BSIM May 2011

Manchester Business School Global MBA Business Simulation Group Project
Study Guide
Original Thinking Applied
Manchester Business School Global MBA
This Study Guide and Workbook has been prepared for Manchester Business School Worldwide by: Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD
We regret that the authors are unable to enter directly into any correspondence relating to, or arising from this Study Guide. Any comments on this work would be welcomed and should be addressed to:
The AcAdemic direcTor Manchester Business School Worldwide The University of Manchester Booth street West Manchester M15 6PB
MBS Worldwide
Manchester Business School Global MBA
Business Simulation Group Project
The materials in this course were prepared by Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD
Contents
Section A : Introduction to the module Section B : Instructions for Business Simulation Section C : Managing in project groups
References for Unit One
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Business Simulation Group Project (Global MBA)
Global MBA Business Simulation Group Project

This Study Guide is divided into three sections:
Section A: Introduction to the module

This section covers the aims and objectives, learning outcomes, logistics, guidance on assessment requirements and submission deadlines.
Section B: Instructions for the Business Simulation

This section gives all the detailed information that you need to understand and participate the business simulation itself.
Section C: Managing in project groups

This section addresses the issues of group dynamics and the requirements for effective group functioning. The ideas in this section can be used to inform the learning you gain from the group dynamics that occur while carrying out the business simulation module and other group activities that have happened or are yet to occur as part of the overall MBA programme.
Business Simulation Group Project Section A Introduction to The Module
introduction to The module

The materials in this course were prepared by: Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD
Study Guide We regret that the authors are unable to enter directly into any correspondence relating to, or arising from this study guide. Any comments on this work would be welcomed and should be addressed to: The Academic director MBS Booth Street West Manchester M15 6PB United Kingdom
making the most of your studies Each study guide and workbook has been designed with the learning template in mind. It will help your revision to check you have attempted to understand the study element in terms of its content. Did you work through the guided questions, including any directed to personal development? Were you able to go more deeply into recommended reading materials such as cases, articles and the textbook? Were you able to connect this with your personal experiences?
Support Printed study guides have been provided to support the electronic version within Blackboard. Blackboard is a core part of the learning process which also contains other course material, such as: Welcome letters, study plans & course outlines Assignment questions Workshop preparatory documents Discussion forums are available to discuss material content.
Section A: Introduction to the module

This section covers the aims and objectives, learning outcomes, logistics, guidance on assessment requirements and submission deadlines.
Introduction to the module

Welcome to the Business Simulation course. In some respects this course is different from most of the others on the GMBA programme. It requires you to work for a sustained period as part of a group, rather than as an individual. It also requires the group to interact with the module tutors when they act as the simulation controllers and bankers.
You and the other members of your team are invited to take over and manage one of a number of identical companies that are competing in a growth market for semidurable consumer goods. Details of the simulation are given in section B.
The following sections set out in more detail the module aims and associated learning outcomes, the module content and chronology, and the required outputs and assessments.
Course aims and learning objectives

There are two primary aims and learning objectives of this course.
The first is to consolidate current and prior learning on the GMBA programme. This is done by mobilising and integrating ideas from the topics addressed in earlier modules (e.g. finance and accounting, operations management, corporate finance, marketing, etc) and applying them in order to manage a simulated business effectively.
The second addresses the issue of effective group working. Specifically, you should focus on the dynamics that occur within your group during all phases of the project and in particular the thoughts, feelings, emotions and insights that you experience and the learning you derive about yourself and how the group functions during all stages of the simulation.
At the end of the course you should: Understand better the key issues associated with setting and implementing of a company strategy and particularly the interplay of factors and decision-making issues that influence effective organisational performance Be able to mobilise prior and current learning from other parts of the MBA programme to address the group task Appreciate the need for organisation, planning, communication, coordination and negotiation in executing a group task Obtain greater insight into your own and other group members ways of working as part of a task group Be able to function more effectively as a member of a group
The Module focus

As has been previously mentioned in the module aims and learning objectives, there are two key aspects in this module: (i) the development of professional management skills in relation to running a business and (ii) effective group organisation and functioning.
(i)
The development of professional management skills
The Business Simulation module has been designed to provide an effective learning experience for managers who wish to develop their professional skills. It does this by focusing on decision-making skills and a satisfactory performance depends on developing an effective team operation. In participating in the activity, the financial consequences of operating decisions are made very explicit and awareness is heightened of the interdependence of specialist functions in the organisation.
(ii)
Effective group functioning
In organisations many of their aims and objectives can only be attained by people working with others as part of a group. Increasing ones experience and understanding of the key dimensions of effective group working can be crucial to achieving effective organisational performance. It is a key management skill. Therefore, as part of this module, emphasis is placed on how you and your project group function while undertaking the task of trying to run a simulated business effectively. The insights and learning that you derive from the direct experience of working with others as part of a task group should be of use to you on other parts of the MBA programme.
Course content and logistics

(i) Pre-workshop study and planning
Prior to the beginning of the residential workshop you should read this Study Guide. You should make contact with the other members of your team. As a team you need to create a short policy statement of just a few lines (which is not assessed) outlining your initial plan for your company.
(ii)
Group formation
Before the residential workshop the GMBA administration will assign individuals to groups which will normally consist of between five and six members. The administration will notify you of the names and contact detail of your fellow team members.
(iii)
Tutorial support
The role of the tutor normally is not to act as a group leader or resolver of conflicts, but rather to be available to offer clarification and specialist advice whenever needed. Groups should keep in touch with their tutor at regular intervals and keep the tutor fully informed about their progress.
Should any group member be unwilling to devote sufficient time to the simulation exercise (instead absenting him or herself or spending time in other ways), and if the matter cannot be resolved satisfactorily within the group it should be reported promptly to the project tutor. It should not be left by default.
(vi)
Module phases
1)
Before the modules introductory session you should you should: - read this Study Guide and especially Section B: a guide to the Business Simulation - make contact with the other members of your team - as a team create a short policy statement (just a few lines) outlining your plan for your company. This can be submitted to the tutors at any time prior to the beginning of the introduction of the simulation at the residential workshop (see separate timetable for due dates).
2)
At the residential workshop the following is scheduled to take place: - An introduction to the business simulation exercise - Decision 1 of the simulation will be taken - Decision 2 of the simulation will be taken - A review of these first two decisions
At the residential workshop there will be opportunity to revisit the twin themes of effective management of your company and the dynamics of effective group functioning. There will also be time available to analyse the market environment and to develop further your plans for running your company. It is very important that all members of a group should try to attend the workshop because face-to-face meetings early on in the life of a project have a significant impact on the effectiveness of the subsequent group functioning and the quality of the task output (see Hertel, Geister and Konradt (2005) for a review of empirical research on managing virtual teams).
3)
After the workshop the following is scheduled to take place: - Decisions 3-7 of the simulation will be taken - Submission of the assessed group report - Decisions 8-10 of the simulation will be taken - A review/debrief of the simulation. The review will focus on the general underlying principles involved in effective planning and management and will be illustrated by examples of actions taken by the participating teams. A detailed timetable giving decision times will be issued separately.
(vii) Assessment
There are two components to the assessment: a group report which focuses on the analysis of your companys strengths and weaknesses and on the threats and opportunities presented by the operating environment and the formulation of an appropriate strategy with the objective of optimising financial performance (for 70% of the final grade).
the performance of your company as reflected by your final share price. This in turn is influenced by the quality of earnings, the value of your net assets, the earnings per share, the dividend yield, the stability of your companys performance and its future prospects (for 30% of the final grade).
There is no formal assessment at this stage of your reflections and learning from the group dynamics that occur during all phases of the simulation. However, it is recommended that you keep an informal contemporaneous written record in the form of a log or diary that captures details of the experiences, thoughts, feelings, emotions, reflections and learning occur while you are working as part of a team on the simulation task.
Group report focus and structure

The report should be structured in a way that most clearly and logically represents your analysis and assessment of your company and the operating environment. Therefore you are free to organise your material in the way you find most effective.
You should explain how you would plan to maximise the share price of your team by the end of period 12, if you were to repeat the simulation over a three year period.
You need to analyse the information in the simulation guidelines (section B) together with the results of the decisions you have made so far, and show how your plan reflects the results of your analysis. Support your answer with tables or graphs where appropriate.
In your analysis you may wish to consider the following questions:
What has been the history of the market for this product in the first five years (refer to the Industrial Bulletin) and how do you see this developing over the next 2.5 years (i.e. 10 decision periods) and also in the longer term (i.e. for three years or 12 decision periods)?
What does the production schedule tell you about how production costs will be influenced by different levels of production and your investment in machine tools?
What is the impact of the labour unrest function?
What does the financial analysis of your company tell you about its strengths and weaknesses?
The body of the main report should no greater than 3,000 words. You can use appendices (which do not form part of the word count) to show supporting material. You should show the actual word count on the first page of the report.
In the assessment what is being looked for is an analysis of key themes such as industry trends, finance, marketing, production, etc and how this leads to a coherent strategy. Explain how you could analyse the situation and formulate an appropriate strategy (using the learning that you derived during the first seven decisions).
Give selective examples of insights you have gained, calculations you have performed, etc. Provide evidence for your statements and assertions. Highlight the important conclusions that you make.
Include a reference section that shows the source of any theories or techniques that you have used (i.e. details of the textbook, article or other source and the author).
You can include a small number of short appendices to support any points that you make in the main body of the report.
It is not necessary to give a descriptive account (i.e. a running commentary) of your decisions period by period.
Leave time in your planning schedule to edit the individual written contributions of group members so that the report reads as a coherent piece of work.
Submission deadlines
The latest submission dates for the group report and for each operational decision are given in a module timetable which is issued separately.
Recommended reading
When constructing your report you should draw on and make explicit reference to any relevant ideas, models and frameworks found in the recommended reading for other MBA modules that you have already completed or are currently undertaking.
The notes included as Section C titled: Managing in Groups 1. Task and Process, and 2. Process and Task and the texts mentioned in that section and cited in the bibliography, can be used to help your group function effectively and for you to learn from the experience of doing this group-based module.
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Business Simulation Group Project Section B Instructions for the Business Simulation Exercise
instructions for the Business Simulation exercise

Section B: Instructions for the Business Simulation Exercise

INTRODUCTION
The Business Simulation Exercise programme* and guidelines have been designed to provide an effective learning experience for managers who wish to develop their professional skills.
It does this by focusing on decision-making skills and a satisfactory performance depends on developing an effective team operation. In participating in the activity, the financial consequences of operating decisions are made very explicit and awareness is heightened of the interdependence of specialist functions in the organisation.
At the start of the exercise participants join a management team to take over and run one of a number of identical Companies. The success of a teams members depends directly on their ability to organise themselves as a working group, their skills in making deductions from information provided and their ability to develop methods to monitor their own performance and to relate their own functional activities to a coherent general strategy.
Each team consists typically of between four and eight participants. The Business Simulation is distinctively different from other such exercises in that the number of teams is not restricted. It has been run for as few as twelve people and as many as one hundred and fifty people at a time. A further difference is that participating Companies do not form the totality of the market. Each active Company has only a 5% market share at the start of the exercise and the rest of the market is in the hands of background Companies. These background Companies do compete but are managed to react belatedly to initiatives made by the active Companies. As a result, teams can develop long-term strategies without being exposed to major disruption from the competing active teams.
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In setting your strategy you should remember that the Business Simulation has been designed to ensure that companies can operate effectively in a variety of different ways. By analysing the information in this booklet you can make the choice between present and future profitability, between growth and return to shareholders, or between security of your existing operations and venturesome expansion. An appropriate strategy can be devised to implement all of these choices.
* D Wood
RUNNING THE BUSINESS SIMULATION The Booklet

The information contained in this booklet is set out as clearly and openly as we are able. There is neither intention to mislead, nor are there any hidden pitfalls. The Controllers will be glad to interpret and clarify the operating rules at any time in order to resolve any difficulties. At no time do the Controllers make arbitrary changes in the rules or operating conditions in the industry or economy.
Time Deadlines
It is helpful if time deadlines are kept, since a consequence of lateness is that other groups are kept waiting for a team which is both delaying the schedule and gaining an advantage of extra time. You will be given notice of the time for your next decision on the Industrial Bulletin each period and after due warning persistent lateness will attract financial penalties.
Team roles
This is a learning experience and you may well decide that you would learn more by getting into a tangle in an unfamiliar area and having to rectify a difficult situation than you would by using your existing knowledge to maintain a stable operation.
Consequently, the team should decide, at the start, whether it wants to maximise on immediate performance or on learning. Focusing on immediate performance would suggest that team members split the tasks up so that each member selects
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the role closest to their existing area of expertise, while to maximise learning each team member takes on a task which is not part of their day-to-day management experience.
The team should also spend some time discussing operating style and the way in which decisions will be taken. Issues of group leadership and effective decision making need to be formally discussed.
YOUR COMPANY
Your Company is initially identical with those operated by other participating Companies. It is engaged in making and marketing a semi-durable consumer good for use in the home. It is in the same price range as a mobile telephone or an MP3 player. The total potential user market is reliably estimated to be 30 million units.
Your Company helped to pioneer this new product and now markets a proven item which is identical in specification to those of all your competitors. This process of development has been an expensive uphill struggle and after three years of losses your Company earned net profits of just 350,000 in year 4 of operations and 425,000 in the recently concluded year 5. However, the undoubted growth potential of this market has always attracted an adequate investment capital.
You are taking over the Company as its new management at the beginning of the first of the four operating periods of year 6. As you embark on this role your first task will be to set an outline strategy covering the highlights of your approach to your new responsibilities. This policy statement (which is not assessed) should only be a few lines but serves as a guide for the Controllers and should be submitted as indicated on the module timetable. Then for the following operating periods, each equivalent to three months trading, you need to fill in the decision form provided (see appendix 2), making the decisions for your Company which your team believes will achieve your targets of growth and profitability.
Each periods operating decisions will be processed for you on the contollers computer and the results, as shown in the operating statement, profit and loss and cash flow
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analysis, will be fed back to you prior to starting work on the operating decisions for your Company in the next period. The results from the last operating quarter (i.e. the last quarter of year 5) are shown within the study guide.
At the end of each year, i.e. after each four decisions, you may be required to produce a profit and loss statement for the years operations and a balance sheet covering your year-end position. A statement reviewing last years operations and outlining your policies for next year may also be required. These statements will be circulated, together with the operating statements for each of the companies, on the last quarter of the year.
You will not be able to raise capital in the first operating period, but you may open negotiations with the controllers capital market at any time after this, although there is no guarantee that your proposals will be fundable. You may also declare dividends on your shares on any decision.
Your teams rating by the capital market will depend on your ability to achieve policy objectives, the stability of your Company under changing market conditions and the effectiveness with which you deliver and control the Companys financial performance.
The price of your shares will be the measure of your operating success and will reflect the quality of earnings, as discussed above, the value of your net assets, the earnings per share, the dividend yield, the stability of your Companys performance and its future prospects.
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PRODUCTION
I Direct Production Costs
Initially you have a single factory, located in area 1, area 2, or area 3. The factories in area 4 are operated by background companies. Details of your factory location, which depends on your team number, are given within the study material. The direct basic production costs for your initial and for any additional factories vary both with the level of output and the intensity of machine tool utilisation. The basic cost schedule is on the next page. Most of the popular production positions are shown on this schedule though there is no reason why you should not operate outside it if you so wish. An extended schedule can be provided on request.
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Depreciation
The cost of depreciation of machines tools is additional to the figures shown in the basic cost schedule. Depreciation of the physical productivity of your capital equipment is reflected by making a physical reduction of 2.5% of the number of machine tools you own at the end of each period. The remainder, after this deduction, are assumed to enjoy their original productivity.
For accounting purposes the cost of depreciation is calculated by multiplying the number of depreciated machines by the current machine tool price.
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Investment
Your Company may invest in machine tools at any time either to replace depreciated tools or to support further expansion.
You pay for them at the end of the period in which they are ordered. They are delivered to you in time to be used for production during the period following your order. The price of machine tools for the next four periods is provided in the Industrial Bulletin and updated during the game for further periods.
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You may operate one factory in each of the four market areas. There is no upper limit to the size and output of a factory though a lower size limit prevents you from producing less than 50,000 units or using less than 400 machine tools in a factory.
Direct Production Cost Schedule, s per unit of output

Production in 000 of units 50 Tools Used
400 450 500 550 600 650 700 750 800 850 900 950 1000 1050 1100 1150 1200 1250 1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 47.78 45.89 44.27 42.85 41.59 40.46 39.45 38.53 37.69 36.91 36.21 35.53 34.91 34.33 33.79 33.28 32.79 32.34 31.91 31.49 31.11 30.74 30.39 30.05 29.72 29.41 29.11 28.82 28.55 28.28 28.02 27.77 27.54 48.61 46.69 45.03 43.59 42.31 41.16 40.13 39.19 38.34 37.55 36.82 36.15 35.52 34.93 34.38 33.86 33.37 32.89 32.46 32.05 31.65 31.27 30.91 30.57 30.24 29.92 29.61 29.32 29.04 28.77 28.51 28.26 28.01 49.32 47.37 45.69 44.22 42.92 41.76 40.72 39.77 38.89 38.09 37.36 36.67 36.04 35.44 34.88 34.35 33.85 33.38 32.94 32.52 32.11 31.73 31.36 31.01 30.68 30.36 30.05 29.75 29.46 29.19 28.92 28.67 28.42 49.94 47.97 46.27 44.78 43.47 42.29 41.23 40.27 39.39 38.58 37.83 37.14 36.49 35.89 35.32 34.79 34.28 33.81 33.35 32.93 32.52 32.13 31.76 31.39 31.07 30.74 30.43 30.13 29.84 29.56 29.29 29.03 28.78 50.49 48.51 46.78 45.28 43.95 42.76 41.69 40.72 39.83 39.01 38.25 37.55 36.89 36.29 35.71 35.17 34.66 34.18 33.73 33.29 32.88 32.49 32.11 31.75 31.41 31.08 30.77 30.46 30.17 29.89 29.62 29.35 29.09 51.01 48.99 47.25 45.73 44.39 43.19 42.11 41.12 40.22 39.40 38.63 37.92 37.26 36.65 36.07 35.52 35.01 34.52 34.06 33.62 33.21 32.81 32.43 32.07 31.72 31.39 31.07 30.76 30.47 30.18 29.91 29.65 29.39 51.88 49.83 48.07 46.52 45.16 43.94 42.83 41.83 40.92 40.08 39.31 38.58 37.91 37.28 36.69 36.14 35.61 35.12 34.65 34.21 33.78 33.38 32.99 32.63 32.27 31.93 31.61 31.31 31.01 30.71 30.43 30.16 29.89 52.64 50.56 48.77 47.21 45.82 44.58 43.46 42.44 41.52 40.66 39.88 39.14 38.46 37.82 37.23 36.66 36.13 35.63 35.16 34.71 34.28 33.87 33.48 33.09 32.74 32.40 32.07 31.75 31.45 31.16 30.87 30.60 30.33 53.31 51.21 49.38 47.79 46.39 45.14 44.01 42.98 42.04 41.18 40.38 39.64 38.95 38.29 37.69 37.13 36.59 36.08 35.61 35.14 34.71 34.29 33.89 33.52 33.16 32.81 32.48 32.15 31.85 31.55 31.26 30.99 30.72 53.89 54.44 51.77 52.28 49.93 50.43 48.33 48.81 46.91 47.38 45.64 46.11 44.50 44.94 43.46 43.89 42.51 42.93 41.64 42.05 40.83 41.24 40.08 40.48 39.38 39.77 38.73 39.11 38.12 38.51 37.54 37.91 37.01 37.37 36.48 36.85 36.01 36.36 35.54 35.89 35.11 35.44 34.68 35.02 34.28 34.62 33.89 34.23 33.53 33.86 33.17 33.51 32.84 33.16 32.51 32.84 32.19 32.52 31.89 32.22 31.61 31.92 31.33 31.64 31.06 31.37
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70
80
90
100
120
140
160
180
200
NOTE:
These costs are per unit per factory. They include all materials, services and labour costs but do not include: 1) 2) 3) Depreciation costs on machinery Interest and other financial costs The costs of labour unrest following an output change.
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In order to build a new factory you simply order the desired number of new machine tools in any of the areas where you currently have no production capacity. A factory building is then automatically ordered on your behalf, and you may go into production in the period following your order. The 2,000,000 cost of the new factory has to be met at the end of the period in which it is first brought into operation. A new factory does not have to be used immediately though the machine tools will depreciate whether used or not. Machinery, once committed to a factory area can only be moved or sold if the continued existence of your Company is under threat.
IV
Labour Unrest
Altering production levels in an existing factory alters work patterns and generates labour unrest during the period in which the change is made. The cost of this unrest rises progressively as output changes. For a 10% production change (up or down) the cost schedules would for example increase by 2.5% whilst for a 25% change unrest would add 15% to basic production costs.
Labour unrest does not occur during the first period of operation of a new factory.
Hiring
Machine tools may be hired at any time provided that you do not hire more than 20% of the number of machine tools which you own in the hiring factory. The cost is 2,000 per period per machine tool. Hiring is accomplished by specifying a usage of machine tools greater than the number you have available in that area. The difference will be automatically hired to you up to the 20% limit. Unless you renew the hire, it automatically ceases after one period. Hired tools have the advantage that they are available immediately, whereas new tools purchased in one period can only be used in the following period. Also, the option of using hired tools is always available, even when your financial situation might not allow the purchase of new tools.
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SALES
I Sales Areas
Each of the four market areas is identical in size, population and market potential (though Area 4 is at a slightly less developed stage and currently is serviced solely by the background firms). The markets in areas 1, 2 and 3 are at an identical state of development when you take over your Company. As time passes competitive activity may create differences in the rate of market development as well as differences in response to pricing and marketing policies in the four areas.
Your Company can sell in any or all of the market areas. Quoting a price in an area signifies a willingness to sell. Ceasing to quote a price or spending nothing on marketing signifies withdrawal from that area.
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Sales Outlets
Your Companys product is sold exclusively through dealers on whom you depend for pre-delivery checks and warranty work. Each dealer has a maximum capacity of 2,500 units per period and you cannot sell in excess of the dealer capacity you provide in a market area. Each dealer costs 30,000 per period.
Extra dealers will not sell extra units merely by their presence. Your price and marketing mix must attract extra custom to the dealers - unless you have been selling to dealer limits, in which case there may be some previously suppressed demand.
Dealers can carry unlimited stocks of your products and there is no warehousing cost.
Dealers can be taken on at any time but can only be discharged at the end of each operating year, i.e. after periods 4, 8 and 12. Dealers cannot be transferred from area to area.
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III
Marketing Expenditure
You should assume that each sum allocated for marketing expenditure is spent as effectively as possible during the period on the relevant advertising media. The marketing expenditures which you enter on the decision sheet do not include either the cost of dealers or of transport. These costs are charged automatically and separately.
Whilst your Company has no intrinsic product advantages over your competitors, you are marketing an attractive product in a new and relatively unexploited set of markets.
Marketing expenditure helps to create goodwill and visibility for your product. Although goodwill develops as trading progresses, you cannot expect this effect to sustain sales when current marketing expenditure is negligible or the price unreasonably high.
As the market develops you can expect increased marketing to show a diminishing return.
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Price
Your Company is marketing a competitive, semi-durable consumer good. Price competition is fairly important especially as the market matures.
Replacement Market
The replacement rate is 75% per annum and is a significant source of potential sales for your Company. There is a heavy replacement demand for the product. Units have a short service life and around 75% of the units in service in the preceding year need to be replaced. Brand loyalty is important in the replacement market.
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VI
Sales Volume
It is as well to remember that, in any period, you cannot sell more units in any area than your initial area stock level, plus your current shipments into that area. Selling out, or selling to dealer limits, attracts no particular penalty but is a signal that price is too low or marketing expenditure too high for that level of stocks or dealers.
VII
Transport
There is no transport charge on units produced and delivered to dealers in the same area. Delivery involving shipping into another area costs 8 per unit. If goods are moved into an area in shipments of 100,000 units or more, the transport cost falls to only 4.
VIII
Wholesaling
It is possible to trade goods between groups at agreed prices at the time of any decision. The selling team must deliver the units into an area in which the buying team has a factory. Transport charges may therefore be incurred by the seller moving units into the appropriate area. Both parties will need to notify the controllers of the terms of a wholesaling transaction at the time of a decision.
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FINANCE
I Cash Transactions
At the beginning of each period your Company has an opening cash balance resulting from its previous operations.
Certain current operating expenses are then incurred at the beginning of the new period. These are: direct production costs (including labour unrest) machine tool hire charges Transport costs marketing expenditures dealer costs
Unless your Companys opening cash balance is sufficient to cover these current expenses, an overdraft position will be created which will last until the end of the period.
All other financial transactions take place at the end of the period. Sales revenue is received, overdraft interest is charged, new machine tools and factories are paid for and dividends (if any) also paid. Capital raised during the period is also received at the end of the period. In the case of tax and bond interest the amount charged in the profit and loss account each quarter accumulates until it is paid at the end of each operating year, i.e. at the end of periods 4, 8 and 12.
II
Overdraft
Overdraft facilities are available to your Company up to a limit which may be increased if you choose in line with sales revenue. Initially your facility is 6m, with advances within this costing 4% per quarter. Funds used in excess of your facility cost 6% per quarter. Interest at 3% per quarter is paid on unused balance.
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Overdraft facilities are negotiated with the Controllers. A charge of 0.25% per quarter on the current facility has just been introduced. Facilities may be altered with one periods notice if the Controllers become disturbed by excessive levels of overdraft.
III
Bonds
Long-term, fixed interest debt, in the form of bonds, can be issued to your Company as an alternative to overdraft financing. Your Company has just issued a nominal 5 million of bonds at 90% which has raised 4.5 million in cash. Bonds may not be issued in your Companys first period of operation under your new management.
Interest on bonds is paid at the end of each operating year at the rate of 2% per period. Bonds may only be issued in multiples of 100,000 nominal value, with a minimum of 500,000, by negotiation with the Controllers. Bonds may be redeemed by your Company at any time but redemption will not be initiated by the capital market.
Bonds always carry a coupon of 2% of nominal value per quarter, but will be issued at a discount that reflects the size of the issue and the closeness the issue brings the company to its gearing limit. Bonds may only be issued by companies in net profit on their last quarter trading. Furthermore, issues cannot result in Market Gearing rising above 1, where Market Gearing is given by:
Market Gearing =
Issued Bonds Issued Equity Shares x Share Price
IV
Equity Shares
Your Company has issued 10 million shares of 1.00 per value. Each share is valued by the capital market at 1.05 at the time when you take over management of the Company. Your share price will fluctuate from period to period depending upon your operating results and financial strategy.
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If you trade profitably, the share price will normally be calculated as a multiple of your net profits. Dividends will help to raise your share price - provided that your Company can afford to pay them. Should profits be inadequate, the share price will reflect (at a discount) the value per share of the Companys net assets.
Additional equities can be issued to existing shareholders at rates negotiated with the Controllers. The larger the dilution involved the bigger the discount which has to be made relative to the latest share price to persuade shareholders to take up the issue. The capital market fluctuates and there is no guarantee that your company will be able to raise extra funds at any particular time. However, the Controllers will normally be able to indicate, on request, the funding potential and terms on which new capital can be issued. Should your Company wish to accept such an offer it will remain open only during the decision period when it is made.
Equity shares are changing hands at 1.05 currently and cannot be issued below 1.00.
Taxation
Depreciation at current replacement cost, overdraft interest and bond interest are all allowed as deductions before calculating gross taxable profit. Furthermore, all expenditure on machine tools (but not on factory premises) attracts a 25% initial investment allowance as a deduction against taxable income.
Trading losses and unconsumed investment allowances are carried forward into subsequent operating periods and will offset future taxable profits. Losses and allowances cannot be carried back to offset earlier taxation.
Tax is charged at 50% on the taxable profit.
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VI
Stocks
Stocks of your Companys product are always valued at 40 per unit.
VII
Takeovers
Takeovers may be permitted by the controllers if this is announced in the briefing. If they are then the relevant rules governing bids are given in Appendix 1.
25
26
Industrial Bulletin
2 1 2 3 4 1 2 3 4 1 2 3 4 5 6 7 3 4 1 2 8 3
100.1 103.2 104.4 105.1 106.2 106.8 90 80 18.2m 395m 85 75 85 75
THE TRADING BACKGROUND
THE TRADING BACKGROUND The general state of the economy influences market conditions. Estimates of future prosperity, as indicated by Gross National Product
The general state of the economy influences market conditions. Estimates of future prosperity, as indicated by Gross National Product (GNP) price of machine tools for each of the next four quarters, together with history on product prices, industry marketing expenditure and together with statistics on past behaviour of GNP levels, are given in the Industrial Bulletin below. You are also provided with the price of industry revenue. machine tools for each of the next four quarters, together with history on product prices, industry marketing expenditure and industry revenue.
(GNP) together with statistics on past behaviour of GNP levels, are given in the Industrial Bulletin below. You are also provided with the
YEAR
101.9 100.5 101.4 103.5 104.3 106.6 106.1 108.1 107.7 108.5 109.4 109.9
97.3
98.3
150 100
105 80
1.5m 1.7m 3.2m 7.1m
15m 41m 100m 207m
Quarter Predicted Index of Gross National Product Out-turn Index of Gross National Product Highest & Lowest Sales Price during year, /unit Industry Wide Marketing Expenditures, m Industry Wide Sales Revenues, m Machine Tool Prices 000
22.75 22.00 22.50 25.00 22.25 22.25 22.50 22.50 22.75 23.00 23.00 23.25
The industry is expected to achieve a 65% penetration of the market by the beginning of year 9. It seems unlikely that higher penetration will be achieved in subsequent years. The quarterly figures in the Industrial Bulletin will be updated each period and your share price together with those of your competitors will also be published. Your companys trading results for periods 4, 8 and 12 will be
circulated to all companies.
13
FINANCIAL STATEMENTS, ALL TEAMS, YEAR 5 Profit and Loss Account for Year 5 Notes '000's Turnover Cost of Sales Trading Profit Interest paid Profit before taxation Taxation Profit for Year 19,738 18,769 969 517 452 27 425 Fixed Assets Current Assets Stock Debtors Cash and Bank Current Liabilities Creditors Overdraft Taxation Dividend Net Current Assets Total Net Assets Non Current Liabilities Bonds 2,102 425 2,527 1 4.25 c Capital and Reserves Called up Share Capital Share Premium Account Profit and Loss Account Balance Sheet at end of Year 5 Notes 2 3 856 0 5,571 6,427 0 0 0 0 0 '000 '000 14,600
6,427 21,027
Movement in Reserves At beginning of year Retained Profit for year At end of Year 5 Earnings per Share
Notes 1 2
5,000 5,000
16,027 10,000 3,500 2,527 16,027
Earnings per Share is calculated on the basis of 425,000 after tax profit divided by the 10,000,000 issued shares Fixed Assets Start of year Additions during year Depreciation for year At end of year Buildings Machines '000 '000 2,000 11,196 2,464 1,060 2,000 12,600 '000 451 405 856 Total '000 13,196 2,464 1,060 14,600
Stock Start of year Additions during year End of year
(21,411 units at 40)
Current Liabilities - All creditors, taxation, interest and dividends are paid in full at the end of the financial year.
14
27
TRADING RESULTS, LAST QUARTER OF YEAR 5
Teams 1, 4, 7, etc Area1 Area2 Area3 Area4 Production '000s 60 0 0 0 % Production Change 0 0 0 0 Machine Tools Used 560 0 0 0 Shipments '000 -40 20 20 0 Machine Tool Order 30 0 0 0 New Tools Owned 576 0 0 0 Direct Costs /Unit 43.3 0 0 0 Shipping Costs '000 0 160 160 0 Production Area1 Area2 Area3 Area4 Dealers 9 9 9 0 Marketing '000 100 110 100 0 Average.Mktg. '000 * 100 100 100 80 Own Price /Unit 80 80 78 0 Average Price /Unit 80 80 80 81 Previous Sales, units 16,200 16,200 16,200 0 Opening Stock Units 4,310 6,404 7,279 0 Closing Stock Units 7,137 7,137 7,137 0 Sales Units 17,173 19,267 20,142 0 Sales
--------------------------------------------------------------------------------------------------------------------------------Teams 2, 5, 8, etc Area1 Area2 Area3 Area4 Production '000s 0 60 0 0 % Production Change 0 0 0 0 Machine Tools Used 0 560 0 0 Shipments '000 20 -40 20 0 Machine Tool Order 0 30 0 0 New Tools Owned 0 576 0 0 Direct Costs /Unit 0 43.3 0 0 Shipping Costs '000 160 0 160 0 Production Area1 Area2 Area3 Area4 Dealers 9 9 9 0 Marketing '000 100 110 100 0 Average.Mktg. '000 * 100 100 100 80 Own Price /Unit 80 80 78 0 Average Price /Unit 80 80 80 81 Previous Sales, units 16,200 16,200 16,200 0 Opening Stock Units 4,310 6,404 7,279 0 Closing Stock Units 7,137 7,137 7,137 0 Sales Units 17,173 19,267 20,142 0 Sales
--------------------------------------------------------------------------------------------------------------------------------Teams 3, 6, 9, etc Area1 Area2 Area3 Area4 Production '000s 0 0 60 0 % Production Change 0 0 0 0 Machine Tools Used 0 0 560 0 Shipments '000 20 20 -40 0 Machine Tool Order 0 0 30 0 New Tools Owned 0 0 576 0 Direct Costs /Unit 0 0 43.3 0 Shipping Costs '000 160 160 0 0 Production Area1 Area2 Area3 Area4 Dealers 9 9 9 0 Marketing '000 100 110 100 0 Average.Mktg. '000 * 100 100 100 80 Own Price /Unit 80 80 78 0 Average Price /Unit 80 80 80 81 Previous Sales, units 16,200 16,200 16,200 0 Opening Stock Units 4,310 6,404 7,279 0 Closing Stock Units 7,137 7,137 7,137 0 Sales Units 17,173 19,267 20,142 0 Sales
*Average Mktg .'000 is the marketing spend for a Company with a 5% market share selling at the average price.
15
28
TRADING RESULTS, LAST QUARTER OF YEAR 5 (continued) All Teams Profit and Loss Statement
Production Costs Shipping Cost Marketing Cost Dealer Cost Tool Hire ( 0) Total Current Expenditure +Value of Stock Change =Cost of Sales Sales Revenue Gross Trading Profit Depreciation (14 Tools) Net Trading Profit Overdraft Interest Bond Interest Profits Before Tax Tax Allowances Tax Net Profit (Cumulative 0.0M)
2,599,440 320,000 310,000 810,000 0 4,039,440 136,720 3,902,720 4,486,276 583,556 315,000 268,556 104,348 0 164,208 168,750 0 164,208
Cash Flow Statement

Opening Cash -Current Expenditure = Overdraft (6M facility) -Overdraft Interest & Fees +Sales Revenue -New Investment ( Number 30) -Dividend (0% on 10M nominal) -Bond Interest (5M nominal) -Tax Paid +New Bonds (5M @ 90%) +New Equity (0M @ 0.0) =Net Cash Flow New Cash Available Tax Allowance Carried Forward Net Profit/Sales 3.7% Cumulative Earnings per Share
1,430,740 4,039,440 -2,608,700 104,348 4,486,276 675,000 0 0 27,495 4,500,000 0 4,139,993 5,570,733 4,542 0
16
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Appendix 1: TAKEOVERS
With the authorisation of the Controllers it is possible for a team to bid for another participating team, and if successful to gain control of its assets and responsibility for its liabilities. The only reservation is that no involuntary redundancy must occur as a result of such an arrangement. Takeover bids are permitted only from period 5 onwards.
A takeover involves shares in the victim group being bought out. The predator has to notify both the Controllers and the victims of the proposed terms at least one week before the next scheduled decision (this period is reduced to 45 minutes in the case of the last three decisions at the debrief location). If an offer is made then the victims have the opportunity to fend off the bid by getting their share price above the offer level with their next decision.
If they do so the bid fails and cannot be renewed for another period. If the victims share price is less than the offer the bid succeeds and the assets and liabilities of both companies are pooled.
At this point the employees of the victim company may receive funding to set up again in business on their own account on terms that are determined by the Controllers.
Where a bid is made it cannot be partial or conditional. Bids may be in cash or shares in any combination but the effective value of a bid is limited to a maximum of twice the cash element offered. To prevent reckless bidding the cash must also be available in the closing cash balance of the predator when the bid takes effect. Typical bids would be:
Cash Only Bid: Company X offers 1.20 in cash for each share of company Y.
If company Y has 10m shares and a share price at the end of the period of 1.15 this bid would succeed if Company X had at least 12m in closing cash.
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Cash and Shares Bid: Company X offers a half of one of its shares plus 0.60 in cash for each share in Company Y.
If Company Xs share price was 1.60; this bid is worth (0.5 x 1.60) + 0.60 or 1.40 but would only be effective up to 1.20 (double the cash element) provided it had 6m available in closing cash.
31
32 Appendix 2 Global MBA Simulation Module - Decision Form N.B.N.B. The shipments forall 4 areasmust add to zero The shipments for all 4 areas must add to zero
0 0 Area 2 0.000 0.000 0.000 New Bonds Area 3 Area 4 Capital Issues 0.00 million @ 0.00% 0 0 0 0 New Equity 0.00 million @ 0.00 0.000 0.000 0.000 0 0 0 0 Dividend 0.00% 0.000 0.000 0.000 New Overdraft 0.00 million 0.00 0.00 0.00 0.00 Last Share Price 0.00 0 0 0 0
Appendix 2 Global MBA Simulation Module - Decision Form
Period
Team
Area 1
Production ,000's
0.000
Tools Used
Shipments In (+) or Out (-) ,000's
0.000
Tools Ordered
Marketing ,000's
0.000
Selling Price
Dealers
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Glossary of Terms
A number of key words and phrases used in the booklet are explained below in lay terminology. The relevant page is shown in brackets.
Balance sheet: A summary of the assets and liabilities of your company at a given date. Brand loyalty: The propensity of customers to buy additional or replacement goods from the same supplier. Cash flow statement: A summary of the cash movements in and out of the company for a given period. Coupon: The interest rate charged on the bonds (set at 2% per quarter) Bonds: A long-term fixed interest loan from the bank . Depreciation: The reduction in the balance sheet value of machine tools (fixed assets). For simplicity the simulation assumes that at the end of each period there is a 2.5% reduction in the number of machine tools that your company owns. Dividends: Cash paid to shareholders for each share owned expressed as a percentage of the nominal value of each share (i.e. 1.00) . Earnings per share (EPS): The amount of net profit divided by the number of shares. Equity: Another name for shares. Fixed assets: Usually such items such as plant (factory building) and machinery (machine tools) used in the manufacture of other goods . Gearing: The ratio of the value of long term money borrowed (i.e. bonds but not overdraft) to the value of the Companys shares (i.e. number of shares x current share price). Gross National Product (GNP): The total value of goods and services produced within a period of time by an economy.
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Machine tools: The equipment on which your companys products are made. Nominal value of shares: The price at which the shares were issued originally (i.e. 1.00). Profit & Loss statement: A summary of financial costs, revenues etc for a given period. Shares: Certificates issued by the company to shareholders in return for money that they invest in the company. Currently your company has issued 10m shares (at a nominal value of 1.00). They are currently valued by the capital market at 1.05.
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Business Simulation Group Project Section C Managing in Project Groups
managing in Project Groups

Section C: Managing in Project Groups

This section addresses the issues of the requirements for effective group organisation and of group dynamics. The ideas in this section should be considered when you are deciding how to organise yourselves and how to function as an effective working group.
For the group dynamics dimension of this project, which forms part of the focus of the individual reflective essay assignment on leadership and professional development (which is submitted in semester seven), you should read and consider using the notes included in this section.
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1.
Task and process
Some practical guidelines introduction
Much managerial activity is undertaken in working groups. As a part of the MBA programme, a project work assignment offers opportunities for working with others as a group, and getting the best out of a group.
Though the life of each group is unique and its development in some respects can be unpredictable, experience has demonstrated that groups work can be facilitated appreciable where groups are able to follow the guidelines set out here.
These notes are set out in two sections. The first section reviews phases of a groups development. The second section sets out some advice and practical guidelines towards task accomplishment.
I:
Phases of group development
1. Three stages of project group activity 2. Two dimensions of activity: task and process 3. The process dimension and its phases
II:
Guidelines towards task achievement
4. Integrating process and task 4.1 4.2 4.3 4.4 Inventory crucial resources: people, time and organisation Agree an initial agenda Establish an overall time frame Establish goals: what the group is to do
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4.5 4.6 4.7 4.8 4.9
Chairmanship: managing boundaries Secretaryship: recording and progressing the groups work Establish a time-based activity plan Allocate roles and responsibilities clearly Progress review
4.10 Anticipate the report 4.11 Virtual team-working
5.
Tutorial resources
I:
1.
Phases of group development

Three stages of project group activity
Work in groups can be richly rewarding, with members of successful groups identifying strongly with one another. Work in groups also can be challenging and time-consuming: the price of success often can be continuing attention, especially to detail.
The MBA project groups typically are required to complete a task usually of some complexity within a prescribed time frame. Overall, a groups work must progress through three stages of activity:
1. Planning and preparation 2. Data generation and analysis 3. Resolution and writing up
Groups also must undertake a number of internal management activities which will involve planning, decision-making and organising.
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While it is necessary for a groups activities to be managed and monitored by members throughout, this is true especially of the initial phases of a groups life, for decisions taken (or avoided) then can have profound effects on a groups subsequent work. They also can be difficult to retrieve later.
2.
Two dimensions of activity: task and process
Typically, groups operate simultaneously on two dimensions: task and process. Task is often represented as the manifest requirements of the assigned task a group has been set, and is grounded in legal rationality. Process encompasses the personal relationships which group members engender in seeking to fulfil the groups tasks. Process is dynamic and volatile; sometimes it is referred to as group dynamics.
In practice, process and task tend to be bound up with one another. Here, however, I have distinguished between them in order to clarify phases through which the work of a project group normally must pass in order for it to develop successfully. Though I begin with the process dimension, the thrust of this paper is concerned with guidelines towards successful task accomplishment.
3.
The process dimension and its phases
At the outset, a project groups organisation is unformed. Its resources include an assortment of individuals, each with different interests, skills, priorities, and degrees of understanding and commitment to the groups undertaking. The success of the project will depend on the extent to which these individuals are able to forge themselves into a team, co-operating effectively, flexibly and consistently towards the achievement of thoughtfully defined and agreed goals throughout all phases of a groups work. Establishing and maintaining secure, reliable and continuing patterns of organisation and authority are essential elements for a groups success. To achieve them, a group typically moves through four main processual phases of development . These are described below.
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3.1 characteristics of four key phases in the development of project group process Phase 1. Form Process dimension (interpersonal relations) Dependence (seeking guidance, leadership, seeking to remove uncertainty) Contention (determining best ways forward) Cohesion (coming together as an effective working group) Co-operation (working effectively as a mutually supportive trusting team) Task dimension (operational activities) Seeking orientation
2. Storm
Forging effective work group organisation Implementing agreed operational ground rules and roles Operating interdependently in problem-solving and task accomplishment
3. Norm
4. Perform
Adapted from: Tuckman, B. & Jensen, M. (1977) Stages of small group development revisited, Group and Organization Studies, vol. 2, no. 4, pp. 419-27, and Huczynski, A. & Buchanan, D. (2007) (6th edn) Organisational Behaviour, pp. 297-300.
Characteristic behaviours during each of these four main phases are described in the passages which follow.
Phase 1: Form
Initial group behaviour tends to be characterised by uncertainty. In particular, uncertainty about how members feel about one another, how they expect one another to behave, the sort of assumptions they will make about one another, the commitment group members will have to one another, the kind of problems they may have in joining forces with one another to progress the work of the group, and so on. Uncertainty is uncomfortable, and often produces a swift hunt for leadership in the form of someone upon whom to depend to produce structure, establish ground rules, and set the agendas for the group to follow.
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Phase 2: Storm
As the groups work begins to develop from its initial, formative stage, it is not unusual for original agendas, swiftly set but ill-considered during phase 1 of the groups life, to begin to unravel. Similarly, awkward underlying issues (perhaps concerning authority and how best to proceed), which have been suppressed in phase 1 (we havent time to deal with that now), re-emerge. Among these are likely to be personal agenda issues: who is to lead, who is responsible for what, who is perceived as an ally, who as a potential threat. Such issues will require discussion and working through to a satisfactory resolution to enable the group to proceed to phase 3.
Phase 3: Norm
During the third phase of group development members can find themselves working well together. There is a sense of having resolved earlier conflicts as a result of which the group has created an effective operational agenda. Members begin to share ideas and information, with emerging openness. This is often regenerative. Feeling that they are achieving something worthwhile, members tend to reinforce positive behaviours with further actions which generate commitment, friendship and trust.
Phase 4: Perform
Phase 4 is characterised by group members interdependent co-operation, as individuals or as sub-group members. The group has moved from the insecurity in its interpersonal relations which often characterises phases 1 & 2 to a state of relative security. At its most effective, this extends to members soliciting and offering feedback, with commitment to common activity, to problem solving and to one another. There can be a strong sense of interpersonal achievement; morale is high, activity is high, with a corresponding reluctance to consider the eventual ending of the group and its activities.
More recent developments of this model have included a fifth phase Adjourn which addresses the issue of managing the disbanding of a group once the task has been completed. For a discussion of the phases of group formation, see Huczynski & Buchanan (2007: 297-300).
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II:
4.
Guidelines towards task achievement

Integrating process and task
While the phases set out in Part I typify the process development of the successful group, progress towards stage 4 is neither automatic nor necessarily easy. Fundamentally, achieving success requires effort and commitment by members throughout, and especially in the groups formative phases, 1 and 2. With such commitment, however, the process of achievements of phase 4 potentially is within the grasp of all groups. Indeed, some apparently unpromising initial groupings have gone on to perform outstandingly well. In doing so, they have found some of the advice set out in the following guidelines helpful.
The guidelines are not exhaustive but summarise some fundamental matters project groups will need to take into account in developing their work. Essentially, they concern issues of authority and organisation. In some respects, the guidelines inevitably place an artificial rationality upon dynamic and unstable forces and it should be recognised that groups at times may find themselves unable to follow such orderly procedures (owing to influences indicated in the companion notes to these on Process and Task).
Nevertheless experience has shown that groups have found this advice not only a very useful agenda to address but also a vital lifeline to return to in cases of difficulty.
4.1
Inventory crucial resources: people, time organisation
Usually, work undertaken in a groups opening phases 1 and 2 is likely to be crucial to its subsequent progress. Vital resources are people and time.
The initial thrust of a groups activities necessarily must be inventorial: as a groups principal resources are its members, it needs to discover how best to go about mobilising their skills ad talents.
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All groups also have a further crucial resource (and one which is often overlooked); namely time. Managing time (a concept which embraces all, and which is neutral and depersonalised) can be an effective way of initially managing people and personalities within a group.
A truism repeatedly demonstrated is that most successful groups are those which organise their operations and time management most effectively.
4.2
Agree an initial agenda
It is useful to begin by agreeing
- An adequate time span for the groups initial work (a pattern of one or two-hour working slots can be helpful). - That the groups initial work is inventorial and exploratory - That outcomes are to include some written plans and preparations
4.3
Establish an overall time frame
As soon as possible, establish an overall time frame for the project groups work ahead. Your time frame should span all of the projects three operational stages (preparation, data generation, resolution), working backwards from the groups report submission date. (Gantt charts or written time lines are useful for sequencing events and activities. They can also be useful for sharing ideas and establishing consensus about time boundaries, where these are located, and what the group will need to do in order to meet them). In doing so, it also can be useful to scan your timetables for events outside your project which potentially may have an impact upon it, your time, and your working arrangements.
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4.4
Establish goals: what the group is to do
One of the advantages of the time frame approach is that it encompasses all and provides an externalised arena into which members can place their ideas about the nature of the project and the work they are able to undertake. This must be explored in order to generate common understanding of what they are organising to do.
Hence, group members need to discuss their initial perceptions of the tasks ahead and the issues these are likely to involve. They need to establish and understand their groups goals and how to approach them. By focusing discussion initially on an overall time frame, the group is likely to be able to progress towards consensual agreement on tasks ahead: on what needs to be done. Subsequent important issues concern how it is to be done and who is to do it.
4.5
Chairmanship: managing boundaries
While leadership can be exercised in different ways by different people in relation to different activities at different times in the life of a group, normally there is a premium upon good chairmanship throughout. The function of the chairman is to manage an arena for group discussion, for planning, for sharing ideas, for reviewing progress. The chairmans task is to enable time to be managed effectively, to enable members to be heard, and points to be recorded.
4.6
Secretaryship: recording and progressing the groups work
Normally, it is helpful to record decisions, remits, time spans for task completion, and so on. Moreover, a summary also should be agree for circulation to group members in order that they know as clearly as possible
- what is expected of them - who and by when and how they have agreed to deliver it.
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If this appears time consuming, it is as nothing when compared to the time, progress and effort which can be wasted in subsequent argument where such matters have been misunderstood. Time management and recording are essential functions. The palest ink can be better than the best memory.
4.7
Establish a time-based activity plan
You already should have established an overall time frame for the groups work ahead. Also you should create a time frame for planning and organising roles and resources.
If a group of six members has, for example, 40 hours timetabled for its work, this should be represented within your overall time frame as 240 working hours available to the group. Setting this out as a timetable and filling in the blanks can be a good way of prioritising tasks, allocating roles and addressing essential questions of how tasks are to be approached and who is to undertake them. Fundamentally, the group must agree and establish its effort-reward ground rules, along with privileges and obligations of membership.
Should any member be unwilling to devote time as scheduled to project group activity (instead absenting him or herself or spending time in other ways), if the matter cannot be resolved satisfactorily within the group it should be reported promptly to the project tutor. It should not be left by default.
4.8
Allocate roles and responsibilities.
If a board of directors fails to assign specific responsibilities (say, for marketing, finance, manufacturing, HR and so on) instead explaining that we just leave everything to everybody justifiably it would inspire little confidence. Similarly, it is essential for group members to have clearly defined roles and responsibilities for specific activities and outputs within the agreed overall time span, especially as the group moves towards phases 3 and 4 of its process activities.
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4.9
Progress review
In phases 3 and 4, it is likely to be necessary for the group to operate in subgroups, in order to make best use of time and resources available. The operating procedures and ground rules a established during phases 1 and 2 should be maintained, in particular for progress review purposes, in order that all members understand where the group is up to, what remains to be done, and sight is not lost of the groups overall strategy and purpose.
4.10 Anticipate the report
In the course of the sometimes heady scrambles of fieldwork, it can be easy to lose sight of the projects resolution phase how the groups work is to be written up and by whom. Yet it is upon such issues that much of the success of a groups work will be judged. It is prudent to begin to draw together initial drafts for the report well in advance of a projects resolution phase. This can be useful for highlighting potential shortcomings while time remains to take steps towards remedial action.
A premise underlying project group activity at MBS has been that each member of a group brings to its work broadly similar levels of skill, accomplishment and competence. Hence, for example, all members should be able to contribute comparably (albeit perhaps in different ways) to the production of a groups final report. Nevertheless, it can be desirable for one or two editorially-skilled members to create a final coherent style for the report.
4.11 Virtual team-working
Advances in communications technology and the increase in globalisation are two of the many drivers that have led to the increased use of virtual teams. During the life of an MBA group project the members will encounter periods when they are working virtually. Shin (2005) suggests that virtual teams may be characterised by members being in different locations (spatial dispersion); being in different time zones and working at different times (temporal dispersion); coming from different national cultures which influence values and norms of behavior in the work setting (cultural
46
dispersion); and coming from different organisations which influences the way team members think that work tasks should be approached (organisational dispersion). This last dimension is often referred to as reflecting organisational culture or the way we do things around here. It is important that all team members hold in mind these potential differences because, if they are unacknowledged, it can lead to mutual misunderstanding and impaired group functioning.
There has been much written on issues associated with working and managing in an international context where differing national cultures have an influence (see for example Hofstede, 1991, 2001; Adler, 2002; Hickson & Pugh, 2001; Schneider & Barsoux, 1997). The organisational behaviour text book by Huczynski & Buchanan (2007) gives a good overview of these key issues. Such influences may well be present in your team and will need to be acknowledged and actively managed.
In a comprehensive review of empirical research studies Hertel et al (2005) identify the key dimensions that influence virtual team working. They argue persuasively that virtual teams are not fundamentally different to conventional teams but rather that the former are variants of the latter. They make the point, as do Griffith & Neale, 2001 (cited in Huczynski & Buchanan, 2007) that all teams fall somewhere along a continuum of very low to very high degrees of virtualness.
5. Tutorial resources
While project group members themselves represent the groups crucial resources, groups normally have further resources on which to draw, including a briefing, usually detailing the framework, expectations and required outputs of their work, and a tutor.
The role of the tutor normally is not to act as a group leader or resolver of conflicts, but rather to be available from time to time to offer specialist advice. It is prudent for groups to keep in touch with their tutor and keep the tutor fully informed about their progress.
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2.
Process and Task
Indications of some processes within groups as an aid to recognition

Group process concerns the nature (or dynamics) of interactions between members of a group. These notes, companions to the guidelines on 1. Task and Process for MBA project groups, broadly correspond with the phases of group development set out in that first paper and indicate some examples of processes which may be experienced in a group at various times.
The notes do not attempt to match the potential variety of dynamics within groups nor do they represent formal analytical schema. Fundamentally, they provide a brief repertory of some typical processes and are designed to help group members who wish to recognise signs and potential implications of some process issues within groups.
Indications of some processes within groups
1. Interpreting group process 2. Leadership and followership 3. Interactions and contributions 4. Influence and decision taking 5. Norms, codes and group performance
1.
Interpreting group process
Group process often can be subtle and complex. It can be mobilised to take a groups activities forward constructively. Alternatively, while ostensibly acting in support of a groups formal task, it may cause group activities to be diverted towards other, less productive ends.
Interpreting complex processes and making effective use of interpretations normally requires training and skill. On the other hand, many people in the course of their everyday lives become adept at reading the implications of commonplace
48
processes, including body language; for example, who is inviting contact; who is closing others out; who chooses to interact with whom; and so on. Most people also swiftly become to recognise in others common place signs of, say, affection, anger, boredom, defensiveness, excitement, frustration, and so on. Nevertheless, some people (perhaps members of a project group) may appear quite oblivious to patterns of behaviour around them; despite these being obvious to others, they remain below some members level of awareness.
However, it can be prudent to remember that members of different national cultures may bring with them conventions and expectations (for example, concerning silence, or group harmony) which may differ from your own. Similarly, when considering the evaluations and interpretations which follow, you may also find it helpful at times to reflect on the bases you yourself use to form your judgements.
2.
Leadership and followership
Leadership can be exercised in different ways by different people at different times in the life of a group. However, in the initial phases of a project groups formation, members often experience uncertainty relating to leadership and followership positions. Fundamentally, both leader and follower activities should enable members to get the best out of the group. Try to evaluate whether they are doing so. For example
Domination as leadership: does one member seek to dominate, or impose his or her ideas irrespective of others views? How does his/her assertiveness influence the groups behaviour?
Does there appear to be rivalry for group leadership, or a struggle for power?
Followership and domination. Who supports or is openly deferential to the dominant member? Does anyone repeatedly avoid negative or dissenting views, or seek to prevent alternative or conflicting opinions from being expressed?
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Are some members silent? Are they withdrawn? Excluded? Do they appear to follow the dominant leader, but in fact express minimal commitment one way or another?
Group centred activity as leadership. Do some members push for tasks or responsibilities to be assigned to all members of the group, rather than certain individuals? Is there insistence that everyone must be included in group decisions and activities, irrespective of what these may be? What is being avoided?
Followership and group centredness. Are some members seeking to avoid individual responsibility (or conflict, or commitment, or expression of views) by repeatedly pushing for a collective we response to all issues which are raised? Are some seeking to block power bids by others?
Task-centred leadership. Does anyone attempt to focus on the groups tasks and resources in an objective way? How is this received? Does anyone express (rather than asset) chairmanship by seeking others ideas and opinions and drawing them into constructive discussion? How? Are opinions and ideas sought (and expressed) freely, without destructive criticism?
Task-centred followership. Who among group members seeks to contribute constructively to a task-related agenda? Is conflict dealt with objectively, in problemsolving ways? By whom? Which members appear to be open to ideas and feedback, and wish to push the work of the group forward?
Does anyone appear uninvolved, perhaps responding mechanically only when prompted by others?
How are policies recorded? How is time used, or managed?
3.
Interactions and contributions
Much as an individuals status may not correspond with others esteem of him or her as a person, so the frequency of individuals contributions to a group may not
50
correspond with the influence they are able to assert on group processes. Some may speak a lot but to little effect, while others who say little may engage group members attention immediately. The patterning of interaction and individual contribution can offer useful indications of a groups modes of working and the extent to which it has developed. It may be helpful to note
Who interacts with whom? Supportively? Negatively? Who makes frequent contributions? Who makes few? To what effect? Do initial patterns of contribution change? Do infrequent contributors begin to speak more; do formerly voluble contributors become silent?
How is silence interpreted? How are silent members treated?
Whose contributions are directed towards task fulfilment? Whose interactions influence the groups orientation? (Towards, say, work: play; interest; task avoidance; conflict; co-operation). How? Who helps others to contribute? (For example, by prompting, supporting, helping them explain or clarify ideas)? Who cuts down or attempts to close out others?
4.
Influence and decision taking
The manifest task of a project group (and the one upon which the project members ultimately will be assessed) normally involves the production of a written report and other outputs which satisfactorily fulfil externally defined criteria. Effective investigation and allocation of a groups resources (including resources of time) normally are instrumental to its success, and constructive processes of decision-taking usually are crucial. Hence, it may be useful to consider some of the questions below.
Influence patterns and decision process. Are decisions made by certain group members without reference to others? Who appears to be most effective in influencing other members of the group? Who appears least? Has this pattern changed?
51
How are ideas accepted or rejected within the group? Does anyone offer contributions which repeatedly fail to elicit a response?
Do group members seek to reach consensual decisions, enlisting the positive support of all? How? Are decisions taken by vote? Why? Does a majority seek to override views of a minority?
How are decisions recorded? How are they conveyed to group members?
Decision taking and task facilitation. Who most effectively helps the group to focus on tasks at hand? How? Who seeks (or volunteers) suggestions concerning the best way to tackle tasks ahead?
Does the group engage or avoid requests for feedback, opinions and ideas? Does it solicit or avoid discussion of alternative ways ahead?
Is progress periodically reviewed? Does anyone attempt to interpret or summarise what the group has been doing? How is time used or managed?
5.
Norms, codes and group performance
As time elapses, patterns or norms of behaviour tend to become established in a group. Effective operational procedures for allocating tasks, integrating outputs and optimising the use of a groups resources (which may involve undertaking some tasks as individual or in sub-groups) can be critical influences on group performance. As far as possible, behavioural norms and values should enable a group to function as an effective entity.
While some norms are likely to have been agreed explicitly, others (for example concerning matters which appear to be regarded as out of place in the group and, as a result, are avoided) may be unstated but become established by tacit consent. Some explicit norms become established as rules and procedures, while others take the form of tacit behavioural codes, fundamentally expressing the sense of the way
52
we do things here. The questions below concern some norms and codes and their implications for group performance.
Does the group at times operate in sub-groups? How do sub-groups (or individuals) relate back to other members in the group? Are sub-groups primarily task-centred, or do they fulfil other purposes? (Such as exporting difficult or uncongenial members, or masking disagreements or antipathy between particular group members.)
Are group members able to exchange feedback and feelings? About the task? About one another? Is feedback offered and used constructively, or otherwise?
How is performance kept track of? Evaluated? Who are principal (and effective) contributors to task performance? Are any ineffectual in their contributions? Do they fail to contribute? Why?
How is deviance managed? By whom? When?
Is there effort to keep all members informed and up-to-date? Is this consensual? Does anyone avoid involvement? How is information-sharing managed? By whom? With what effect?
53
Bibliography
Adler, N. (2002) International dimensions of organizational behaviour (4th edn) London: International Thomson.
Griffiths, T & Neale, M (2001) Information processing in traditional, hybrid and virtual teams, Research in Organisational Behaviour, Vol 23, pp 379-421.
Hertel, G., Geister, S. and Konradt, U. (2005) Managing virtual teams: a review of current empirical research, Human Resource Management Review, Vol 15, Issue 1, pp 69-95.
Hickson, D. & Pugh, D. (2001) Management Worldwide: Distinctive style amid globalization, London: Penguin Books.
Hofstede, G. (1991) Cultures and organisations, London: McGraw-Hill.
Hofstede, G. (2001) Cultures consequences: international differences in work-related values, (2nd edn) London: Sage.
Huczynski, A. & Buchanan, D. (2007) (6th edn) Organisational Behaviour, London: Financial Times Prentice Hall.
Schneider, S. & Barsoux, J-L. (1997) Managing across cultures, London: Financial Times Prentice Hall.
Shin, Y. (2005) Conflict resolution in virtual teams, Organizational Dynamics, Vol 34(4), pp 331-45.
Tuckman, B. & Jensen, M. (1977) Stages of small group development revisited, Group and Organization Studies, Vol 2(4), pp. 419-27.
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Manchester Business School Global MBA Business Simulation Group Project

Original Thinking Applied

Manchester Business School Global MBA

Manchester Business School Global MBA

Business Simulation Group Project

Business Simulation Group Project (Global MBA)

Global MBA Business Simulation Group Project

Section A: Introduction to the module

Section B: Instructions for the Business Simulation

Section C: Managing in project groups

Business Simulation Group Project (Global MBA)

Business Simulation Group Project Section A Introduction to The Module

introduction to The module

Section A: Introduction to the module

Business Simulation Group Project (Global MBA)

Introduction to the module

Course aims and learning objectives

Business Simulation Group Project (Global MBA)

The Module focus

The development of professional management skills

Business Simulation Group Project (Global MBA)

Effective group functioning

Course content and logistics

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Group report focus and structure

In your analysis you may wish to consider the following questions:

What is the impact of the labour unrest function?

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

instructions for the Business Simulation exercise

Section B: Instructions for the Business Simulation Exercise

Business Simulation Group Project (Global MBA)

RUNNING THE BUSINESS SIMULATION The Booklet

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Direct Production Cost Schedule, s per unit of output

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Business Simulation Group Project (Global MBA)

Issued Bonds Issued Equity Shares x Share Price

Business Simulation Group Project (Global MBA)

Tax is charged at 50% on the taxable profit.

Business Simulation Group Project (Global MBA)

Stocks of your Companys product are always valued at 40 per unit.

Business Simulation Group Project (Global MBA)

THE TRADING BACKGROUND

Business Simulation Group Project (Global MBA)

1.5m 1.7m 3.2m 7.1m

15m 41m 100m 207m

circulated to all companies.

16,027 10,000 3,500 2,527 16,027

Stock Start of year Additions during year End of year

(21,411 units at 40)

Business Simulation Group Project (Global MBA)

TRADING RESULTS, LAST QUARTER OF YEAR 5

Business Simulation Group Project (Global MBA)

Cash Flow Statement