Transcript 01-First-Decision - Welcome to Prospect Learning

Making Your first Decision
With Sample of Biz-Café Decisions
for The First Week
Ted Mitchell
In this lecture You will
• 1) learn about the types of decisions
• 2) learn how you earn points in both the
single-shot games and the practice games
• 3) be given a reasonable but NOT optimal
decision set for starting the game
• 4) Learn to buy the professional market
research
Hard to make smart decisions
• when you have no idea what the situation is
• Read the Biz-Café Case
Historical Information about
likely Sales Revenue and Prices
Ted Mitchell
Historical Demand and Revenue
Week
starting
Daily
M-F
Sat
Sun
Total
S&S
Total
Week
Price
Jan 1
1000
750
550
1300
2300
3.50
Jan 8
1150
720
510
1230
2380
3.50
Jan 15
1070
780
530
1310
2380
3.50
Jan 22
1045
950
690
1640
2685
3.50
Average
1,066
1370
2,436
$3.50
Weekly
Revenue
$8,527
Demand and Price From Pat’s Old Coffee Shop
Mature market with 100% customer awareness
Starting Biz-Cafe
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You are the owner of a Biz-Café
You are the team leader (leader of a Team of ONE, you)
You get a loan of $25,000 to start the Biz-Café
The goal is to maximize cumulative profits (Retained
Earnings on the Balance Sheet)
Not just the net income for the final week
But the maximize the net income for every week
Making a bigger profit from week to week is NOT
sufficient!
Your goal is to make the biggest profit that can be
made!
There are Two Types of Simulations
• 1) a Practice Game with lots of opportunities to
replay decisions (Groundhog Day effect)
• To get the points for playing a practice game you
must finish the simulation normally 8 or 16
decision periods
• The goal of the practice game is for students to
experiment with different choices and prepare a
strategy for the Single-Shot game.
• 2) a Single-Shot Game with NO opportunities for
any replays. (You’ll need to have a plan prepared
in advance.)
Earn Points in a Practice Game
• 1) Finish the simulation and end the game
with the results of the final week’s decisions
• If the simulation involves making decisions for
16 simulated weeks then finish the practice
with a balance sheet for month 4!
• You will be participating in several different
games (scenarios). Finish each one by
completing the total weeks involved.
Earn Points in a Single Shot Game
• Make as much net income each week as you possibly can
and increase your retained earning to the maximum
amount you can
• The bigger your retained earnings at the end of the game
the more points you will earn
• If you have average retained earnings you will get the
average grade for the class
• If you fail to make a positive cumulative profit (a positive
retained earnings) then you get zero points
• You will be given target goals for the different games you
will be playing
• Example: To earn a grade of A- you must Reach an
awareness level of at least 80% and have a retained
earnings of at least $30,000
Three Types of Decisions
• 1) Start up Decisions
– Renting the Floor Space
– Buying Furniture (choose the style)
– Buying an Espresso Machine (choose the size)
• 2) Weekly Business Decisions
– Management
– Marketing
– Operating Decisions
• 3) Special Incident Decisions
– Buying insurance, market research, renovations
1) Start Up Decisions
Choose a Name
Optional
Choose a Logo
Not Necessary
Rent The Floor Space
Required
Choose The Style of Furniture
Choose the Size of Espresso
machine (dual or quad)
You only make these decisions once!
2) Making a Weekly Decision
• You make your decisions for next week at the end of
the current week
• When making Decisions for Week Number One, #1
You will be in Period #0
• You must advance the game to week #1 in order to see
the Results and Outputs of Your Decisions for week #1
When you are finished reviewing the results of your
decision for week #1, then you will be making decisions
for week #2.
• You are at the end of week #1 when you make
decisions for the operation of the café in week #2
• You must advance the game to week #2
Your Business Grows and
• You will change you decisions over the span of
the game
• The goal is to find an optimal set of decisions
that will maximize Retained Earnings for each
week the business is open
• The decision set that is optimal in week #1 will
not be the optimal decision in week #15
• The game is a moving target
Weekly Decisions Always Include
Managers Weekly Salary
Number of Servers to Hire/Fire
Server Hourly Wage
Price Tag for a Medium Cup
Type of Newspaper Ad
Number of Daily Radio Spots
Hours per Day (starts with a Five
day week)
Quality of Coffee
Pounds of Coffee to order
Number of Cups to order
‘Reasonable’ Decisions For Week 1
Managers Weekly Salary
$610
Number of Servers to Hire/Fire
20 servers
Server Hourly Wage
$9.00
Price Tag for a Medium Cup
$3.50
Type of Newspaper Ad
General Awareness,
$200 per day
Number of Daily Radio Spots
5 per day @ $40 per
spot
Hours per Day (starts with a Five
day week)
8 am to 10 pm
Quality of Coffee
Best, $6 per pound
Pounds of Coffee
40 pounds
Number of Cups
20,000 medium cups
with Logo
If you do not change the decisions
• Then they will remain the same each week.
Type 3) Special Incident Decisions
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Depending on The Learning Objective for the game
There will be different types of one-off decisions
Buy insurance or not
Buy a professional market survey or not
Buy a pastry oven or not
Advertise Fair trade
Buy a Coffee Roaster
Choose type of entertainment
Renovate Furnishings
Deal with Sexual Harassment
Deal with angry customer
Any Special Incident
• Only occurs once during a game
• Buying insurance or not only occurs once per game
• Choosing to sell pastry or not only occurs once per
game
• There is no second chance to see the incident again.
• The consequences of the incident decision last for the
duration of the game
• In a Practice game you can repeat the decision in order
to learn the consequences of your decision about the
incident (the groundhog day effect)
• In a Single Shot game there is no second chance and
you live with the consequences for that entire game.
Any Questions
• on The nature of The Decision Making in BizCafé?
• Remember it is a moving target. The market is
growing, competitors are reacting, special
incidents will occur!