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					             BUSINESS SIMULATION GAME INSTRUCTIONS

                                       Introduction

       Welcome to the exciting world of operating a business. The challenge will be in
making the correct decisions for a television (TV) company over six (6) time periods
beating out the competition and making a profit for the company. The organization is
depending on you to lead them into the future. Are you up for the adventure?


                                       Product Line

        The TV company manufactures and sells five (5) different screen sizes of
televisions. The color monitor screen sizes are the 3-inch screen, the 13-inch screen, the
20-inch screen, the 27-inch screen, and the 52-inch screen. The following are the
advertising descriptions used to sell each size of TV.


3-inch TV:     "The personal hand-held TV is the perfect device for that person who
               cannot miss their favorite program or the news. The 3-inch color monitor
               brings the big picture to the small screen. Included with the purchase is
               headphones that will allow you to listen to your program without
               disturbing others. Also included is an AC adapter/charger that allows you
               to plug into any electrical outlet to watch or simply charge the batters for
               6 hours of entertainment before having to recharge the batteries. The
               futuristic design will make people think you are from the 24th century.”

13-inch TV:    “This flat screen jewel will add style to your smallest space. The TV
               cabinet comes in the colors of red, orange, yellow, blue, or green. Also
               the unique TV cabinet design allows the TV to be hung from underneath a
               self for those extra tight spaces. The perfect accessory for dorm rooms,
               kitchens, garages, or even children’s bedrooms. The TV is cable ready
               and comes with a standard remote.”

20-inch TV:    “You will love the picture and features of this stylish 20-inch flat screen
               TV. The unique screen design reduces reflections and glare by over 60%
               producing incredible image accuracy and allowing wide viewing angles.
               The TV can be programmed to turn on or off at preselected time periods
               using the simple remote. Wake up to your favorite morning show or fall
               asleep watching a movie without the worry of turning the TV off. The TV
               is cable ready and has front and rear AV jacks for connecting a VCR,
               DVD, camera, or video game. The TV cabinet comes in the colors of
               black, silver, or gray.”
27-inch TV:   “This TV is loaded with accessories for everybody in the family. The
              screen design produces sharper edges and better depth giving corner-to-
              corner detail when watching your favorite program. The crisp, vivid
              picture will take your breath away. The picture-in-picture (PIP) feature
              will allow dad to watch two ball games at the same time. The parental
              control V-chip will allow mom to use the TV rating system to block
              particular programs so kids cannot watch them. And kids will love the
              front AV input design allowing them to hook up their gaming system in a
              jiffy. The TV is cable ready and comes with an easy-to-learn remote. The
              TV cabinet comes in various simulated wood colors to match any home
              decor.”

52-inch TV:   “The granddaddy of TV’s, the ultimate home entertainment system. Each
              time the TV is turned on, the electronic digital convergence provides a
              flawless color combination and a consistently perfect picture giving the
              viewer a sense of realism. The four separate speakers provide surround
              sound enhancing the audio portion of the program. The viewing
              experience becomes truly cinematic. The TV is both cable and satellite
              ready and can access up to 999 channels. The only challenge will be what
              to watch! The universal remote allows you to control not only your TV,
              but also any other video or audio components eliminating various remote
              controls. Home theater versatility at its best.”


                                      Decisions

   1. PRODUCTION – How many of each product will you produce? The objective is
      to have enough inventory on hand to meet customer demand. But at the same
      time, not have too much inventory left over tying assets up in the warehouse. If
      you do not produce enough televisions to meet customer demand, the company
      will have a stockout, which will cause you to have unhappy customers. A
      stockout will cause you to lose sales because customers could not get the product
      when they wanted it and they will buy from one of your competitors. On the
      other hand, if the company has left over inventory at the end of the time period,
      the company will be charged an inventory carrying cost (storage, handling,
      insurance, etc). Production cost and inventory carrying cost for each product can
      be found on the Information Page.

   2. PRICE – What price will you charge for each of your televisions? If you price
      your product too low, the customer will view your product as Low Quality, and
      probably not buy it. If you price your product too high, the customer will view
      your product as Not Worth It and not buy it. However if you price your product
      within the price range the customer expects to pay for the product, the customer
      will see your price as being Great and the more televisions you will sell.

                                             2
   Once you have your price within the price range the customer is expecting, you
   do not know whether your price is at the low end or high end of the price range.
   If your price is at the low end of the expected price range, you take the risk, and
   slightly increase your price, customers will think your price is still Great and keep
   buying letting you increase your revenue without demand suffering. However if
   your price is at the high end of the expected price range, you take the risk, and
   slightly increase your price, customers will no longer see your price as being
   Great decreasing demand and revenue. All prices must be in whole
   dollar amounts. For example, $109 or $525 or $973. Do not use cents when
   making your pricing decisions, such as $199.95. If the pricing decision is not a
   whole dollar amount, the price will be rounded to the nearest whole dollar.

3. DISTRIBUTION – Where will you distribute each of your products for customers
   to purchase? You have four (4) types of outlets that you can distribute your
   products through to reach the customer. The types of outlets you can choose
   from are Discount Stores, Department Stores, Electronic Stores, and TV Specialty
   Stores. Customers will associate certain televisions with certain outlets better
   than the other outlets and more customers will go to a certain outlet looking for
   your television than other outlets. The goal is to find out which outlet the
   customer prefers to shop for your televisions. If you choose the wrong outlet,
   customers will Hate the location. However if you choose the correct outlet,
   customers will think the location is Perfect. Choosing the correct outlet for your
   products will greatly increase your sales. Below is a brief description of each
   type of outlet.

           Discount Stores: They provide little or no service in the selling process.
           The customer must totally decide whether to by a product based on the
           information provided on the packaging, display, and their understanding
           of the product. Price is usually important to the customer but not the only
           variable used in buying the product. The stores usually stock one or two
           sizes of televisions more than they do of the other sizes.

           Department Stores: They provide some service in the selling process. The
           customer is allowed to shop on their own but a salesperson is always
           available to answer questions and provide demonstrations. More floor
           space is given to certain sizes of televisions more than other sizes to meet
           the needs of various customers. Sometimes value can be more important
           than price to customers but not always.

           Electronic Stores: They provide some service in the selling process. The
           customer is allowed to shop on their own but a salesperson is always
           available to answer questions and provide demonstrations. These stores
           are usually stocked with numerous types of gadgets including televisions.
           Sometimes price can be a factor for customers, and sometimes price is not
           a factor for customers.
                                            3
           TV Specialty Stores: They provide full service in the selling process. The
           salesperson asks detailed questions to match the customer’s needs with the
           right product. Also the salesperson provides plenty of information and
           material to help the customer to make a decision and gives extensive
           demonstrations on how to use the product. Price is not as important if the
           customer gets exactly what they want and feels they are getting value.
           Theses stores stock a wide variety of televisions but sales efforts are
           focused more on a few sizes of televisions than other sizes of televisions.


   To avoid channel conflict, you can only distribute each product through one (1)
   type of outlet. In other words, a company could not distribute the 3-inch
   television through all four (4) outlets: Discount Stores, Department Stores,
   Electronic Stores, and TV Specialty Stores. You must decide on one (1) outlet for
   each of your products. Below is an example.

                                 Product              Outlet

                                 3-inch               Discount Stores
                                13-inch               Department Stores
                                20-inch               Electronic Stores
                                27-inch               TV Specialty Stores
                                52-inch               Discount Stores

   If more than one (1) outlet is chosen to distribute a product, the first outlet listed
   will be used.

4. ADVERTISING EXPENSE – How much will you spend on advertising to inform
   and persuade the customer to purchase your televisions? A minimum amount
   must be spent on advertising before customers are persuaded to seek out your
   product. If a minimum amount is not spent, customers will buy from your
   competitors and the company’s customer satisfaction level will decline when
   customers realize that they could have bought your brand. On the other hand,
   once you have spent a certain amount, no matter how much more you spend on
   advertising, the company will not attract any more new customers. Also too
   much advertising could annoy customers and turn them away because they are
   Sick Of Them. Also the amount you should spend on advertising will fluctuate
   based on the economy. When the economy is doing well, the customer will
   expect you to spend more on advertising. But when the economy is doing badly,
   the customer will expect you to spend less on advertising. Advertising
   expenditures must be done in whole dollar amounts. For example, $109 or $525
   or $9,730. Do not use cents when making your decisions, such as $199.95. If the
   decision is not a whole dollar amount, the number will be rounded to the nearest
   whole dollar.
                                        4
5. PUBLIC RELATIONS (PR) – How much will you spend on public relations to
   develop a favorable company image and brand name in the customer’s mind?
   Again, a minimum amount must be spent on PR before customers begin
   developing a favorable image toward your company and brand name. If a
   minimum amount is not spent, customers begin developing a more favorable
   image toward your competitors and their brand names resulting in fewer sales for
   you. But after you have spent a certain amount, no additional expenditures will
   increase the customer’s image about the company and brand name. Also too
   much PR will give the customer the impression that you are “kissing up” to them
   and they will think it is Overkill. Also the amount you should spend on PR will
   fluctuate based on the economy. When the economy is doing well, the customer
   will expect you to spend more on PR. But when the economy is doing badly, the
   customer will expect you to spend less on PR. PR expenditures must be done in
   whole dollar amounts. For example, $109 or $525 or $9,730. Do not use cents
   when making your decisions, such as $199.95. If the decision is not a whole
   dollar amount, the number will be rounded to the nearest whole dollar.

6. RESEARCH & DEVELOPMENT (R & D) – How much will you spend on
   research and development to improve your product line? Keeping ahead of your
   competitors is crucial. R & D expenditures will keep your product on the “cutting
   edge” and make your product more desirable than your competitors. The
   customer will expect you to spend a steady amount on R & D to keep your
   product desirable. If not enough money is spent on R & D, your competitor’s
   products become more desirable than your products. At the same time, if too
   much is spent on R & D, the improvements on your product become Too Fancy
   for the average customer and it will turn the customer away. After a certain
   amount has been spent on R & D for a product, the company will experience a
   breakthrough and demand will increase for the product. Examples of an R & D
   breakthrough could be a better sound system, improved picture quality, or longer
   durability. But once you have a breakthrough, you should not let your guard
   down. Having a competitive edge in the market could be fleeting because
   competitors will soon copy your ideas for their products. Also after a certain
   amount has been spent on R & D for all products, a company will experience a
   major breakthrough that will reduce production cost for all its products.
   Examples of a major R & D breakthrough could be lower labor cost, lower
   material cost, or lower overhead cost. R & D expenditures must be done in whole
   dollar amounts. For example, $109 or $525 or $9,730. Do not use cents when
   making your decisions, such as $199.95. If the decision is not a whole dollar
   amount, the number will be rounded to the nearest whole dollar.




                                       5
7. MARKETING RESEARCH – Will you spend money on marketing research to
   obtain information to help your company make better decisions? Each company
   will have the option of purchasing information from a national marketing research
   firm. The following is a list of research activities that can be performed and the
   cost of the activity.

   a) A survey of customers on what they think about your pricing, location,
      advertising, PR, and R & D decisions for each of your products. The report
      will give you the most common comment made about a decision. If you
      receive a comment with an exclamation point after the comment, your
      company has made the best decision possible. If you receive the comment
      “none”, the research company could not find enough comments about the item.

                            COST PER ORDER = $25,000

   b) Also a competitor information report can be purchased. The report will show
      Competitors Prices for the Time Period, Competitors Advertising Expense for
      the Time Period, Competitors PR Expense for the Time Period, Competitors
      R & D Expense for the Time Period, and Competitors Location Decisions for
      the Time Period

                            COST PER ORDER = $25,000

8. CAPACITY – How big of a factory or plant will you build to produce your
   televisions? The factory must be built in one hundred (100) unit increments and
   the smallest factory you can build is five hundred (500) units. Also, the amount
   of factory capacity you allocate for each product must be in one hundred (100)
   unit increments as well. For example, a company builds the smallest factory
   allowed, or 500 units, and means the company can produce up to a total of 500
   televisions. However, each product must be allocated a 100 unit capacity.

                        Product                Capacity

                         3-inch                100 units
                         13-inch               100 units
                         20-inch               100 units
                         27-inch               100 units
                         52-inch               100 units
                                   Total       500 units

   Now let’s say the company would like to expand operations and increases the
   factory by 100 units. The additional 100 units cannot be divided between the
   products and must be allocated to only one of the products.


                                           6
                        Product               Capacity

                        3-inch                 100 units
                        13-inch                100 units
                        20-inch                200 units
                        27-inch                100 units
                        52-inch                100 units
                                  Total        600 units

   Now let’s say the company would like to expand operations again and increases
   the factory by 200 units. The additional 200 units cannot be divided between the
   products and must be allocated to two of the products.

                        Product               Capacity

                        3-inch                 200 units
                        13-inch                100 units
                        20-inch                300 units
                        27-inch                100 units
                        52-inch                100 units
                                  Total        800 units

   Once a company increases the size of its factory, a company cannot reduce the
   capacity of its building. Using the information above, this company would have a
   total capacity of 800 units for the rest of the game and the 20-inch TV would have
   a capacity of 300 units for the remaining part of the game.

9. FINANCING – How will you finance the building of your factory? Each 100 unit
   increment will cost a company $10,000. Therefore, the smallest factory (500
   units) would cost $50,000. However, a company will have several options of how
   they would like to finance their factory.

   a) Capital Loans: A company can obtain a loan from a financial institution. The
      loan is issued in $1,000 increments, such as $3,000 or $40,000. The financial
      institution expects the company to pay 5% of the total outstanding loan(s) plus
      5% interest on the total outstanding loans each time period. For example, a
      company decides to take out a $50,000 loan to pay for its factory. The
      payment would be calculated as follows:

       $50,000 outstanding loan x 0.05 payment = $2,500
       $50,000 outstanding loan x 0.05 interest = $2,500
       $2,500 payment + $2,500 interest = $5,000 time period payment



                                          7
b) Stock: A company can sell shares of stock to raise money. Stock must be sold
   in blocks of 100 shares at a time. However, the price of the stock will
   fluctuate with the economy. When the economy is doing well, the stock price
   will increase. When the economy is doing badly, the stock price will
   decrease. Also stockholders will expect the company to pay them dividends
   each time period whether the company made money or not and will expect a
   higher dividend per share as time goes by. To start the game, the price of
   stock is $20 per share and the stockholder expects a $2.00 dividend per share.
   For example, a company decides to sell $50,000 worth of stock to pay for its
   factory. The dividend payment would be calculated as follows:

   $50,000 / $20 per share = 2,500 shares of stock
   2,500 shares of stock x $2.00 per share dividend = $5,000 dividend payment
                                                             per time period

c) Bonds: A company can sell bonds to raise money. Bonds must be sold at
   $1,000 per bond. Also bond holders will expect the company to pay them
   10% interest on each bond. The bond interest rate of 10% will remain
   constant throughout the game. For example, a company decides to sell
   $50,000 worth of bonds to pay for its factory. The bond interest payment
   would be calculated as follows:

   $50,000 / $1,000 bond = 50 bonds
   $1,000 bond x 0.10 interest rate = $100 interest per bond
   $100 interest x 50 bonds = $5,000 bond interest payment per time period

A company may pay for their factory and any expansion by using only one
method of financing or a combination of financing options. For example, a
company may use nothing but capital loans, or sell only stock, or issue only
bonds. However, a company may use a combination of financing methods. For
example, a company decides to build a $50,000 factory. The company could take
out a $10,000 capital loan, sell $20,000 worth of stock, and issue $20,000 worth
of bonds.

If a company ends a time period with a loss, a financial institution with issue the
company an Emergency Loan to cover the loss. The emergency loan will be
rounded to the nearest $1,000. For example, a company had a loss of $28,139 for
a time period. An emergency loan of $29,000 would be issued to the company,
and the company will be expected to make payments back to the financial
institution for the remaining part of the game. However for an emergency loan,
the financial institution will expect the company to make payments of 10% of the
total emergency loan amount and pay 10% interest on the total emergency loan
amount. For example, a company needs a $29,000 emergency loan. The payment
would be calculated as follows:

                                     8
       $29,000 emergency loan x 0.10 payment = $2,900
       $29,000 emergency loan x 0.10 interest = $2,900
       $2,900 payment + $2,900 interest = $5,800 time period payment

  10. SALES – A company may put each of its products on sale once during the game.
      Putting a product on sale will automatically increase sales of that product for the
      time period, as long as other factors are in line. For example, a company can’t
      charge $1,000,000 for a 52-inch TV, put it on sale, and expect to make a bunch of
      money. The product’s price will automatically be reduced by a certain amount
      based on market factors to represent a sale. Examples of market factors are the
      economy, prices of competitors, are competitors having a sale also, and other
      product decisions such as location, advertising, PR, and R & D.

 11. ECONOMY – A company can judge the state of the economy by the economic
     forecast. The beginning economic forecast to start the game will be handed out by
     the instructor. When the economic forecast is greater than the beginning
     economic forecast, a company can assume the economy is getting better or is
     doing well. However when the economic forecast is less than the beginning
     economic forecast, a company can assume the economy is getting worse or is
     doing badly. Also the estimated demand tells a company how many people are in
     the market looking for a TV. However the estimated demand does not mean that
     many televisions will be sold. If companies do not make good decisions in selling
     their products, the customer will postpone their purchase to a future date.

                                     FEEDBACK

        At the end of each time period, each company will receive a report on how well
they performed. Each company will receive the information below to help them analyze
the decisions they made and what decisions need to made for the next time period.

      Income Statement – A simple income statement showing sales, production cost,
       expenses, and profit/loss for the time period.

      Inventory – The report will show the beginning inventory, units produced, units
       sold, and ending inventory for the company.

      Product Information – The report will show the completed sales for each product
       to help a company keep track of how many sales they have done during the game.
       Also the report will show the production cost per unit for each product. If a
       company has a major breakthrough, these numbers will change so pay attention to
       these numbers. In addition, the report will show the number of R & D successes a
       company has completed for each product. The more successes a company has,
       the more demand a company can expect for its products. And last, the report will
       show the number of unhappy customers there were for each product. A zero

                                           9
       means the company met demand. But if a number appears such as 27 for the 3-
       inch TV, the company had a stockout. The company did not produce enough of
       the product and 27 customers could not buy your product making them unhappy.
       So the 27 unhappy customers bought a 3-inch TV for one of your competitors.

      Industry Report – The report will show the period profit for each company, the
       overall profit for each company, and the overall rank of each company in the
       game.

      J. D. Powers Customer Satisfaction Report – The marketing research firm, J. D.
       Powers, will provide an industry report showing the satisfaction level of
       customers for each product sold by each company. The satisfaction level can
       range from 0% to 100%. The higher the satisfaction level, the more customers
       approve of the way you are operating the business (i.e., the decisions you made).

      Market Share Analysis – The report will show the percentage of total market sales
       each company got for each product for the time period.

      Economic Forecast – The report will show the estimated total market demand for
       TV units for the next time period. The estimate is the potential TV’s that could be
       sold during the time period and gives a company some indication of how well the
       economy is doing. But if all the companies do not make good decisions in trying
       to sell their TV’s, customers may postpone their purchase to a future date. On the
       other hand, if all the companies make excellent decisions in trying to sell their
       TV’s, more customers may enter the market now and buy rather than waiting
       later. Also the report will show the present capacity the company has for each of
       its products.

      Financing – The report will show the total amount of capital and emergency loans
       a company has. Also the report will show the total shares of stock sold and value
       of the stock. The present stock price and present dividend will be given as well.
       In addition, the report will show the total number of bonds sold and value of the
       bonds.

                               Decisions Form Instructions

Step 1: Write the number for the time period the decisions are being made for such as 1,
        2, 3, etc., on the Time Period line. Then print the name of your company on the
        Company Name line.

Step 2: Write down the number of units you want to produce of each product, the price
        you want to charge for each product, and the type of outlet you want to distribute
        each of your products through on the lines provided. If you would like to put
        your product on sale, print the letter Y after the price.

                                            10
Step 3: Write down the amount you want to spend on Advertising, PR, and R & D on the
        lines provided.

Step 4: Write down the capacity level for each product. Remember, capacity must be in
        100 unit increments. Only write down the capacity level for each product if you
        are expanding.

Step 5: Write down how you would like to finance your factory. For a capital loan, write
        down the dollar amount you would like to obtain from a financial institution on
        the Capital line. Remember, loans are made in $1,000 increments. To sell stock,
        write down the number of stock shares you would like to sell on the Stock line.
        Remember, stock must be sold in blocks of 100 shares. To sell bonds, write down
        the number of bonds you would like to sell on the Bonds line. Remember, bonds
        are sold in $1,000 denominations. The only time you finance is to build or
        expand a factory. You do not finance to pay for expenses or losses.

Step 6: Order Marketing Research, if you like, by writing down the numbers (1 and/or 2)
        on the line provided to indicate what research reports you want to buy. If you do
        not want Market Research, leave the line blank.

Step 7: Make sure the answers are clearly written. If the answers are not clearly written,
        a “best guest” method will be used when inputting variables.

Step 8: NO LATE DECISIONS WILL BE ACCEPTED! Late decisions will slow down
        the progress of the game. Therefore if a decision form is late or not turned in, the
        decisions from the last time period will be used for the present time period.

Step 9: A sample Decisions Form has been provided as a reference and a blank Decisions
        Form has been provided. Please make copies for your game decisions.




                                             11
                               INFORMATION SHEET

                Production           Carrying
Product        Cost per Unit        Cost per Unit

 3-inch            $34                   $6
13-inch            $28                   $5
20-inch            $48                   $8
27-inch            $97                  $17
52-inch           $385                  $69

Marketing Research:

       Customer Comments for the Time Period:                     $25,000
       Competitor Report for the Time Period:                     $25,000

Financing:

       Capital Loans - $1,000 increments
                       Payment per period = 5% of total outstanding loans
                       Interest payment per period = 5% of total outstanding loans

       Stock – 100 shares at a time
               $20 per share to start game
               $2 dividend per share to start game

       Bonds - $1,000 per bond
               Interest payment per period = 10% per bond

       Emergency Loans – Nearest $1,000
                         Payment per period = 10% of total outstanding loans
                         Interest payment per period = 10% of total outstanding loans




                                           12
DECISIONS FORM (SAMPLE)                              Time Period: ____1_____


Company Name: ___XYZ Corporation______________________________________

Product               3-inch TV   13-inch TV   20-inch TV    27-inch TV    52-inch TV



PRODUCED             ___100___    ___127___    ___207___     ____53___     __1,005__



PRICE                ___173___    ___23Y__     ___115___    ___475Y__      __8,999__
(Y) = Sale


LOCATION             ____1____    ____2____    ____3____     ____4____     ____1____
1 = Discount
2 = Department
3 = Electronic
4 = Specialty

ADVERTISING          __70,000_    __10,724_    ___729___    __1,233__     __25,000_



PR                   __1,550__    __20,000_    ___112___    __7,692__     __45,000_



R&D                  __13,200_    __1,240__    ____75___    __50,000_     _175,500_



CAPACITY             ___100___    ___200___    ___300___     ___400___     ___500___



FINANCING:       Capital__10,000_____    Stock____600______    Bonds_____45______


MARKETING RESEARCH: ___________1 and 2__________________________

                 1 = Customer Comments          2 = Competitor Report
DECISIONS FORM                                Time Period: __________


Company Name: _________________________________________________________

Product              3-inch TV   13-inch TV    20-inch TV   27-inch TV   52-inch TV



PRODUCED             _________   _________      _________   _________    _________



PRICE                _________   _________      _________   _________    _________
(Y) = Sale


LOCATION             _________   _________      _________   _________    _________
1 = Discount
2 = Department
3 = Electronic
4 = Specialty

ADVERTISING          _________   _________      _________   _________    _________



PR                   _________   _________      _________   _________    _________



R&D                  _________   _________      _________   _________    _________



CAPACITY             _________   _________      _________   _________    _________



FINANCING:       Capital_____________    Stock_____________    Bonds_____________


MARKETING RESEARCH: _______________________________________________

                 1 = Customer Comments          2 = Competitor Report

				
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