Bis simulation

We will be playing “BUSI Sim” over a three or four-week period. In your teams, you will play the part of a company competing against other companies in your class. Your company manufactures and sells a non-specific product with universal demand.

The game will run through several periods, representing three month timeframes, or quarters. At the beginning of each quarter, your team will make decisions on the price you will charge for your product, how many units you will produce during the quarter and how much you will spend on 6 areas:

• Marketing
• Research & Development
• Maintenance
• Plant and Equipment
• Purchase of Raw Materials
• Dividends paid to shareholders

Prior to the actual running of the game, you are strongly advised to read the BUSI Sim manual. This will give you insights and suggestions on how to make the decisions you need to make each quarter.

The other teams in the class will be your competitors. You will be competing against them for market share. You will all start off in the same position (these are the decisions you made last quarter):

Price = $25.60

Marketing budget = $200,000

Research & Development budget = $100,000

Maintenance budget = $75,000

Production Volume Schedule = 100,000 units

Investment in Plant and Equipment = $500,000

Purchase of Materials = $1,000,000

Dividends Declared = $53,000

For each quarter played, you will submit to the instructor your decisions on the above eight variables. This is recorded on a decision sheet (sample given on pg 3 of the manual). After each quarter is run, you will receive a report indicating quarterlyresults. You will also have basic information about your competitors’ results (the price they charged, the dividend they paid, their sales volume and net profit.) You will receive more detailed information on your results, including an operating statement, income statement, cash flow and some balance sheet accounts. (see example, pg.8 of the manual)[1].

At the end of each fiscal year (4 quarters) you will receive a summary report of your average expenditures, and your cumulative ROI, Return on Investment. You will also receive more detailed information about your competitors, such as their cash position, inventory and owner’s equity. (see example, pg. 19 of the manual).

Your success in the game will depend on the decisions you make and the decisions your competitors make. In addition, certain external events such as changes in interest rates, economic growth, seasonality and inflation (Price Index) will have an effect of your financial outcome in the game.

The following table summarizes the effect of some of the factors in this game:

Your final grade on this part of the course will be based on your final market share and Return on Investment (ROI):

Grade = Constant Number + MS + 1.5(ROI) + S

Where:

• “Constant Number” is a number between 40 and 55 (depending on the number of firms in your class; to be determined by the instructor).
• MS is final year (4-quarter) average market share.
• ROI is end of game return on investment (provided by the reports).
• S is a subjective evaluation by the instructor, range ± 5, average is 0. This is based on your group’s level of interest and participation in the simulation.

[1] The sample report on pg. 8 also indicates your current position in terms of previous quarter revenues, expenses, asset values and liabilities/equity.