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Why is each business environment unique?
- Cost structures
- customers response to prices
- effectiveness of different marketing approaches
How can you be successful in the business simulation (and real life)?
develop an understanding of the customers and the competitors in the simulation market
What products does your business sell?
complete feed, concentrate feed, commercial grade fertilizer and custom blended fertilizer
Why would growth or contraction for the market not be necessarily smooth?
Sales will probably be subject to random fluctuations in livestock raised and acreage of crops grown.
Any change in the distribution of sales between complete and concentrate feed or between custom blended fertilizer and commercial grade fertilizer among quarters will occur at what rate?
A slow one
Historically, in which quarter does complete feed sell best?
- Fourth quarter (Oct-Dec)
- Overall, sales seem to be increasing from year to year
In which quarter does concentrate feed seem to do best?
- 1st quarter, followed by 4th quarter.
- Overall, sales seem to be increasing year over year.
In which quarter does commercial grade fertilizer do best?
- Second quarter (April-Jun) - by far
- Overall, this is in fluctuation. Doing 2,486 three years ago, followed by 2,422 two years ago and 2,354 last year
In which quarter does custom blend fertilizer do best?
- Second quarter
- Overall, this seems to be increasing year over year.
what do income statements show?
- sales, margin and expense data for the quarter and previous 12 months
- shown on total dollars, dollars/ton and percent of sales
what does cash flow statement show?
amount of cash generated and how it was used, how much money you have to invest or pay down loans
market share report shows?
- what other teams were charging
- price limits for next quarter
- data on advertising outlays, sales by product line (tons) and market share by product line is also here
The price you can charge customers for each of the four products must not be more than
- $4 above or below the market average price
- average prices are in the results and used as the base for the current quarter
starting prices and wholesale prices for complete feed?
206 (SP), 158 (WP)
Starting price and wholesale price for concentrate feed?
315 (SP), 255 (WP)
Starting price and wholesale price for commercial grade fertilizer?
138 (SP), 93 (WP)
Starting price and wholesale price for custom blend fertilizer?
159 (SP), 106 (WP)
sale respond positive to price reductions, but...
response of sales to price change varies among products
changes in the price differential between complete and concentrate feeds and commercial and custom blended fertilizers will result in...
shifts of sales between product lines
If you don't have enough inventory (quantity ordered plus inventory) to meet deman, you get unfilled orders. Selecting yes on the decision form will help recover those sales. Consequences?
- 10 percent surcharge over wholesale prices
- some customers won't want to wait
where are unfilled orders reported?
how does advertising affect sales of products?
explain credit policy 1
- 30 day policy
- bad debt loss low
- 90 percent of credit sales are collected in current period
- remaining 10 percent are accounts receivable and collected next quarter
explain credit policy 2
- 60 day policy
- some increase in bad debt loss
- 70 percent collect in current quarter
- 30 percent are accounts receivable
explain credit policy 3
- 90 day policy
- bad debt losses increase
- 30 percent of sales are current quarter
- 70 percent (less bad debt loss) collected the following quarter
if you extend the credit period, what happens to sales?
what are your current facilities?
- office, scales, storage, etc.
- worth (book value) $297,360
how much storage capacity owned and how many tons does it store?
- 14,000 square feet
- 3,271 tons of product
each ton of product requires how much storage space?
- 4.28 square feet
- if you don't have enough, it's automatically rented at 75 cents per square foot/quarter
Storage depreciation is the only fixed cost of storage. How many years is it for? What are variable storage and handling costs?
- 15 year depreciation
- 12.50 per ton variable and handling
How many trucks? Book value? Hauling capacity?
- 5 trucks
- 2,800 tons capacity
how much can added trucks be bought for?
one truck is need for how many tons of product sales? what happens if you don't meet the requirement?
- One truck = 560 tons
- auto-rented for 3,640/quarter
- you can rent for half a quarter
truck depreciation? variable costs?
- depreciation is 5 years
- it's the only fixed cost
- variable costs are 7/ton
workers hired in the current quarter need extra training. extra expenses are
- 1000/full time
- 500/part time
- you're responsible for training each time you hire
one worker is needed for how many tons of sales?
- need at least three workers at all times
regular labor per quarter and overtime?
manager receives how much?
- not included when figuring available labor
expansion of storage costs how much per ton?
18.19 per ton
regular interest rate for firms with debt/equity of less than 1.0?
regular rate of interest for firms with debt/equity of 1.0 or greater?
emergency loan interest rate?
investment interest rate?
cash outlays consist of:
product purchases, variable truck and facility costs, labor costs, rentals, interest, advertising, truck and facility expenditures, investments made, loans repaid and misc. expenses 2,200 per quarter plus 80 cents per ton of sales
cash to meet obligations consists of
cash on hand at the beginning of the quarter, cash sales, beginning a/r, interest earned on investments, loans secured and investments called
max loan repayment?
can't be greater than the total amt of cash available at the start of the quarter plus 1/2 of the a/r balance at the end of the previous quarter, plus any investment called
what do you need to pay each quarter?
- current portion of bank debt and any emergency loans
- if you don't have enough cash, you can borrow at the regular rate of interest
- you'd better make arrangements to borrow or you're going to keep rolling over at the higher interest rate
a new 10-year loan was taken out at the end of quarter 0, with first payment due quarter 1. repayment schedule is?
quarterly principal payments, plus interest
excess cash can be invested to earn annual interest at what rate?
- 6 percent
- made at start of the quarter and can't exceed starting cash plub 1/2 of a/r at the start of the quarter (less debt repaid)
if the firm doesn't have the cash needed to meet obligations, what happens?
investments are called in - interest is lost as a penalty
cost of goods sold is based on
the weighted average value of the inventory carried over and the value of current purchases
Five Steps in Market Research
- 1. Define the problem
- 2. Develop the research plan
- 3. Collect relevant information
- 4. Develop the findings
- 5. Take marketing actions
Two things you need to do in Step 1 (defining the problem)
- Set research objectives (specific, measurable goals)
- Identify possible marketing actions (measures of success, like playtime, lead to possible actions)
Three main types of marketing research:
- Exploratory (ideas about vague problem)
- Descriptive (frequency or extent of a relationship between two factors)
- Causal (how much does one factor lead to another)
One test of whether research should be done?
will different outcomes result in different marketing actions?
Three steps in Step 2 (Developing the Research Plan)
- Specify constraints (time? money?)
- ID data needed for marketing actions (has to help managers make clear choices)
- Determine how to collect data
Two key elements in determining how to collect data?
- 1. concepts (ideas about products or services)
- 2. methods (approaches to collection)
Internal secondary data includes marketing inputs and marketing outputs. Examples?
- marketing inputs - effort made to make sales - advertising budgets, sales call reports
- marketing outputs - results of marketing efforts - billing records on shipments from the accounting department with sales data on each salesperson, communications from customers
a specialized observational approach in which trained observers seek to discover subtle behavioral and emotional reactions when consumers come into contact with products in their natural use environments
semantic differential scale?
five-point scale in which the opposite ends have one or two word adjectives that have opposite meanings
agree or disagree with a statement