Transcript Cesim Global Challenge introduction

Cesim Global Challenge
introduction
Cesim Global Challenge
Students are the management team of a global
mobile phone company and compete with other
teams to gain market share and create value for
the shareholders.
The objective of the game is to achieve the
highest financial performance through a sound
business strategy, timely decisions, and accurate
implementation. Strategic approach to decisionmaking, careful analysis, continuous R&D, good
timing, and successful product positioning are the
main keys to success.
Cesim Global Challenge is used by Universities
and Business Schools all around the world.
Decision-making Overview
Research and Development
– Manage the company through four different
technological phases.
– Invest in your own R&D and/or buy technology
know-how from outside.
– Develop a solid strategy and time your decisions
accurately.
Marketing
– Manage product life-cycles and product launches.
– Increase customer loyalty and company image.
– Choose different product features, determine
prices, and decide on the promotion for all markets
internationally: Europe, USA and Asia.
Decision-making Overview
Production and logistics
– Plan the global production and react to the emerging
opportunities.
– Utilize the learning curve concept and economies of
scale in your strategy.
Investments and finance
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–
–
–
–
Invest in production facilities.
Issue debt or equity and/or make share buybacks.
Determine your dividend policy.
Manage your capital structure.
Deal with international finance issues like exchange rate
fluctuations, interest rates, taxation.
Flow of operations
System
provides new
background
info and
results for
each round
Analysis and planning
Decision making with
the tool
System calculates the
results automatically
at given deadline
Results and feedback
Learning Process
Concrete experience
Decision making
Applying new ideas
Observations & reflections
Results & coaching
Analysis & planning
Generalising from the
experience
Lectures & discussion
Simulation features
 3 markets, up to 2 products in each market
 Product = Mobile communications device
 Marketing mix
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•
•
•
Product
Price
Promotion (advertising)
Place (delivery priorities)
 Product dimensions:
• Technology (four evolutionary stages)
• Product features (max ten features, each feature brings
additional cost)
Simulation features continues..
 Production takes place in two areas:
USA, Asia
• Products to Europe will be shipped from
these areas relative to the decided
production capacities
 Demand driven production = no finished
goods inventory
 Costs due to demand estimation errors:
• If you overestimate the demand;
• Production will be scaled down automatically and an
adjustment expense will occur.
• Logistics will not be optimized, which may cause additional
costs.
• If you underestimate the demand;
• You will have lost sales, i.e., production will not adjust
upwards.
Simulation features continues..
 Outsourcing is available in both production
areas up to given maximum.
 Learning curve effect has significant impact in
production costs = > keep in mind when
considering outsourcing options.
 Investments in production facilities have two
period delay, i.e., investment now will be
available for production in two years. Payment
will be made in the middle, after one year.
 Own R&D investment has one period delay,
licensed technology becomes available
immediately
Your team...
 Takes over from the previous management
team
 Is responsible for the overall operations of the
company
•
•
•
•
•
Strategy
Marketing
R&D
Operations (production, logistics)
Finance
 Will aim to convince the investors about the
long-term growth prospects and profitability of
the company
Key metrics
Cumulative Total Shareholder Return
– Total Shareholder Return (TSR) is a concept used to
compare the performance of different companies'
stocks and shares over time. TSR combines share
price appreciation and dividends paid to show the
total return to the shareholder. It is expressed as a
percentage of the initial investment.
– Cumulative Total Shareholder Return shows the
annualised percentage return that a team delivers
during the whole simulation.
FAQ: How should I interpret the network coverage
chart?
E urope
Each market area has its own network
coverage forecasts. Those forecasts are
indicated in charts on ”Markets” page, each
representing the current best knowledge
about the expected development of
networks for each respective technology in
each area.
Tec h 1
Tec h 2
Tec h 3
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
%
%
%
%
%
%
%
%
%
%
%
%
2004
110
100
90
80
70
60
50
40
30
20
10
0
Tec h 4
The picture above forecasts that in 2004,
Europe has 100% coverage for Tech 1, about
50% coverage for Tech 2, and 20% coverage
for Tech 3. Tech 4 networks start developing in
2006 and by 2007 the coverage is expected to
be about 40%.
Key issues to consider:
• Network coverage forecast is not the same
as demand forecast.
• Networks are not backwards compatible,
i.e., you can not use Tech 1 handset in Tech
2 network.
• New technology is considered more
attractive than the old technology, i.e., part
of the demand comes from the ”novelty” factor.
• Finally. It is very costly to develop all
technologies and in some situations you
may be better off by making choices
between them.
FAQ: How to make the production decisions?
1.
First check your current production capacities.
•
2.
Decide how you want to deliver to the European
markets. From US, from Asia, or from both?
•
3.
Remember it takes two periods to complete new
production facilities.
It is helpful to look at the parameters under ”Market
conditions” to see what the transportation costs are. If
you decide to deliver from Asia only, assuming you have
enough capacity, you need to allocate your production so
that you produce exactly the amount equal to estimated
demand in the US and the rest (Asia + Europe) in Asia.
Adjust the production capacities in both areas to
achieve the desired outcome.
•
•
You have two production lines in each area. So in total
you can produce all four different technologies if need be.
Remember that it is more expensive to start producing
new technologies in Asia. The best outcome is achieved
when you start producing new tech in US and move it to
Asia once it is more mature.
FAQ: How to make the production decisions?
4.
About capacities
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5.
Outsourcing is also available
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•
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6.
Besides the learning curve, also production cost curve has
impact on the production costs. This means that within
given period you can minimise the production costs if you
find the optimal production capacity (75 - 85% capacity
utilisation ratio).
This does not mean that you should not use 100% of
capacity if you have demand for your products!
You must allocate one production line from your own
capacity in order to outsource certain technology.
Costs and maximum amounts are given on the
production-page.
Remember that there is no learning curve effect from
outsourced products.
When you have done all these decisions go to
”Logistics” page to check the outcomes.
•
Under ”Products available” you see how the transports
are planned to take place. Observe the arrows.
FAQ: Why do I get logistics costs even if I planned not to?
1.
Often this happens in a situation where the actualised
global demand is less than anticipated.
•
2.
When you have overestimated the demand the system
automatically scales down the production, but the
logistics is no more optimised. The most typical outcome
is that you deliver to Europe both from the US and from
Asia. The only way to avoid this is to estimate the
demand completely accurately and produce according to
the estimated demand.
It can also happen if the delivery order on the
”Logistics” page has been wrongly set.
•
For example, if you set US as the number one delivery
priority from Asia it means that you will deliver to US
first. In normal circumstances this is not a good decision;
you should always seek to deliver the local markets first
from each area (US from US and Asia from Asia)
FAQ: How do I benefit from transfer
pricing?
1.
Transfer price is the price at which the producing
subsidiary sells its products to the selling
subsidiary. By transfer pricing you can optimize
global profit by allocating highest profit to the
region in which taxes are lowest. Also, it is
feasible to utilize transfer pricing in a situation
where one subsidiary would be making loss and
the other one(s) would be making profit. The
production subsidiary can set the transfer price
in the range of 1 to 2 times its direct variable
unit cost.
FAQ: How to make the financing decisions?
1.
First make the treusury management decisions. On ”Finance”
page the chart with the title ”International Treasury
Management” shows the situation in group companies (USA,
Asia, Europe). USA being the parent company.
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•
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Blue bar shows local cash and green bar shows local debt.
Usually it is better to finance the group companies through the
parent company (USA).
If you have either surplus (cash) or deficit (local debt) in Asia or
Europe, you can move funds by inputting the desired amount to
the Internal loans cells. Positive number indicates that you move
funds from the US to the country (to cover deficit) and negative
number indicates that you repatriate excess funds.
Remember that if you invest in the production facilities in Asia
you need to finance them one year after the investment decision
has been made.
FAQ: How to make the financing decisions?
2.
Next make the financing decisions. The first step here is to check the
cash balance and short-term debts.
a)
b)
c)
d)
Look at the parent company cash flow statement and see whether your
budgeted cash in the end of the period is 2000 tUSD (this is the minimum
cash position always) or more. You should target to have a little bit more
than 2000 tUSD on the row ”Cash (end of period)”. This means that you
do not have excess funds in low-return cash-account and you do not
expect to take any expensive short-term loans.
If it is substantially above 2000 tUSD, it means that you have cash
surplus. You can refer to the next page about re-paying funds to external
sources. If it is exactly 2000 tUSD, it means that you do not have enough
funds to finance the working capital and investments. Continue to step c)
Check the line ”New short term loans taken” on the left-hand side
column. If that number is positive, it means that you are increasing your
short-term debt. Assuming that you did not have any short-term debt the
year before, you need to raise enough funding (see next page about
raising the funds) to avoid the need for short-term debt (in this case
short-term debt is more expensive than long-term).
In case you have accumulated some short-term loans in the past you
should aim to pay that off as soon as possible in order to avoid extra
financing costs. Line ”Paypack of short-term loans” shows how much you
are paying off.
FAQ: How to make the financing decisions?
3. Raising/re-paying funds from/to external sources.
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You have two alternatives, debt and equity. Your
goal should be to have approximately about
50/50 of both debt and equity on your balance
sheet throughout the simulation (you can see the
capital structure in the equity and liabilities chart
on the left).
The means how you can adjust your capital
structure are: issue new equity (= brings cash in
the form of equity), share buy-back (= give
excess cash back to the owners), issue debt (=
brings cash in the form of debt), re-pay debt (=
reduce the amount of loans).
“Minimise”
On-line helper
Note that by clicking the
small green i -signs in the
system you can find
explanations and
information that is related
to the specific section in
the decision-making area.
“Maximise”
“Open manual”
“Close”
“More inform
on the topic”
(Opens the m
at a relevant p
example belo
For more information
On-line Global Challenge
Presentation
http://globalchallenge.cesim.com/presen
tation/index.html
Technical Support
[email protected]
Flow of the Game
Introduction
Practice
Round
Strategy and
Objectives
Decision
making
Conclusion
and Analysis
Introduction: Participants familiarized themselves with the game
Practice: There is an optional practice round before the actual
game.
Strategy: The teams define their strategy and objectives.
Decisions: The teams must take decisions for each of the areas
of their company, aiming to perform better then their competitors
and adding more value to their shareholders.
Conclusions: The financial indicators are analysed at the end of
each of the rounds to determine the value of the company and its
performance.