheet as set out in
Table 21.
.
157. Stocks of Raw Materials held in
the factory, or in commercial warehouses at
the end of a quarter, are valued in the
balance sheet as set out in Table 21.

160. Sales made by your company are

invoiced to customers for future payment in
line with your companys credit terms.
Amounts due, but not paid before the end
of a quarter, are carried forward as debtors
on your Balance Sheet. However, not all
customers pay promptly so that there is
always a shortfall in the flow of cash.
161. There is a cost associated with Cash
Collection and credit control, which is a
fixed amount per unit of product sold
(Table 20).

158. Company tax is levied on taxable

profit at a rate given in Table 20. The tax
year is the same as the calendar year, and
an assessment of tax is made at the end of
the fourth quarter. Any tax assessed is
deducted immediately from the company's
net profit. Tax is entered as a liability on
the balance sheet, where it remains until it
is automatically paid in the second quarter
of the following year. Losses are
accumulated from previous years and are
offset against future taxable profit.

162. Finally there are certain Fixed

Overheads associated with running your
company which have not been included so
far. These include fixed cost items such as:
local property tax, audit fees, insurance,
etc, and are shown in Table 20.
163. Other Variable Overheads such as:
telephones, stationery, heat and light,
postage, building maintenance, etc. which
are charged as a percentage of all
overheads (including the fixed cost
elements listed above), at a rate given in
Table 20.

159. Purchases made by your company

are either paid in the same quarter in which
the purchase was made, or in later quarters,
in which case the amount owed by you will
be carried forward as a liability (creditors)
in the Balance Sheet. Table 22 lists all

24

FINANCIAL MANAGEMENT
164. The success of your finance department depends on good management.
The
amount you decide (I) to allocate to your total management budget will therefore have an
effect on debtors, cash flow and share price.

25

PART III
THE MANAGEMENT REPORT
The Management Report tells you what has happened to your company in the quarter
just completed. It re-presents the decisions that were put into effect last quarter, tells
you about the companys operations, its people and its financial affairs. It also gives
some information about what your competitors are doing.
In particular, this part describes each entry in the Management Report and defines
the arithmetic derivation of each number, where possible.
165.
The Management Report is in five parts, consisting of a reprint of the decisions
entered to the computer, resource statistics, product statistics, accounts and business
intelligence. This description of the contents of the Management Report assumes that you
have just received it. What follows therefore refers to the contents of the Report as being
last quarter's data. You will use the information in the Report to help you make decisions
for next quarter.
166. On receipt of the Report, first check that the copy you have received is for you, that
it has your group and company number on it, that it has your team leader's name and that it
is for the correct quarter. If any of these are incorrect please contact the Game Control as
quickly as possible.
and which is thought to be best in the
circumstances.
170. If you have omitted a decision, your
writing is illegible, or your Decisions were not
received, default values as defined in Part Four
will have been put in and a hash (#) printed as an
error indicator.
171. A decision may have been incorrectly
and unwittingly entered to the computer with a
consequent distortion of what you were trying to
do. This type of error may be significant, but
it can only be discovered by you when the
Management Report reaches you

Important Detail about the Report

167. The first section of the Report reprints the
decisions which you entered to the computer.
Normally they will be the same as your own
retained copy of the decisions, but there are four
ways in which they might differ.
168. A decision put forward by you was
invalid in terms of the current exercise, e.g. trying
to sell three vehicles when you only owned two, or
more likely, trying to buy a machine when your
credit-worthiness was not adequate. It may also
differ because a decision did not achieve the
desired effect; for instance you may have been
able to recruit only three salespeople when you
tried to recruit five. In such cases the computer
will have edited your decision to the nearest
possible
value, and printed an asterisk (*)
immediately after the edited number on the
Management Report, where your decisions are represented.
169. A decision by you was invalid because it
lay outside the limits allowed in completing the
Decision Sheet, e.g. entering 10 people to be
trained when the maximum allowed by the
configuration of the Decision Sheet is only 9. In
such cases the Game Control will either have
contacted you about the problem, or will have
entered a decision which resolves the problem,

172. Clearly then, it is important to check the decisions entered on your Report. If a
number is different from your master copy, and has one of the error indicators, try and work

26

out why. If you cannot, Control will be pleased to explain. If a number is different, and
there is no error indicator, contact the Control immediately so that a check can be made
against the Decisions which you sent in. If the number turns out to have been wrongly
entered to the computer by Control, the appropriate action can then be taken.
173. The rest of the Report gives you information about the state of your company and
the exercise. It will either tell you what happened last quarter, the state of some parameters
of your company now, or say something about next quarter. It also gives you information
about your competitors and the economic environment.
PRODUCTION
174. Machines Available Last Quarter': the
number of machines which you had available for
production last quarter.

182.

'Hours Breakdown ': the total number of

hours during which machines were out of
production due to breakdown and repair.

175.

183.

'Machines Available Next Quarter':

machines available from the quarter before last,
less any machines sold at the beginning of last
quarter.

'Hours Planned Maintenance': the total

number of hours of preventive maintenance given
to your machines, outside normal production time.
The number of maintenance hours decided,
multiplied by the number of machines available,
less breakdown time. If total breakdown time
exceeded the total number of maintenance hours
allocated, no maintenance will have been done.

176.

'Vehicles Available Last Quarter': defined

similarly to Para. 161
ASSEMBLY WORKERS HOURS.
Hours Available Last Quarter': the number
of assembly workers you had available last quarter
multiplied by the maximum number of hours which
each could have worked (Table 16), less a fixed
number of hours per worker for each strike week
notified at the end of the quarter before last (Table
17).

184.

'Total Worked Last Quarter': the total

number of hours machine time used to produce
products last quarter. The number of units of each
product which were produced, multiplied by the
machining time appropriate to each, extended by
the effect of loss of machine efficiency.

177.

185.

'Average Machine Efficiency %': the

theoretical minimum number of machine hours
which should have been taken to manufacture your
products last quarter, divided by the actual time,
expressed as a percentage.

178.

'Absenteeism/Sickness': the number of

assembly hours lost through workers being sick, or
not turning up for work for other reasons.

179.

Total Worked Last Quarter': the total

number of paid hours worked by assembly workers
last quarter. Defined as, the number of products
you delivered last quarter, plus rejects, multiplied
by the assembly time for each product, as specified
by you last quarter.

RAW MATERIAL UNITS

'Opening Stock Available': the number of
units of raw material available in stock at the
beginning of last quarter.

186.

187.

'Delivered Last Quarter': the number of

units of raw material delivered according to an
order placed in the quarter before last, plus any
deliveries from supplier '0' to make up a shortage
of material last quarter.

180.

'Notice of Strike Weeks Next Quarter':

The number of weeks' work which will be lost by
each assembly worker next quarter, due to intended
industrial action. This is irrevocable and is a fixed
number of hours per man per week (Table 17).

188.

'Used Last Quarter': the total number of

units of raw material used last quarter. The
numbers of each product delivered, plus rejects last
quarter, multiplied by the material content of each.

MACHINE HOURS
181. Hours Available Last Quarter': the number
of machines available to you last quarter,
multiplied by the maximum number of hours each
could work under the shift system decided, (Table
5).

189.

'Closing Stock': the quantity of raw

material left in stock at the end of last quarter.

27

PRODUCT MOVEMENTS & AVAILABILITY

Scheduled': the total numbers of each
product requested in your 'Make & Ship' decisions
(N) last quarter, summed across all areas.

190.

'On order for Last Quarter': the quantity

of raw due to be delivered next quarter. This does
not include units in Closing Stock.

191.

'Available Next Quarter':

Closing Stock and On Order.

198.

The total of

199.

'Produced': the number of products which

were actually produced in your factory last quarter,
including those which were rejected and those
made to replace rejects. This may be less than the
number requested if you did not have sufficient
production capacity to make the numbers you
wanted

PERSONNEL
192. 'Personnel at Start of Quarter': the number
of salespeople, assembly workers and machinists
available to you at the beginning of last quarter.
This is the number of salespeople and assembly
workers that worked for you throughout last
quarter. For machinists this is just the number that
were available to you at the start of last quarter.

200.

'Rejected': the numbers of each product

rejected from those produced because they were
discovered to be sub-standard in your Quality
Control department. These are sold off at scrap
value. If you have sufficient resources your
production department will produce extra to
replace the rejects.

193.

'Recruited during Last Quarter': the

numbers of each type of worker which you
successfully recruited last quarter. Salespeople and
assembly workers were recruited at the end of last
quarter, and hence did not work during that period.
Machinists were recruited automatically at the
beginning of the quarter, to make up the numbers
required for your machines at the shift level
decided (Four workers per machine, per shift).

201.

'Serviced': The numbers of each product

serviced to correct defects, under the company's
one year guarantee, by local servicing agents.

202.
'Trained from Unemployed Last Quarter':
the number of new workers taken on from the pool
of unemployed labour and trained last quarter, as
salespeople or assembly workers. These will now
be available to work for you next quarter.

'Shipped to': the numbers of each product

actually delivered to each area. This may be less
than the numbers originally decided (N) if your
factory did not have sufficient machine capacity or
assembly capacity to make the quantities you
wanted.

195.

203.

194.

'Dismissed at end of Last Quarter': the

numbers of each type of worker which you decided
to dismiss last quarter. Salespeople and assembly
workers were dismissed at the end of last quarter
and hence worked for you during that period.
Machinists were dismissed at the beginning of last
quarter. as a result of a reduction in the number of
machines, or a lowering of shift level, but as only
half of any surplus labour can be dismissed In one
quarter it is possible to have more machinists than
you need.

'Orders from': the number of orders

received for each of your products in each area last
quarter from retailers. These are new orders and do
not include any backlog of orders waiting to be
satisfied from the quarter before last.

204.

'Sold to': the numbers of each product sold

to retailers in each area last quarter. Calculated as
the lesser of: new orders plus any backlog from the
quarter before last; OR, deliveries last quarter plus
any product stock carried forward for sale from the
quarter before last.

196.

'Left at end of Last Quarter': the numbers

of each type of worker who left because of
retirement, or sickness, or who went to work for
rival companies at the end of last quarter.

205.

'Order Backlog': the number of unsatisfied

orders (backlog) for each product in each area
carried over from last quarter because of poor
delivery. Note that these quantities are only half of
the actual number of dissatisfied orders, as the
other half will have cancelled their order. These
have not gone directly to your competitors, but are
likely to do so indirectly at some time in the future.
Your backlog of orders may fall still further at the
beginning of next quarter if you decide to raise
your price in the meantime, or reduce the fitting
time for your products. (See Para. 193 for method
of calculation.)

197.

'Total Available for Next Quarter': the

numbers of each type of worker who will be
available to you at the beginning of next quarter.
The number of machinists may then change
immediately due to changes in the number of
machines or in the level of shift working. This
figure is the total of 'Personnel at Start of Quarter'
plus 'Recruited', less 'Dismissed' and 'Left'.

28

206.

'W/house Stock': the numbers of each

product warehoused in each area and available for
sale next quarter. Stocks of any product may be
sold for scrap at the beginning of next quarter if
you decide in the meantime to take up a major
product improvement available for that product.
Product Stocks or Backlog for each product in each
area, is calculated as: Product Stocks from the
quarter before last, plus Deliveries last quarter,
minus Backlog from the quarter before last, minus
Orders received last quarter. A positive result
means that you have product stocks in that area
available for sale next quarter. A negative result
means that you had unsatisfied orders in that area,
half of which will have been cancelled, so that the
result will have been divided by two before being
shown as Backlog, which will be carried forward.

212.

'Sales Office': sales administration costs

1% of the total value of orders taken in all areas
last quarter.

213.

'Guarantee Servicing': the total cost of

repairing products returned last quarter as faulty,
within the company's one year guarantee. The
number serviced last quarter multiplied by their
respective costs (Table 7).

214.

'Transport Fleet': The cost of running your

company's fleet of vehicles. The number of
vehicles available to you last quarter multiplied by
the fixed cost; plus the number of days when the
vehicles were actually used to carry the company's
products multiplied by the running cost. When the
actual cost shown is higher than this theoretical
figure, it will be because ageing vehicles are
working less efficiently and breaking down (Table
11')

207.

'Product Improvements': three words can

appear here, for each product, either:
'None' indicating that no product improvement
suggestions have come out of your R&D
department last quarter.
'Minor' indicating that your research and
development department has made a relatively
minor improvement to your product, which will
already have been incorporated into the product last
quarter, and begun to affect your marketing image.
'Major' indicating that your research and
development department has come up with an
improvement of major significance which now
awaits your decision to be implemented when you
are ready to do so. A product improvement is only
listed at the time it is reported though it remains
available until you decide to take it up. Indeed
further major improvements may be notified before
an earlier one has been implemented, and when this
happens all available improvements are introduced
at the same time, when you do make the decision.

215.

Hired Transport': The cost of using

contract transport to deliver your company's
products when your own vehicle fleet is not able to
do so. The number of vehicle days needed in
excess of the capacity of your fleet multiplied by
the daily hire rate. (Table 11). Part loads can be
carried.

216.

'Product Research': the total amount spent

last quarter on research to improve your products,
as decided.

217.

'Personnel Department': the total cost last

quarter of trying to recruit and dismissing
personnel. The numbers decided under each
category multiplied by the appropriate cost given in
Table 15.

218.

'Maintenance': the cost of maintaining and

repairing the company's machines. The number of
contract hours decided, multiplied by the number
of machines, multiplied by the hourly cost. If the
number of breakdown hours exceeds the total
contract hours, the difference will be paid for at a
premium hourly rate (Table 4).

ACCOUNTS
208. The company accounts consist of
Overheads, Profit and Loss, Balance Sheet and
Cash Flow. These are dealt with in detail, below.
All transactions are recorded in pounds ().

OVERHEADS
The overhead items are for costs incurred
last quarter.

219.

'Warehousing and Purchasing': the cost of

operating your own storage area per quarter, plus
administrative costs; plus a cost for each order of
raw material placed; plus a cost for warehousing
each unit of raw material over the capacity of your
own storage space; plus a cost for each of the
average number of product units warehoused in the
sales areas. (Tables 12 and 13).

209.
210.

'Advertising': the total cost of advertising

all products in all areas, as decided.

211.

'Salespeoples' Salaries etc': the total salary

and commission paid to salespeople working for
you last quarter, plus expenses for each member of
your sales force (Table 2).

220.

'Business Intelligence': the cost of buying

information last quarter, as decided (Table 2).

29

materials purchased last quarter to make up a

shortage.

221.

'Management': the cost of your company's

management last quarter.

230.

'Assembly Wages': the number of

assembly hours used last quarter on basic working,
Saturday overtime working and Sunday overtime
working, all multiplied by the basic assembly wage
rate, or increments of it, as appropriate. If this total,
converted into the average wage per worker, per
week worked, is less than a similar figure for
machinists workers, the machinist rate of average
weekly earnings is used instead, multiplied by the
total number of weeks worked.

222.

'Credit Control': the cost of collecting

money from your company's debtors, (Table 20).

223.

'Other Miscellaneous Costs': the total of

other miscellaneous costs not included so far. A
fixed cost plus a percentage of all costs included in
Overheads so far (including the fixed cost) (Table
20).

224.

'Total Overheads': the total of all overhead

items listed in Paras. 210-223.

231.

'Machinists Wages': the number of

machine hours used last quarter plus breakdown
time, at the basic rate, Saturday overtime rate and
Sunday overtime rate, for the shift level being
worked, multiplied by the appropriate wage rate
(based on a proportion of the assembly wage rate,
see Table 17), all enhanced by the shift premium,
and multiplied by four workers per machine. If the
number of machinists employed was greater than
the number needed to operate your company's
machines at the shift level being worked, these
surplus workers are paid at the same average rate as
those operating the machines. Machinists are paid
for a minimum number of hours each, per quarter
(Table 17)

225.

'Taxable Profit/Loss Accumulated': The

amount of profit accumulated since the beginning
of the year (or loss, if negative) up to the end of last
quarter. This is calculated as taxable profit/loss
from the quarter before last, plus gross profit and
interest received, less interest paid, overheads and
depreciation from last quarter. If this value is
positive when tax is assessed in the fourth quarter
of the year, then tax will be payable on a
percentage of the value, and the figure for Taxable
Profit/Loss Accumulated' will be carried forward to
the next quarter as zero. If it is negative (a loss)
when the tax assessment is made, no tax will be
payable and the loss carried forward to the next
quarter. In the fourth quarter of each year the
figure shown is its value immediately before tax is
assessed. Once tax has been assessed and charged,
taxable profit is reset to zero at the start of the first
quarter. See Table 20 for the tax rate.

232.

'Machine Running Costs': the cost of

running your machines last quarter. The number of
machines available to you multiplied by the cost of
machine overheads, plus the cost per shift for
supervision, plus the number of machine hours
used multiplied by the machine rate, plus a charge
for each unit of product requested for production
planning charges (Table 8).

PROFIT AND LOSS

The profit and loss account is set out in
two parts. The first part calculates the gross profit,
the second gives the net profit.

226.

233.

'Closing Stock Value': the total value of

raw material and product stocks at the end of last
quarter as given in the Balance Sheet (Paras. 248249).

227.

'Sales Revenue': total revenue from all

trading last quarter. The numbers of each product
sold multiplied by the appropriate prices; plus the
numbers of each product sold off at their valuation
price after introducing a major product
improvement (Table 21); plus the sale of any
product rejects at their scrap value (Table 6).

234.

'Cost of Sales': the cost of producing the

products sold last quarter. The total of values for
Paras. 228 -232, less Para.233.

235.

'Gross Profit/Loss': Sales Revenue, less

Cost of Sales.

228.

'Opening Stock Value': the total value of

material and product stocks held at the beginning
of last quarter, given as Closing Stock Value in the
Profit & Loss account for the quarter before last.
(Para.220)

236.

'Interest Received': interest earned on

investments held during the quarter.

237.

'Interest Paid': interest paid on any bank

overdraft and unsecured loans by the company last
quarter, plus interest paid on medium term
borrowing. The calculation of interest assumes an
initial re-organisation of borrowings, cash and

229.

'Materials Purchased': the cost of materials

bought last quarter in the quantity decided in the
quarter before last and at the price quoted at the end
of the quarter before last; plus the cost of any

30

investments from the Balance Sheet position at the

end of the quarter before last,
due dividend
payments made at the beginning of last quarter.
Overdraft and unsecured loan interest is then
calculated on the assumption of a steady flow of
funds into and out of the company during last
quarter, as detailed in Table 13. Interest on
Unsecured Loans is added to Unsecured Loans;
interest on Overdraft is added to Overdraft.

value of machines shown in the balance sheet for

the quarter before last, plus the second part
payment for any machines installed last quarter,
less the depreciated value of any machines sold last
quarter all reduced by the quarterly rate of
depreciation; plus the value of any first payment
made on machines newly ordered last quarter. The
depreciation rate is given in Table 18.

247.
238.

'Value of Vehicles':
The current
depreciated value of your company's vehicle fleet.
The value of vehicles shown in the balance sheet
last for the quarter before last; plus the value of
new vehicles bought at the beginning of last
quarter; less the depreciated value of vehicles sold
last quarter; al reduced by the 6.25% quarterly rate
of depreciation.

'Overheads': see paragraph 224

239.

'Depreciation': the total amount by which

your machines and vehicles depreciated last
quarter. Calculated as a fixed percentage of: the
value of vehicles, plus a fixed percentage of: the
value of machines, both as shown in the balance
sheet for the quarter before last; plus the second
payment on any machines installed last quarter,
less the value of any machines sold last quarter;
Depreciation percentages are given in Table 18.

248.

'Value of Product Stocks': the value of

product stocks held in the various sales areas at the
end of last quarter. The numbers of each product
held multiplied by their appropriate valuation
(Table 21).

240.

'Tax Assessed': the amount of tax on

profits which your company must pay is assessed at
the end of the fourth quarter each year. This is
calculated on any positive value of taxable profit
(Para 225) accumulated at the rate of tax given in
Table 20. Tax assessed is immediately deducted
from the profit and loss account, and carried
forward as a liability in the Balance Sheet until it is
paid in the second quarter of the next year.
(Para.252)

249.

'Value of Material Stock': The value of

material stock held in or near your factory at the
end of last quarter. The number of units held,
multiplied by 50% of the raw material price
announced at the end of the quarter before last.

250.

'Debtors': the value of money owed to

your company by its customers. Debtors in the
balance sheet for the quarter before last, plus sales
last quarter, less trading receipts.

241.

'Net Profit/Loss': gross profit, plus interest

received; less interest paid, overheads, depreciation
and tax assessed.

251.

'Cash Invested': the amount of cash held

and earning interest. Cash from the quarter before
last, less any cash needed to fund the company's
operations; (or) plus any surplus funds generated
by the company's operations. Note that the amount
of cash will move in and out of this account
automatically with the company's need for liquid
funds.

242.

'Dividend Paid': the amount paid out to

your shareholders following a decision in the first
or third quarter to pay a dividend. Your share
capital multiplied by the percentage dividend
decided.

243.

'Transferred to Reserves': Net Profit (or

Loss) less Dividend. Reserves at the end of last
quarter will equal Reserves from the quarter before
last plus this amount.

Liabilities
'Tax Assessed and Due': the amount of tax
assessed in the fourth quarter as due for payment in
the following second quarter. A figure will appear
here only in the fourth and first quarter of each year
if tax is due to be paid

252.

BALANCE SHEET
'The Balance Sheet': this is in two parts assets and liabilities, followed by a reconciliation
of net assets with shareholders' funds.

244.

253.

'Creditors': the amount of money owed by

the company for goods and services supplied last
quarter. The cost of advertising, plus guarantee
servicing, hired transport, maintenance, part of
warehousing and purchasing, business intelligence,
and plus 50% of materials purchased (Table 22).

Assets

245.

'Value of Property': the fixed value of the

company's factory building and other fixtures.

246.

'Value of Machines': the current

depreciated value of your company's machines. The

31

254.

263.

'Bank Overdraft': the amount of money

loaned by the bank on variable interest secured
against the company's short term assets. This is
limited to the Overdraft Limit given in the report
for the quarter before last, however the interest
payable on the overdraft from last quarter is also
added to the amount due so that if your borrowing
is near the limit it may appear to be over the
maximum allowed. Funds are moved into and out
of overdraft automatically (up to the limit)
depending on the company's operational
requirements.

'Interest Received': interest earned from

surplus cash invested last quarter.

264.

'Investments Sold': the value of

investments sold last quarter to meet cash
requirements.

265.

'Additional Loans': the total of bank

overdraft, and unsecured loans last quarter, less the
total of the same items from the quarter before last,
if positive.

266.

'Trading Payments': payments made for

wages, goods and services supplied to the
company. These are Overheads, 50% of materials
purchased, total wages, machine running, quality
control, plus creditors from the quarter before last,
less the overhead creditors from last quarter (ie.
excluding the cost of materials last quarter)

255.

'Unsecured Loans': the amount of money

loaned to the company for a short term, without
security, to fund its operations over and above any
funding provided from internal resources, bank
overdraft and Medium Term Loans. The interest on
this type of loan is added to the amount of the
loan.. Unsecured loans are provided and repaid
automatically depending on the company's
operational requirements, only after the available
overdraft is exhausted.

267.

'Capital Payments': sums paid for new

vehicles plus part payment for machines ordered or
installed last quarter. (Table 18)

256.

'Net Assets': the total of the company's

assets, less its total liabilities.

268.

'Interest Paid': the cost of borrowing last

quarter. Interest is paid on Overdraft and
Unsecured Loans at rates given in Table 20.

257.

Ordinary
Capital':
the
original
shareholders' funds in the form of one pound (1)
shares, which were used to provide starting capital
for the company.

269.

Investments Bought':
Surplus cash
generated last quarter and added to Cash Invested.

270.

'Tax Paid': in the second quarter only, tax

assessed from the balance sheet in the quarter
before last (para. 252)

258.

'Reserves':
undistributed
profits
accumulated during the lifetime of the company.
Reserves can be negative. Reserves are equal to
reserves from the quarter before last plus any net
profit (or loss) transferred to (or withdrawn from)
reserves.
259. 'Total Funding': the total of share capital
and reserves.

271.

'Loans Repaid': the total of bank overdraft

and unsecured loans in the quarter before last, less
the total of the same items last quarter; if positive.

272.

CASH FLOW STATEMENT

260. The 'Cash Flow Statement' is the final part
of the accounts and shows how the company's
funds flowed into and out of its operation during
the last quarter.

Dividends Paid: ( Para. 242)

273.

'Overdraft Limit for Next Quarter': the

maximum amount of overdraft which your bank
will be prepared to lend you next quarter. Based on
the your balance sheet at the end of last quarter,
and calculated as shown in Table 19.

261.

'Trading Receipts': payments made to the

company by its debtors last quarter. A proportion
of the total of 'Debtors' from the quarter before last
and sales last quarter. These debts are never quite
met in full, and outstanding debts are carried
forward to next quarter as debtors on the Balance
Sheet.

274.

Price of Raw Material (per 1000 units):

The basic price of raw material which will be
charged next quarter for material ordered last
quarter. Material stocks held at the end of next
quarter will be valued at 50% of this price.

BUSINESS INTELLIGENCE
The last part of the Management Report
which gives information provided to allow you to
assess how your competitors are performing.

275.

262.

'Capital Receipts': the value of machines

sold at the beginning of last quarter at their
depreciated value.

32

for the Home Areas add to 100%; the percentages

for the Export area do not, since there are local
traders and exporters from other countries such
about which little is known.

276.

'Share Prices': The price quoted on the

Stock Market for each company's shares at the end
of last quarter, is given in pounds and pence (.p)
SHARE PRICE AT THE END OF THE
EXERCISE IS THE CRITERION BY WHICH
COMPANIES' PERFORMANCE IS JUDGED

288.

277.

289.

ECONOMIC INFORMATION
This does not cost anything.

'Dividend Paid %': The percentage of each

company's ordinary capital paid out in dividend as
decided last quarter (odd quarters only).

'Gross Domestic Product': in an adjusted

form to smooth out the quarterly seasonality. This
gives an indication of the underlying trend of
economic growth (or decline) in the markets, and
of changes in that trend.

278.

'All Company Balance Sheets':There is a

facility in the computer to print out the current
balance sheets for all of the companies in your
group so that teams can compare their progress
using the kind of information usually available to
companies. This information will be given at the
end of the second and fourth quarters of each year,
or as otherwise announced.

290.

'% Unemployed Rate': this gives the

percentage of unemployed people and gives an
indication of likely movements in spending It also
gives a guide to the availability of labour. It is
given in a deseasonalised form.

291.

'Annual Central Bank Rate from Next

Quarter': this gives the rate of annual interest set by
the Central Bank which will apply in all areas from
the
beginning
of
next
quarter.

BUSINESS ACTIVITY (at no cost)

279. Company information which would be
available to you in the normal course of events.
which costs you nothing

280.

'Prices': charged in the Export and Home

areas for each product by each company, last
quarter.

281.

'Total Employed': the total of salespeople,

assembly workers and machinists employed by
each company last quarter.

282.

'Assembly Wage Rate': the basic hourly

rate paid to assembly workers in each company last
quarter.
BUSINESS ACTIVITY
The following information is only
provided if you decide to ask for it. There is an
associated cost which is given in Table 2

283.

284.

The total amount spent on advertising by

each company last quarter.

285.

The total amount spent on R&D by each

company, last quarter.

286.

The publics view of the design quality of

your products, as assessed by a consumer panel,
and given as a star rating for each product, (1 star
=poor, 5 stars = excellent.)

287.

% Market Share of Sales': is given for

each product, for each company, in each area,
calculated on the number of sales, and not on
orders (which may be different). The percentages

33

PART IV
THE DECISION SHEET
The Decisions Sheet provides a framework which guides you through the
decision making process. Starting at the top it takes you through the marketing
plan, then sets the working conditions for your employees and the volumes of
product that you are going to produce and investment in R & D. At the bottom
are strategic decisions involving the workforce, raw materials and machines.
291. The Decision Sheet is the means by which you communicate your decisions to Game
Control for processing. It can be sent physically, by post; or be sent by fax; or transferred to
electronic media. Control will settle these matters before the start.
292.
It is important that you fill the sheet in correctly, and that it you check it. Once the
decisions have been transferred from the sheet to the computer there is no way by which an
incorrect entry which has been taken from the sheet can be altered. There are some simple points
to watch:

Only whole numbers can be used; no fractions or

decimals, except for the Wage Rate decision.
Except for one relatively minor case, no negative
numbers can be entered.
Only one digit in each square.

293. The controller will try to do his best to

sort out any problems which may arise on a
Decision Sheet. But if he is unable to contact
you before the computer processes the data he
will act on his own initiative to avoid holding
up the exercise. If no decisions reach him in
time, or if any numbers are omitted or
unreadable he will enter a Default Value as
defined on the Decision Sheet itself. This type
of error is indicated on the Management
Report b a # sign.
294. If you enter a number which does not
conform to the layout of the Decision Sheet
(e.g. a decimal number, or two figures in a
field designed for only one) he will enter a
value which he thinks is closest to what you
intended. This decision will be binding
295. If you enter a decision which is not
acceptable in terms of the current game (e.g.
trying to sell two machines when you only
have one to sell) the computer will replace the
wrong value by the nearest acceptable one.
This type of error is indicated by *
296. At the top of the Decision Sheet is a
specification line which identifies the Year
and Quarter that the decisions are intended for;
then Group, Team and Identity numbers

There is no need to enter leading zeros

If you wish to make a nil decision enter 0 (zero).
Blank fields are not allowed.

which tell Control and the computer which

team is submitting these decisions. (If you
have not been given a Group number, use
1). When entering the Year and Quarter
use the Game date, not real life; and
remember that quarter 1 follows quarter 4.
297. Each line has a reference letter, which
has been used throughout this manual when
referring to decisions..
298. Finally,
when you get your
Management Report back make sure that the
first thing you do is check that the decisions
have been entered to the computer are the
same as those on the Decision Sheet. If you
find an unexplained error contact Control
immediately.

34

35

36

37