Action Learning and Business Simulations

Why Action Learning is Essential for Teaching Today’s Students

Increasing demands on instructors and pressure on tertiary Institutions to provide work-ready graduates, instructors are looking for new ways to engage their students as a means of ensuring success.

What is action learning?

Action learning is not one specific teaching method, but rather a philosophy and an approach which encourages action within a team environment where learning is every participant’s job. All action learning approaches are philosophically rooted in theories of learning from experience, as practiced collaboratively with others through some form of action research.

Education scholars agree upon three principles that form the foundation of any action learning course:

  1. Learning is acquired through action and dedication to the task at hand.
  2. Knowledge creation and utilization are collective activities, wherein, learning becomes everyone’s job.
  3. Users demonstrate a learning-to-learn aptitude, allowing them to question the underlying assumptions of practice.

Why action learning?

In the modern teaching environment, more is needed from teaching faculty in communicating and delivering course content. Socratic and other traditional teaching methods are not engaging students as effectively as they once did. Students now need to be actively involved in their learning, rather than passively participating.

Employing action learning principles within a course enables students to resolve and take action on real problems in real time, and learning while doing so. Participants become engaged within the learning process and learn transferrable skills in the process. Further, by encouraging learning through doing within and among groups, an individual participant realises that their viewpoint is just that – it is no more than a hypothesis. Through this learning outcome, the participant reaches a reflective state. These reflective states are arguably where significant learning is achieved through challenging assumptions and preconceptions about business.

It is thought that action learning also increases an individual’s capacity to collaborate. By being stimulated intellectually by their peers within this environment, they gain access to other people’s worldviews, therefore, enabling them to challenge their own views and behaviours, providing further opportunities for growth. The team-based nature of action learning often encourages new theories or ideas which may not have been reached through traditional teaching methods.

The outcomes from action learning produce greater self-efficacy along with heightened states of autonomy, meaning and responsibility. Authors agree that action learning is the first step for participants in a journey toward greater self-insight, greater capacity to learn from experience, and greater awareness of the political and cultural dimensions of an organization. For organizations, it is often a first step toward linking individual learning with systemic learning and change (Marsick & O’Neil, 1999).

What does action learning look like?

A typical action learning program covers aspects of traditional learning models, where a series of presentations might be given on a specific theory or topic, and then builds on this through applying prior and new knowledge to a live project. This environment then provides intrinsic feedback from the work itself, rather than from an external authority (e.g. graded assignments).

Throughout the course, participants continue to work on the project with assistance from other participants, as well as from qualified facilitators, who help foster an understanding of the work as well as the theories taught. The facilitator in each team is critical to change agency. It is important for them to observe teams during meetings and provide feedback to individual members and/or the team. However, the facilitator in this scenario should not become a supervisor, rather, only to encourage free discussion, reflection, thought and critical analysis.

Assessing action learning

Measurement may require key performance indicators that are not typically used within traditional teaching methods, since individuals and teams create their own workplace reality through ongoing reflection. However, conventional methods for assessment (survey and evaluation/examination) can still be employed based on the learning outcomes of the training or course. Inman and Vernon (1997)  suggest the use of narratives and dialogical approaches to assessments, such as scenarios, to embed learning through consensus-building processes.

What forms can action learning take?

One of the more common forms of action learning within higher education is business simulators. These are employed alongside traditional lectures as a teaching or learning resource where students for a management team to run their own virtual company. To succeed in action learning participants must apply their learned knowledge to a live and responsive project (their simulated company). This environment poses multiple different situations and problems that students must address over the course of the simulation.

As the simulation progresses participants receive both intrinsic and extrinsic feedback from the simulation itself, for example Shareholder Value (in MikesBikes IntroMikesBikes Advanced) and Marketing Contribution (in Music2Go Marketing & AdSim Advertising), and from their group. Business simulations also provide the perfect opportunity to integrate reflective assignments to explore the scenario and identify what students take away from the action learning exercise.

Throughout this process, instructors and professors (which under this philosophy are the learning facilitators), work alongside students to facilitate group discussion. This can be done in class, workshops or group meetings.

Contact us if you would like more information on simulations and action learning, or access to a free demo account for one of our simulations.

 

reduce manufacturing cycle time text in a blackboard

Question of the Week: How do we reduce our Manufacturing Cycle Time?

Manufacturing cycle time in MikesBikes Advanced is the time from when an order is received to the factory to when it leaves the factory (to go to the warehouse). It is often measured in weeks and indicates the responsiveness of the production process.

While simply holding finished goods stocks allow rapid fulfillment of a customer’s order, it requires financing (money tied up in stock). Long manufacturing cycle times mean less responsiveness to changes in demand patterns – e.g. if a new competitive product takes the market share. Hence, reducing manufacturing cycle time is desirable where possible. This will usually mean manufacturing with small batch sizes. However, small batch sizes mean frequent setups. Setup times must be reduced to avoid most of the capacity of the machine being taken up on non-product setup time, rather than working on the product.

To get the best trade-off between responsiveness  and capacity utilization in a fast changing market, investments in just-in-time systems and computer integrated machinery are required.

Other contributors to the length of the cycle times are:

  • Number of products
  • Complexity of products being produced by the firm and;
  • The firm’s factory capacity

A rough rule of thumb is that production cycle time will increase in proportion to increases in batch size, number of products or product complexity. On the other hand, it will decrease in proportion to any increases in factory capacity.

Do you have a question suggestion for our next question of the week? Send us a message.

Business Simulations Help U.S. Students Succeed

7 Reasons Business Simulations Help U.S. Students Succeed in a Global Marketplace

The world is continually becoming smaller, and today’s students face the very real challenge of competing for jobs in a global marketplace where languages, culture and hands-on experience are critical to a successful job application. Many business students in Boston and other business school hubs across the United States find it difficult to secure a job after obtaining their degree. So what is the best way to bridge the gap between college and the global workplace? Business simulations can help.

Business simulation games encourage active learning, which entails any type of learning where participants are behaviorally and cognitively active and involved. Simulations fill a very deep void that is faced by educational institutions globally, namely being able to provide real experience to prepare students to enter the workforce. They fill this void by complementing theoretical education with a dynamic, reactive, risk-free learning environment for students to engage in and gain confidence in practical business problem solving skills.

Several studies show that experiential learning can significantly improve student outcomes, including not only employability, but also interaction between students (and faculty), cooperation between educational institutions and grades. A 2014 meta analysis in Developments in Business Simulation and Experiential Learning found strong support for the relationship between experiential learning exercises and learning outcomes. Simulations also create more enjoyable and engaging course content.

All professors are naturally concerned about the career prospects of their graduating class. One of the key predictors of success in the workplace is confidence. A 2012 study by the University of Melbourne drawing upon more than 100 interviews with professional staff in large corporates based in Melbourne, New York and Toronto found a strong correlation between confidence and occupational success. Confidence is not something that can be taught, but can only be gained through experience. Professor Darl Kolb of the University of Auckland has been using the MikesBikes Advanced simulation for over 15 years and reports that the confidence acquired by students through using the simulation consistently translates into job interview and workplace success. Hear more about his experience in the video below.

There are many reasons why Smartsims Business Simulations help set students up for post-graduation success. Below are seven of them.

1. Risk-Free Learning

Business strategy games are an excellent way to practice real-world business decision-making skills in a risk-free simulated learning environment. In a simulation, students are encouraged to try out different strategies, observe the results, monitor market fluctuations and then pivot their direction, all without real-life repercussions. They are thus able to navigate the landscape of a real company (which could be based anywhere in the world) in a safe environment.

2. Multiplayer Environment

In online business simulation games, students form the management team of a virtual company that competes against other student-run companies in the same market for a slice of the consumer pie. These teams could potentially be formed anywhere in the world to improve cross-campus cooperation, create exciting competitions between partner universities and get students ready to compete in any market, anywhere.

3. Interactive Gameplay

Another appeal of business simulations is the real-time feedback they offer on any decision. This not only makes the learning experience far more involved, but also helps students practice a range of different strategies in a short period of time and discover what works best.

4. Accelerated Performance Through Experiential Learning

Experiential learning has been shown to be more effective than other kinds of training, as shown in the meta analysis cited above. Partly this is because simulations allow students to learn by experiencing the consequences of their actions and repeating different strategies to determine different outcomes.

5. Full Immersion

In business management games, students go one step further towards full immersion since their decisions truly determine the fate of the company and they get to experience real loss or gain. Not only does this give students a greater sense of purpose, but it also encourages them to think far more carefully about their actions when they don’t only exist in theory.

6. Rewards!

With business simulation games, students experience rewards in multiple ways (e.g. through amazing rankings on the leaderboard or a market leader position for shareholder value). The most valuable rewards, however, are improved decision making skills, teamwork and proactive responsiveness – all within the context of the economy of their choosing.

7. Employability Focus

Simulations are designed with an employability focus that aims to develop career skills, including how to develop proposals, work in teams, solve problems and resolve conflicts. The ultimate objective is equipping students with the skills to achieve workplace success and obtain a job placement in the country of their choosing. That’s an outcome we can all get on board with!

factors influencing the product specs index

Question of the week: What factors influence the Products Specs Index in the Market Summary Report?

The Product Specs is a statement of how a design is made, what it is intended to do and if it complies with the preferences of each market segment. The ideal product attribute levels desired by each segment and the actual attribute levels for all products on the market are in the Market Segments and Product Attributes Report (go to Design and Development menu ->Reports tab)

The Product Specs Index which you can see in the Market Summary Report on the other hand is based on the distance from the ideal consumer preferences relative to the radius of influence of a segment on the perceptual map.

What does this mean for you?

If, on the perceptual map, a product is at a point which is exactly halfway between the ideal segment center point and the outer ring, then your product spec index will be approximately 0.50. If you are on the outer ring, your index will be closer to 0.01. If you hit close to the center, then it will be closer to 1.0. It does not matter whether you are above or below the ideal point – what matters is your distance away from it relative to the radius of influence for the market segment.

How do you determine what the product specifications are?

The Market Segments and Product Attributes report shows the exact values last period. Go to Reports->Marketing Reports->Product Reports to view this report.
Note that the Perceptual Map chart (which you can find in the Key Reports menu) also show the ideal consumer preferences for last period. The ideal points tend to shift over time in MikesBikes Advanced due to changes in the preferences of the consumers. If you aim for what you currently see on the map, then you are likely to find the segment center points have shifted slightly when you see the results after the rollover.

Do you have a question suggestion for our next question of the week? Click here to fill out a form or email it through to help@smartsims.com.

trophy photo with QS world university ranking label

2017 QS World University Rankings

We are proud to announce that 8 Smartsims Business Simulation users entered this year’s QS World Ranking’s Top 150 Schools in Social Sciences and Management. A big congratulations from all of us here at Smartsims!

university logos

The QS World Rankings by Subject ranks the world’s top universities in individual subject areas. Each of the subject rankings is compiled using four components. First through academic reputation, second through employer reputation, as well as research citations per paper. In addition, they also assess the school’s H-index, which is a way of measuring both the productivity and impact of the published work of a scientist or scholar. These four components are combined to produce the results for each of the subject ranking, with weightings adjusted for each discipline.

The full list can be viewed here.

 

board with question of the week photo, how do we ensure our factory is operating at its optimum level?

Question of the Week: How do we ensure that our factory is operating at its optimum level?

In MikesBikes, as in real life, your factory is most effective when the capacity of your workers is well matched to the capacity of your plant.

The formula used to calculate your Total Capacity (SCU) is:

Total Capacity (SCU) = √ (Factory Workforce Capacity SCU * Plant Capacity SCU)

This equation allows you to emphasize one form of capacity over another depending on how each approach fits with your strategic plan. For example, you can employ more workers immediately whereas you have to wait 12 months for new plant to become available.

Just be aware that if your Factory Workforce Capacity and Plant Capacity get too far out of balance then together they will not be working to their full potential.

Check your Manufacturing Responsiveness report when deciding whether to hire more or workers or purchase more Plant.

Here are some examples on how to calculate your Total Capacity:

Example 1

Factory Workforce Capacity = 30,000 SCUs and Plant Capacity = 30,000 SCUs

Total Capacity = 30,000 * 30,000 = 30,000 SCUs

Example 2

Factory Workforce Capacity = 40,000 SCUs and Plant Capacity = 15,000 SCUs

Total Capacity = 40,000 * 15,000 = 24,495 SCUs

Example 3

Factory Workforce Capacity= 50,000 SCUs and Plant Capacity = 25,000 SCUs

Total Capacity = 50,000 * 25,000 = 35, 355 SCUs

Do you have a question suggestion for our next question of the week? Click here to fill out a form or email it through to help@smartsims.com.

winning team from the strategic management event at njit

Third Annual Strategic Management Showcase at NJIT

Last December, NJIT’s Martin Tuchman School of Management ran its third annual Strategic Management Showcase.

The top-performing teams from the 2016 Fall Semester Capstone course were selected to compete using MikesBikes Advanced for prizes. The criteria for judging the winning team was 80% on their performance in the simulation (i.e. based on the Shareholder Value) and 20% on their presentation. They must also be able to demonstrate their analytical decision-making skills in multiple areas including product development, marketing, finance and operations.

The competition concluded with The Cycle Path winning first place after having been bankrupted early in the competition! This is certainly quite a feat in itself. The team consisted of Yidi Wu, Michael Teixeira and Amad Ellahi. We decided to get in touch and interview them, they had the following to say:

“This business simulation was exceptionally fun. Our team was fully engaged in this competition for the grade, money and mockery of other teams when we win, and we did. Fierce competition kept this business simulation exceedingly fun, especially since the other teams are putting up a fight. This simulation definitely made me realize things will never as smoothly as you might think. Have a strategy in mind, be prepared when things go south.”

The showcase concluded with an awards ceremony to recognize the winners.

Congratulations to the winning team and participants of the third annual Strategic Management Showcase!

You can watch the full event here.

 

The Cycle Paths team presenting in front of their class

Students go from Bankruptcy to Success

December saw New Jersey Institute of Technology run its third annual strategic management showcase where students competed against each other for various prizes. The criteria for judging the competition was based 80% on their performance in simulation and 20% on their presentation and strategic plan. The Cycle Paths (Yidi Wu, Michael Teixeira, and Amad Ellahi – pictured above) took first place despite a dip into insolvency after the second rollover. 

The Smartsims team reached out and interviewed The Cycle Paths to speak on their achievement, experiences and advice they would give future students. 

How did you effectively work together as a team?
“It was a rough start. The team was not united at the start; one of the members felt left behind. The turning point was when our team went bankrupt after the second rollover. Our team was lost, and that was when we realized that this is getting serious; this competition is worth 25% of individual grade and if we fail, it’s all over. “Go big or go home” that was our motto after the second rollover.

We do not recommend going bankrupt as a way to get your team serious, or rather, a way to encourage your teammates to start contributing.  Instead, the key to success is have a team leader. You should have one of the team members lead and divide up the roles effectively among the team. Each member should focus on one or two decision areas. However, it is the team’s responsibility to check one another’s work before finalizing decisions.

The 3 points for any effective team;

  • Leadership
  • Divide the roles
  • Combine the numbers”

What was your decision making process within the simulation?
“It was a zero-sum competition, where there are winners and losers. We learned that if we want to win and succeed then we have to study what competitor. Each week, we printed out last week’s results and went over the numbers. From there, we looked at what we needed to do to move forward. We had an idea on what we are aiming for, however, we found that you never be sure. Learn your enemies and find their weaknesses.”

What was your strategy going into the simulation?
Before the first week? WIN. After the bankruptcy? Let’s go BIG

We were extremely aggressive, we went for low prices, high volumes. We want monopoly. For our low prices, we were able to profit with our high volumes. As far as marketing goes, we were in second or third, it did not matter to us as much because we were dumping our bikes as such low prices.

The best advice we can give future students is: study your competitors and your market.

If you want to win, you MUST look over each week’s report and find your competitor’s weaknesses and begin developing a strategy.

How did you begin implementing that strategy?
Bankruptcy was something we never want to go through again but it was something that pieced our team together. We used tools like Microsoft excel and the MikesBikes offline rollovers. The offline rollover was a powerful tool that your team must use to piece through a couple of the numbers. I do not think I can get into the details on here, but do not use the offline rollover to compare to other groups, but rather use it as a tool to study your own company. Play around with the numbers.

How did you familiarize yourself with the simulation?
This is sort of cliché but the quote ‘practice makes perfect’ is practically what you need to do to familiarize yourself with the simulation. Read the manual, you’ll learn more than you think, and just practice over the offline simulation over and over again. Even now, after we won, back to back, if you put us in front of the simulation again, we would still get lost over a couple of things. You just have to practice.

How would you describe the competition?
Fierce, brutal, and intense.

What challenges did you face? How did you overcome these?
Getting up early every weekend to come to school to go over the numbers and strategies so we would not miss anything else; that was rough.

Time management is critical during the showcase, you have a limited time to go over the numbers before the next rollover.

The other major challenge your team is most likely to face will be conflict (in one form or another) between team members. During the showcase competition, our team was placed in a conference room on a floor of facility offices. At the end of the competition, let’s just say, we were most likely not be welcome back. Fierce competition can lead to conflicts, because everyone wants to win. Compromise, this is the best solution.

We went through bankruptcy, we knew exactly what a single mistake can cost. At the end of the competition, yes we could’ve got a higher shareholder value, but we did not want risk it. Trust us when we say, many of the teams went bankrupt because they swing too close to the fences. When conflicts arises, take a step back, look at the numbers and ask yourself: “does your team need to swing for the fences?”

Was there anything in particular you did that you think helped to prepare yourself?
Coffee.

Be prepared when the numbers do not go your way (more often than you think). This is a zero sum game with winners and losers. It has to be balanced and believe it or not, no one wants to be on the loser side. You win by outsmarting the other teams.

How has participating within a course which uses a business simulation to supplement their teaching materials helped you? What do you think of the business simulation?
This business simulation was exceptionally fun. Our team was fully engaged in this competition and course for the grade, money and the bragging rights. Fierce competition kept this business simulation exceedingly fun, especially since the other teams are putting up a fight. This simulation definitely made me realize things will never as smoothly as you might think. Have a strategy in mind and be prepared when things go south.

Picture of Robinson Lu - who placed 15th in Smartsims' MikesBikes Introduction Hall of Fame

Hard work and dedication does pay off!

Robinson Lu is a student at Santa Clara University currently taking a business course taught by Theresa Strickland using MikesBikes Introduction. Having seen the simulation, Robinson’s competitive side took over and he dedicated hours to become the best of the best! As of the 17th of March (2017), Robinson Lu has placed 15th within our Top 20 Global Hall of Fame (Single-Player). This is an incredible feat considering that he splits his time between course work, the simulation, and becoming a founding father of a new ATO chapter in his school.

With all of this in mind we asked Robsinson some questions about what makes him so successful! Check out the interview below: 

What is your decision making process within the simulation?
Business is an extension of practical economics where I think execution and forecasting make up the most important segments of success. My business professor Theresa A Strickland always says that “cash is king” thus my main decision making process is about eliminating the left over inventory so that profit can be maximized and the minimization of waste(as to avoid conflicts of innovation costs). It is more about how decisive you are in the simulation. It is never about fearing the outcome or even trying to make everything perfect. Your team’s opinions do matter but only to an extent where your main stream of thoughts are not impeded by the thoughts of others.

At the end of the day, you have to be very confident about what you are doing regardless of what mistakes you made or what other people are commenting on your results within the simulation.

What was your strategy going into the simulation?
My strategy is to find the right balance of quantity and price. Ironically, it took me 2 hours to figure out my first two rollover and the time exponentially decreased as the rounds proceeded. Balance is the key in single player because in the multi-player, there are way too many variables so that profit maximization would not be achievable unless surplus of Luck was introduced by the elements of nature.

How did you familiarize yourself with the simulation?
Oh, as what any student should do. Practice. Practice makes perfect. It is all about what do you see behind the numbers which sometimes can be confusing but becomes clearer with practice.

What resources did you pull on to develop your winning strategy which led you to the Hall of Fame?
In order to win, you definitely need to be able to sit down in a calm manner and not stress about every time you messed up your shareholder value. You have to adapt the changes and challenges along the way. If you are as nerdy as I am, who loves to collect random data and analyze them, then just get into it.

What challenges did you face? How did you overcome these?
You have to understand that life is a game of trade-offs and opportunity costs. If today I decided to work on MikesBikes for 2 hours, I would give up the time I spent with that intelligent girl I met in the dining hall. However, in order to be successful, you have to be very determined about what you want. If you want to be successful in business (and in the simulation) you have to work for it.

Was there anything in particular you did that you think helped to prepare yourself
You have to go into the simulation with an open mind. Yes, like the old cliche, be yourself in the dating world. You have to be open to the situation set in front of you so that you will adapt to the problem rather than wanting the problem to change. Eventually, you have to love the things you do no matter what.

How has participating within a course which uses a business simulation to supplement their teaching materials helped you?
It will definitely help with future career building. Business simulation gave me a very clear hypothetical scenario where I am able to solve a real life situation without dealing with the bad results. I wish that it will worth more points in my grade because to some extend, Mike’s Bike tests my ability to problem solve in the business world. It certainly boosted my confidence. I now have a new vision for my book sales in China and for my new book that will probably come out in 3 years. I could use lots of what I see in the simulation to enlarge my profit building in my online shop in China and even use some techniques I developed in trading stocks.

Do you have any parting comments?
It is my honor to be a part of the simulation. I believe that it is a learning process for me. One of the most intriguing things about Smartsims is that their staff are phenomenal! You guys are really patient about all my tedious questions about basically anything. You guys responded very efficiently and quickly considered the fact that you are all the way in New Zealand! I would love to work again with the staff and please give them some bonus. They deserve it.

 

Photo with bike and article title, top 3 questions student asked

Top 3 Questions Students Asked

 “Don’t be afraid to ask questions. Don’t be afraid to ask for help when you need it. I do that everyday. Asking for help isn’t a sign of weakness, it’s a sign of strength. It shows you have the courage to admit when you don’t know something, and then allows you to learn something new.”

-Barack Obama

Here are the top three questions that students asked from the last two MikesBikes Introduction Q&A sessions we held recently. If you have missed the sessions or would like to review the questions asked, you can view the posts through our Facebook page here.

Question #1

What would you say is the biggest challenge that we will face and how should we deal with it?

The “biggest challenge” differs with each firm, but there are a few common challenges students will face:

  1. Excessive Inventory or Lost Sales

Both of these scenarios are caused by inaccurately forecasting your firm’s sales for the year ahead. Ideally a firm would want to minimize this by correctly forecasting sales and adjusting your production based on this forecast (while also taking into account existing inventory levels).

There is a very helpful video available that demonstrates how to Forecast Sales within MikesBikes Introduction for new and existing products. Click here to view the video.

  1. Not paying attention to consumer preferences.

It is crucial that your Product Strategy follow the preferences of your consumers. Valuable Market Research has been conducted to investigate what your customers are looking for in the products they buy. This information is available to you under the Market Information Report (under the Key Reports menu).

Market Information Report with information on Product Dimension Sensitivities and Preferences in MikesBikes Intro

The table above (taken from the Market Information Report) will tell you important areas that you should be focusing on. For example, the Mountain Segment has High sensitivity to Advertising. What this means is you should be focusing your Marketing Budget on Advertising and not PR (as the Mountain segment has low sensitivity in this area). If a market segment is highly sensitive to one area this means: “if you increase this figure, then proportionately more people are going to buy your bike.” This would then result in a higher return on your investment than if you invest in areas where your target market segment has a low sensitivity in.

  1. Incorrect Pricing Strategy

Students make a mistake on pricing their products too high without the increasing demand and their Sales Revenue starts to suffer. Contrary to that, some may also enter into a pricing war and priced their products too low resulting in difficulty covering costs.

When a situation like this arises, you will need to assess where your products are situated in relation to consumer preferences and your competitors. The best report to look at would be the “Market Summary Report” and identify if your product has low Awareness, low Quality or low Delivery (or all of the above) in comparison to your competitors. If they do, you should price your product at the lower end of the market. If not and demand for your product is still average to high, then you can price your products at the higher end of the market. Keep in mind that extreme prices, high or low, will have a negative effect on Gross Margins.

Question #2

In the fourth period, we’ll be given the option to launch a new product and modify our existing product. Is it better to remodel an existing product or launch a new product?

This depends on what your team decides to be more valuable to your strategy.

Essentially, when looking at launching a new product you will need to ask yourself the following questions:

  • How big is the market for this product (Check the Market Information Report)?
  • How many existing competitors are in there?
  • Are we expecting any new entrants into this segment in the upcoming rollover? If so, what do we anticipate their market share would be?
  • How many bikes would we anticipate on selling?
  • Taking into account of the above, how much would we spend on marketing to enter the market?
  • Based on our effective number of sales in the segment, what do we anticipate our profit to be?

You can then compare this potential profit against the potential profit gained from modifying your bike.

In remodeling your existing bike, you will look at things like:

  • Are we remodeling to reduce costs or improve Technical Specifications (or both)?
  • If we want to reduce costs, is the $1 million modification cost outweighed by the profit gained in the reduction costs?

You can calculate it as:

Old Production Costs – New Production Costs x Number of bikes you anticipate you will sell

  • If you want to update the Technical Specifications, look at the Market Information report to see how sensitive the market segment is to changes in that? If it is High, then getting closer to the Ultimate Technical Specifications could result in significant increases in demand for your product (depending on how far away your product is from that desired technical specifications).
  • How do anticipate this impacting our sales?

Once your team has looked at those two things (new bike versus modification) then you can decide, “Okay, which is more valuable to us right now? Can we afford that? Could we afford both? Or neither?” You can then evaluate your Cashflow Report for your Ending Cash Balance from the previous year.

Question #3

What is the best strategy to implement to get the best return in Distribution?

The best strategy is to look at the Distribution Summary report (see the table below for what this might look like) and analyze where your customers shop. Once you have identified this, place more emphasis on your Retailer Margin and Extra Support in those Distribution Channels.

Distribution Summary Report in MikesBikes Intro

It is also important to keep in mind here that the more a distributor profits from selling your products, the more likely they are to stock your product in upcoming years.  That means they consider things like your Price, Sales Volume, Retailer Margin and Extra Support. However, be careful not to eat so much into your own products.

If you have any questions, please feel free to click here and fill out a form or email us at help@smartsims.com.