THE CONCEPTS SERIES
The motif showing a dark area on a lighter corporate pyramid indicates that these simulations are designed to explore a specific business or management concept.
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THE CONCEPTS SERIESThe motif showing a dark area on a lighter corporate pyramid indicates that these simulations are designed to explore a specific business or management concept. |
The Concepts Series consist of very short non-interactive business simulations that can be used:
The Concepts Series consists of several simulations each addressing different management ideas. These are:
KEY LEARNING: As described later, each simulation covers different learning objectives.
DURATION: Between two and four hours. These short durations allow the simulations to fit into most course time-tables (even the "difficult" after dinner slot).
TARGET AUDIENCE: The simulations are designed to be used by trainees, junior management up to middle management, functional specialists and supervisors. Or, as an ice breaker, for all levels up to senior management.
METHOD: After a short briefing the training group is divided into several teams of three to five participants. Each consider the problem facing them and then make a series of decisions that are fed, by the team, into their own microcomputer that simulates their effect. The results are printed for the team to analyse before making their next decisions. This decision-making cycle should be repeated for at least eight periods. At the end of the simulation phase the teams reunite to discuss and compare results.
The simulations may be used with any number of teams and, if necessary, up to three teams may share a microcomputer.
AVAILABILITY: Except for Design Management, ForeTime and ForeTaste, these simulations are available off-the-shelf and a comprehensive Trainer's Pack is provided allowing trainers with little or no experience with simulations to run the them.
Business Focus involves participants in developing a sales area by deciding how to allocate time to prospecting for new customers, selling to existing customers and researching the market while servicing customer initiated requests. Before deciding how to allocate effort, participants must decide their objectives in terms of which customer group and product type to concentrate on and the relative importance of income growth, profitability and business risk. Then they must decide how to meet these objectives by targeting their sales effort. Hence the simulation provides a means of emphasising the need for financial success, time management and focus in selling.
Lasting as little as four hours its duration makes it suitable as part of a training course, at a sales meeting or as a feature of a sales conference.
The simulation is designed to be used by sales people; new sales management and functional specialists who need to know about customer development and sales objectives.
Designed in 2000 for Barclays Bank, Business Focus incorporates our latest design paradigms).
MANAGE A PORTFOLIO OF CUSTOMERS & PRODUCTS
With the Classic and Progressive versions, teams take over a business unit that is selling three types of product to four groups of customers. With the Progressive version, the range of products expands to five and this is the situation at the start of the Complete version.
Each product/customer segment differs in terms of potential and the current situation. Some will need to be developed, others harvested and others protected. So each offer different opportunities for growth, income and profit and involve different risks.
IDENTIFY AND DEVELOP BUSINESS OPPORTUNITIES
During the simulation participants must identify opportunities through timely research. Then, based on this, they must grow the customer base through prospecting for new customers and grow sales to existing customers through directing selling effort towards specific customer groups and individual products.
ENSURE BUSINESS SUCCESS
Participants must grow their customer base, total income and profit while maintaining a presence in all market sectors and ensuring each product and customer group contributes to success. To help assess this contribution, the simulation produces reports highlighting the differences between customer groups and products. Reports that can form the basis of discussion on the participants own customer/product information needs and measures of success.
MAKE EFFECTIVE USE OF TIME
Through out the simulation, participants must balance the effort they decide to expend on prospecting, selling and researching and the time available for servicing customers. However, as the simulation progresses, this balance changes as the prospective customer base is penetrated, as existing customers are penetrated and as new products are introduced. So, throughout the simulation, participants must continuously reassess how they expend effort in the most effective way.
MAKE EFFICIENT USE OF TIME
Although teams allocate effort to prospecting, selling and research they must also allow time to respond to customer initiated requests for servicing. If too little time is allocated, they will lose customers. If too much time is allowed, then there will be idle time. Besides forecasting the amount of time to allocate to servicing existing customers, teams must ensure that they do not waste time prospecting and selling where there is little or no opportunity for growing the client base and income. Also, they must balance their need for market information with the effort taken to research the market (effort that otherwise could be used for selling, prospecting or servicing).
TEAM WORKING
With participants working in small teams, they have the opportunity to share experience and knowledge, present and promote different viewpoints and develop their "people" skills. Also, optionally, at the end of the simulation, participants can be asked to produce a formal sales presentation covering their strategies, the current and future situation, how they allocated effort and learning
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Participants prepare a medium term forecast based on the time-series analysis of past sales for several representative products. The analysis familiarises them with the statistical concepts, forecasting practicalities and the method's strengths and weaknesses. So, this analysis exercise is an ideal introduction to medium term forecasting and basic statistical concepts.
Originally designed in 1983, ForeTime has been in use since then and was completely revised in 2003 (incorporating our latest design paradigms).
TIME SERIES ANALYSIS
Participants are introduced to Time-Series models (additive and multiplicative), their components (cycle, trend, seasonal and residual) and analysis process (decomposition, analysis of components, determination of best fit and projection).
DECOMPOSITION
Participants use the simulator to separate the sales data into moving monthly averages and a stationary time-series.
TREND ANALYSIS & MODELS
The moving monthly averages are analysed using regression analysis to determine the trend component. Three curve types (linear, compound and saturating) are progressively fitted backwards over the trend line to determine which is the best curve to use and over what period. (The curve types cover the patterns encountered in the Product Life Cycle. By fitting backwards over the sales history, the analysis takes into account changing trend patterns.)
SEASONALITY
The stationary time-series is analysed to determine the repeating seasonals pattern that occur in most, if not all, sales.
RESIDUAL PATTERNS & ACCURACY
The seasonal pattern is removed from the stationary time-series to determine the residual component. In turn, this is analysed to identify unusually large or small residuals (outliers) and to determine the average spread and so the expected level of accuracy.
SALES PROJECTIONS
After determining the Time-Series Components (trend, seasonal and residual), participants must decide which to use to prepare several forecasts.
STATISTICAL METHODS
During the exercise, participants become familiar with a range of basic statistical concepts and measures. These include mean, standard deviation, variance, regression and correlation analysis. However, they will not be expected to manually calculate these measures. Rather learning focuses on the concepts behind them and the implications of their use
TEAM WORKING
With participants working in small teams, they have the opportunity to share experience and knowledge, present and promote different viewpoints, and develop their people skills.
(BUSINESS PRESENTATION)
Optionally, at the end of the simulation, teams can be asked for make a formal presentation presenting and justifying their forecasts and the risks associated with them.
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Participants use a medium term forecast to plan production. In doing so they see the financial consequences of inaccurate forecasts on costs. Running the manufacturing unit on a quarter by quarter basis for a year participants must update their forecast to minimise costs. The analysis familiarises them with the statistical concepts, forecasting practicalities associated with short-term forecasting and the impact of forecasting on manufacturing costs (overtime, inventory levels, lost sales, idle staff etc.). The simulation can be used standalone or linked with ForeTime (Medium Term Forecasting using Time-Series Analysis - above).
Originally designed in 1988 to sensitise Sales Directors of ICL to the need for better forecasts, ForeTaste has been in use since then and was completely revised in 2003 (incorporating our latest design paradigms).
FORECASTING & PRODUCTION
Participants must produce an Annual Budget Forecast, Medium Term Forecasts for the next quarter and detailed Short Term Forecasts for the current quarter. Forecasts that will be used to set factory capacity, determine manning, material requirements and inventory levels.
COSTS AND IMPACT OF INACCURACY
The differences between the different forecasts and actual sales will determine cost variances in terms of lost revenue and gross profit, inventory costs, overtime & idle staff costs and idle capacity - with each of these linked back to the source of inaccuracy.
SHORT TERM (ADAPTIVE) FORECASTING
When updating their Medium and Short Term Forecasts, participants will be able to use a variety of forecating techniques including Adaptive (Exponential) Forecasting and Band Budegeting.
(STATISTICAL BIDDING THEORY)
Optionally, participants can bid for new contracts that are separate from the normal stream of business and explore statistical techniques.
TEAM WORKING
With participants working in small teams, they have the opportunity to share experience and knowledge, present and promote different viewpoints, and develop their people skills.
(BUSINESS PRESENTATION)
Optionally, at the end of the simulation, teams can be asked for make a formal board presentation covering objectives, strategies, process, the future and learning.
OPERATIONS covers forecasting, planning & budgeting, scheduling and control. It lasts three or four hours depending on whether a formal budget is prepared (using the optional work sheets).
Participants run a simulated operating unit for twelve months. Each month they must decide on how much to produce, the amount of raw materials to purchase and whether to work more than one shift. But, before doing this they must forecast future sales (based on past sales trends) and decide a strategy to ensure they meet demand at the lowest possible cost.
While running the unit they will have decide whether sales are meeting forecast and costs are to budget despite the erraticness of the sales and actual production.
Operations is ideal for introduction to operations, financial appreciation, and on management appreciation courses. Also, a special version exists (Smooth Operator) for company conferences.
Originally designed in 1981, Operations has been in use since then and was completely revised in 1997 (incorporating our latest design paradigms).
SALES FORECASTING
The simulation starts with participants analysing five year's sales history. Optionally, this allows the introduction of statistical sales forecasting approaches such as time-series analysis and, for advanced groups, band forecasts. Alternatively, to shorten this phase, participants can be provided with prepared forecasts.
OPERATIONS PLANNING
Participants, must decide h ow much to produce, what materials to purchase and whether or when to increase the number of shifts worked. In doing this, they must evaluate and balance the costs of overtime, inventory holding, purchase volume discounts, the costs of changing shifts and lost sales.
BUDGETING
If time allows and if required, a full set of budgeting work sheets is provided to allow participants to produce a detailed budget. Alternatively, participants can build a "spread-sheet" model based on the work sheets.
SCHEDULING
Having decided their budget, teams must actually run the unit on a month by month basis. They enter target production, purchasing and shift working decisions into the simulator that then produces the results for analysis and comparison against the budget.
PERFORMANCE MEASUREMENT
Besides introducing participants to standard manufacturing costs and cost of sales, the simulation allows exploration of trends in unit costs, measures of efficiency losses, inventory costs and the balance between sales, production and inventory.
OPERATIONAL CONTROL
With random variations in sales and production achieved, coupled with inaccuracies in the forecast, participants must measure how they are meeting their budget and decide whether they can meet year-end targets. To help with this activity, an, optional, worksheet is provided.
ANALYSIS, DIAGNOSIS & DECISION-MAKING
The uncertainties, ambiguities and dynamics of the simulation mean that it can be used to acquaint new graduates, engineers and scientists with the nature of business and decision-making.
TEAM WORKING
With participants working in small teams, they have the opportunity to share experience and knowledge, present and promote different viewpoints, develop time management and their "people" skills
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PRODUCT LAUNCH covers pricing & promotion responses, the Product Life Cycle, profits & cash flow.
Participants launch a unique new consumer product making decisions about price, promotion and production. Initially, they have to discover the best way to influence early adopters while maintaining solvency and penetrating the market.
Eventually, usually just when the participants have found the best mix of price and promotion, competition enters the market and market share erodes.
Product Launch is ideal for sales, marketing and general management courses. Also, a special version exists (Make a Million) for company conferences.
Originally designed in 1977, Product Launch has been in use since then and was completely revised in 1997 (incorporating our latest design paradigms).
PRODUCT LIFE CYCLE
Participants launch a unique product into a new market without competition. But, eventually, competition will arrive. So, first, they are concerned with penetrating the market and growing sales. When the competition arrives, the market situation changes and sales peak and then erode. Consequentially, participants manage the whole of the Product Life Cycle from initial launch, through growth, maturity to decline.
PRICING STRATEGY
Each period, teams must decide how much to charge for the product and so, must decide the correct price to meet period and long term marketing targets. Initially, participan ts will be selling into a price insensitive market that, probably, will accept high prices. However, as the product penetrates the market and the mix of customer changes, price sensitivity increases. Finally, when competitors enter the market, customers b ecome very sensitive to price. As a consequence, throughout the simulation, participants must assess price sensitivity and adjusting their price. An adjustment that has to take into account sales growth, long and short-term profit needs and cash flow.}
PROMOTIONAL STRATEGY
Each period, teams must decide how much to spend on promotion and so, must decide the correct level to meet period and long term marketing targets. Initially, participants must promote heavily to grow the customer base and establish themse lves before the competition arrives. When competitors enter the market, the need for promotion reduces (as competitors help build product awareness) and as price reductions reduce profit.
PROFIT & CASH FLOW
During the simulation, participants must consider both profit and cash flow and realise the difference between the two. Initially, as sales grow, participants must worry that too rapid expansion will exhaust their cash reserves and lead to bankruptcy. Equally, a too prudent launch will mean that they are not established in the market before the competitors arrive.
Over the Product Life Cycle, profits will move from initial losses, peak and then, as competition "bites" erode and may, eventually, lead to losses. A very skilful team may be able to make cum ulative profits of over a million and this may be used as a target, to encourage competition and choose a "winner".
ANALYSIS, DIAGNOSIS & DECISION-MAKING
The uncertainties, ambiguities and dynamics of the simulation mean that it can be used to acquaint new graduates, engineers and scientists with the nature of business and decision-making.
FORECASTING
Throughout the simulation participants must accurately forecast demand so as to set the right production level. Too low production will loose sales and reduce profits. Too high production may risk over expansion and bankruptcy and will reduce profits because the product has a limited life and a proportion of surplus inventory will be scrapped.
TEAM WORKING
With participants working in small teams, they have the opportunity to share experience and knowledge, present and promote different viewpoints, develop time management and their "people" skills.
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RETAIL MIX covers marketing and profit with, optionally, interpersonal relationships and group processes.
Participants are responsible for marketing two ranges of products through two retail outlets. They have to decide the mark-up for the products and for number of sales staff in the outlets. Based on these the simulator calculates sales, a profit and loss account and a forecast for the next period.
Participants have unit sales, revenue and profit targets. So, optionally, individuals can be assigned responsibilities for meeting these and authority for one decision area. This can be used to explore team working behaviours, especially from period four onwards where an additional report shows performance against budget! (And can be used to instigate conflict!). However, the matrix of decisions and results means that, to be successful, the team must overcome any conflict.
Retail Mix is ideal for sales and marketing courses and courses exploring behaviour (where it can replace team building activities that are not business based). A special version exists (Hit the Target) for sales and business conferences (where it can be used to develop leadership without dangling your key staff on a rapidly fraying rope over a pit of alligators).
Originally designed in 1983, Retail Mix has been in use since then and was completely revised in 1999 (incorporating our latest design paradigms).
PRICING & PROMOTION RESPONSE
Initially, participants are selling an established range through a n established outlet. At the same time they must launch a new range and open a new outlet. During the simulation, teams must price and staff to grow the sales of the new range and the new outlet. In doing so, the contribution of the established range selling into the established outlet will fall from about sixty percent to about twenty-five percent.
PROFIT CONTRIBUTION
Besides seeing the financial impact of decisions in terms of total revenue, cost of sales, promotion costs and profit, participants should review the separate profit contribution of each range and each outlet.
COSTS OF BUDGET VARIANCES
The purpose of the simulation is to be successful and to meet targets for unit sales of the ranges, outlet revenues and overall profit. Initially, meeting the targets is not emphasised. However, in the fourth period an additional report is produced summarising performance against the targets for the period and cumulatively. Later, in period six, a further report quantifies the costs of budget variances. So, the simulation can be used to demonstrate to people how their actions influence purchasing and financing costs. Further, it can be used to show how maximising the results from one part of the business may sub-optimise the profits of the business as a whole.
GROUP WORKING
Each team can consist of between three and five participants, each of whom can be assigned a role - product range manager, outlet manager and area manager. The product ra nge managers are responsible for meeting unit sales targets for the ranges and have the authority to set prices. The outlet managers are responsible for meeting outlet revenue targets and have the authority for setting staffing levels. The area manager is responsible for overall profit and co-ordination but has no decision-making authority.
INTERPERSONAL CONFLICT
The initial de-emphasis of targets means that each team tends to work in an unfocussed collaborative manner aiming at maximising profits and forgetting about the targets. However, when the target comparisons are produced and, if the trainer rewards those participants who are close to target, this will introduce conflict. (This is especially true if, at this point, the trainer announces a prize for the individual closest to budget at the end of the simulation.) However, to meet individual and team goals, conflict must be resolved and individuals collaborate.
INTERPERSONAL NEGOTIATION
The matrix of authorities and responsibilities means that, for an individual to meet his or her target, he or she must negotiate with the others and make trade-offs.
TEAM BEHAVIOUR
In terms of team behaviour, each team moves from a friendly, unfocussed group, through a pe riod of conflict to a well-balanced purposeful team. To help explore this, an optional questionnaire is provided. The questionnaire asks individuals their feelings about fellow team members - feelings that may include helpful, determined, disorganised, divisive, weak, etc..
SALES CALLS covers sales objectives, customer strategies, call planning & targeting and measuring sales performance.
Participants have to decide how frequently to call on their customers. In doing this they must take into account individual customer potential, the current relationship, profitability, risk and work load.
After the participants have made their decisions, the simulator evaluates calling success and produces a report showing market share, revenue, profits and return on assets. Using Activity Based Costing, the simulator treats each customer as a profit centre taking into account selling and servicing costs and capital employed funding debtors (or accounts receivable).
In deciding call strategy, participants will need to realise their goals must be wider than just building sales and must include building profits and profitability. Also, they will need to classify their customers based on current and future potential, growth etc..
Sales Calls is ideal for sales and marketing courses. Also, a special version exists (Calls Up) for sales conferences.
Originally designed in 1983, Sales Calls has been in use since then and was completely revised in 1999 (incorporating our latest design paradigms).
SELLING OBJECTIVES
Sales Calls is designed to widen sales people's views of selling objectives. So, besides having objectives in terms of revenue and market share, participants must consider profits, profitability and risk. Further, not only must participant's maximise the results for their area as a whole but also set objectives for each individual customer.
MEASURING SALES PERFORMANCE
Depending on the version, sales performance is measured in terms of market share, revenue, gross profit, contribution, return on assets, revenue/call and profit/call.
ANALYSING SALES DATA
In deciding how many calls to make on individual customers, participants must rank customers, analyse growth and profit opportunities both for the current period and the long term. Analyses that investigate the patterns of customer potential, sales revenue, profit & costs, debts, the impact of calling, changes in customer need etc..
CUSTOMER DEVELOPMENT STRATEGIES
When developing their calling strategies, participants will probably need to categorise customers according to their potential and the current penetration. They may wish to divide customers into key and minor customers. Key customers that can be sub-divided into those where there is potential for growth, those where growth potential is negligible but revenue must be maintained and those where growth is such that the customer may become dominant. Then, for each category, participants must decide calling rates to develop the business.
CALL PLANNING & TARGETING
The strategies are implemented and refined through the participants deciding the number of calls to be made on individual customers, entering these, simulation and analysing the outcomes before deciding the next period's calls.
TEAM WORKING
With participants working in small teams, they have the opportunity to share experience and knowledge, present and promote different viewpoints and develop their people skills.
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SALES MIX covers marketing and profit with, optionally, interpersonal relationships and group processes.
Participants are responsible for marketing two types of product into two sales areas. They have to decide the prices for the products and the promotion for the sales areas. Based on these the simulator calculates sales, a profit and loss account and a forecast for the next period.
Participants have unit sales, revenue and profit targets. So, optionally, individuals can be assigned responsibilities for meeting these and authority for one decision area. This can be used to explore team working behaviours, especially from period four onwards where an additional report shows performance against budget! (And can be used to instigate conflict!). However, the matrix of decisions and results means that, to be successful, the team must overcome any conflict.
Sale Mix is ideal for sales and marketing courses and courses exploring behaviour (where it can replace team building activities that are not business based). A special version exists (Hit the Target) for sales and business conferences (where it can be used to develop leadership without dangling your key staff on a rapidly fraying rope over a pit of alligators).
Originally designed in 1983, Sales Mix has been in use since then and was completely revised in 1999 (incorporating our latest design paradigms).
PRICING & PROMOTION RESPONSE
Initially, participants are sel ling an established product into an established sales area. At the same time they must launch a new product and penetrate a new area. During the simulation, teams must price and promote to grow the sales of the new product and the new sales area. In doing so, the contribution of the established product selling into the established sales area will fall from about sixty percent to about twenty-five percent.
PROFIT CONTRIBUTION
Besides seeing the financial impact of decisions in terms of total revenue, cost of sales, promotion costs and profit, participants should review the separate profit contribution of each product and each sales area.
COSTS OF BUDGET VARIANCES
The purpose of the simulation is to be successful and to meet targets for unit sales of the products, area revenues and overall profit. Initially, meeting targets is not emphasised. However, in the fourth period an additional report is produced summarising performance against the targets for the period and cumulatively. Later, in period six, a further report quantifies the costs of budget variances. So, the simulation can be used to demonstrate to sales people how their actions influence production and financing costs. Further, it can be used to show h ow maximising the results from one part of the business may sub-optimise the profits of the business as a whole.
GROUP WORKING
Each team can consist of between three and five participants, each of whom can be assigned a role - product manager, sales manager and marketing manager. The product managers are responsible for meeting unit sales targets for the products and have the authority to set selling prices. The sales managers are responsible for meeting area revenue targets and have the authority for setting promotion levels. The marketing manager is responsible for overall profit and co-ordination but has no decision-making authority.
INTERPERSONAL CONFLICT
The initial de-emphasis of targets means that each team tends to work in an unfocussed collaborative manner aiming at maximising unit profits and forgetting about the targets. However, when the target comparisons are produced and, if the trainer rewards those participants who are close to target, this will introduce conflict. (This is especially true if, at this point, the trainer announces a prize for the individual closest to budget at the end of the simulation.) However, to meet individual and team goals, conflict must be resolved and individuals collaborate.
INTERPERSONAL NEGOTIATION
The matrix of authorities and responsibilities means that, for an individual to meet his or her target, he or she must negotiate with the others and make trade-offs.
TEAM BEHAVIOUR
In terms of team behaviour, each team moves from a friendly, unfocussed group, through a period of conflict to a well-balanced purposeful team. To help explore this, an optional questionnaire is provided. The questionnaire asks individuals their feelings about fellow team members - feelings that may include helpful, determined, disorganised, divisive, weak, etc..
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