Business Simulations Future Proofing

Future Proofing Your Student’s Skills

How do you future proof your student’s skills and knowledge when nobody can be certain what jobs will be available? To give you an idea; we no longer need the bowling alley pinsetter, human alarm clocks (“Knocker-up“), ice cutterslamplighters, or switchboard operators which technology and economic conditions has so readily replaced today.

A recent study by the World Economic Forum predicts that approximately 5 million jobs will be lost before 2020 as technology replaces the need for human workers. Millions of workers today that don’t account for the possible future where their current job is automated (and prepare accordingly) are likely to find their jobs redundant.

What does the future require of us?

It is not all doom and gloom. Researchers like David Deming (Associate Professor of Education and Economies at Harvard University) argue that soft skills such as sharing and negotiating will be crucial alongside a strong technical understanding of theories and practice that are traditionally taught in current courses. As a part of his research, Deming has mapped the changing needs of employers and in doing so identified the key skills that will be required to thrive in the job market in the future.

graph

Source: David Deming, Harvard University

What do we take away from this? 

Specific roles which relied heavily on one type of skill over another (hard vs soft) are not the way of the future. In recent years, jobs which only required mathematical skills have been automated whereas jobs which rely solely on social skills tend to be poorly paid. To ensure students take solid and future-proof skills from their time at an education institution they need to be taught both hard and soft skills.

How? 

Business simulations provide students with the opportunity to engage and expand their skill set. Not just the hard or the soft but encourage students to combine the two. Recent research has shown that business simulations are effective at developing critical thinking and analytical skills as well as improving a students ability to negotiate, communicate and work within a team. Over the past 20 years various researchers have conducted research into the benefits of business simulations.

There are many forms of this; marketing simulations, business simulations, management accounting simulations, and advertising simulations. If you’d like to learn more about future proofing your student’s skills through business simulations then click here.

 

 

 

Business Simulation Experience

One Instructor’s Experience with MikesBikes Introduction

The article below is written by Russell E. Holmes, a business and law instructor currently using MikesBikes Introduction within his course at Des Moines Area Community College.

 

It All Began…
A few years back my business department decided to incorporate a business simulation into our Introduction to Business course. The college felt our introductory business course would become more acceptable as a transfer course to a larger number of universities if we did this.

I was adamantly opposed to requiring a simulation in the course. I had taught the course for many years, was comfortable with the variety of assignments and activities I had developed over the years and had no interest in having to deal with what I perceived to be an activity that would take a lot of time and, in my opinion, be of minimal value.

What really upset me was when I was told we would be required to take students through chapters that dealt with accounting, financial management, securities and marketing at the beginning of the course so they would be able to understand the simulation better. I was beyond angry as I had always done those chapters at the end of the course. More than that, I felt the tail was wagging the dog – in other words, I felt the simulation was becoming the centerpiece of the course as opposed to being a part of it.

Taking A Stand
In protest to this major change to the course, I choose not to teach it. I had enough other courses I could teach that I did not need to do the Introduction to Business course. I felt bad about this as I had always enjoyed the course but, well, I had no interest in dealing with the business simulation and all the problems I was sure it would bring about. I was fairly confident that in a couple of years MikesBikes Introduction would become a thing of the past and the people who had advocated for it would see the error of their ways.

Reluctantly Accepting
About two years after the college began requiring the business simulation in all the Introduction to Business courses, I was forced to teach the course again since I needed a full load. I was upset, to put it mildly, that I would have to deal with the simulation. I was convinced it was a waste of time and greatly over-rated. I had ignored it for two years and had had no interest in learning what it was all about.

Still, I had no choice. I figured if the students were going to have to deal with it, then I would figure out a way to make it somewhat palatable. There had to be some redeeming value to it even if I had no idea what it might be. I knew I would need to be able to explain it and have some working knowledge of it for obvious reasons.

Knowing I had no choice I was forced to dive in and begin to learn what this MikesBikes simulation was all about whether I liked it or not (and I definitely did not). Over a long break I attempted to learn how to do the simulation. I would go in spurts. After struggling with the most basic of concepts in Years 1 and 2 (how in the world am I supposed to determine a selling price or how many units to produce?!) I fought and cursed the simulation every step of the way. I was determined to prove it was a waste of time and could not in any way be remotely realistic.

The Turning Point
However, slowly – ever so slowly – I began to see a glimmer of light here and another glimmer there. No matter how hard I tried to find fault with every aspect of the simulation, I began to see something that was slightly interesting and perhaps even somewhat relevant to this thing we call “business.” I began to see the marketing screen and the production screen actually correlated with each other (can you say “supply and demand”?).

I began to realize those Key Reports – something I had tried to ignore – actually had some really valuable information in them and were appropriately named (imagine that?). I discovered that if I knew the size of my market it was actually helpful in determining how many bicycles my factory should be producing in the upcoming year. Slowly, ever so slowly, I stopped cursing the simulation and began to see how it might have some value.

As the simulation progressed into Year 2 and Year 3 and Year 4 an amazing thing happened – what I had learned in earlier years could be used to build upon in the following year. Before long I was seeing a rather interesting relationship before my eyes involving many pieces to a large puzzle – financing, production, advertising, branding, pricing, dividends and on and on. So many pieces but they all fit together so nicely when you – the owner of your firm – figured out how to put those pieces in place.

From Ugly Duckling to Beautiful Swan
The simulation was no longer an ugly, disjointed, confusing maze of frustration. Rather it had turned into a beautiful kaleidoscope of moving parts and beautiful colors. There was no one right way; there were actually many right ways to obtain a high shareholder value. I was, in a word, astounded at not only the beauty of the simulation but the intricacy of it. Still, it was simple enough for a student in an Introduction to Business class to understand if he or she was willing to give it some time and thought.

Isn’t that what a college course is all about – taking the time to give the subject matter some time and thought so the concepts can be digested? Isn’t actually being actively engaged in an ongoing project – something that requires a person to work on week after week – better than sitting passively reading or listening or even watching a video about some topic?

The Value
I, the old curmudgeon, had learned something even though I had tried so hard to keep my mind closed. The simulation brought some real life into the course and made it better (shocking but true). MikesBikes Introduction brought to life a variety of concepts that are discussed in the text and allowed students to work together making decisions for the upcoming year.

Both my online as well as my face-to-face classroom students do the simulation and I could not be more pleased. Sure, some students get so frustrated they want to quit – but I tell them the key is to push forward, stay with it, preserve and never give up. When they see the light it is an amazing sight for me and a feeling of true success for them.

Becoming a Strong Advocate
Today, I would not consider teaching Introduction to Business without the business simulation (MikesBikes Introduction). I have come full circle from vocal nonbeliever to strong advocate. One of my students this past semester scored #2 in the MikesBikes Introduction Hall of Fame.

If he had only declared a dividend he would have easily been #1! To this day I will never understand why he never declared a dividend for his shareholders!! Oh, what could have been!

More importantly is not what could have been but what is. And what MikesBikes Introduction is, is invaluable to my course.

 
Russell Holmes

Russell E. Holmes teaches Business Law and Introduction to Business. He obtained his law degree from Drake Law School in 1989. He has a Master’s degree from Iowa State; a Bachelor’s degree from the University of Iowa and an Associate of Arts degree from North Iowa Area Community College in Mason City.

After graduating from University, he worked with the Federal Land Bank of St. Paul, Minnesota as a loan officer. In 1977 he started teaching full time for the American Institute of Business in Des Moines and also worked for a consulting firm in Des Moines.

Russell first began at Des Moines Area Community College(DMACC) in 1980 and was with the department until 1986. He left DMACC to attend law school. From 1989 until 2004 he was in private practice in Polk and Story counties. For eight years he was the executive director of the Legal Aid Society of Story County. He returned to DMACC in 2004 and has been teaching there ever since.

New Zealand landscape with a question "When is the best time in the simulation to offer dividends?"

Dividends: When is the best time?

New Zealand landscape with a question "When is the best time in the simulation to offer dividends?"

 

If you were to walk into a computer lab with students playing MikesBikes, one of the questions or topics of interest that will be discussed is ‘Dividends’. Specifically, when is the best time to pay it and is it worth it?

This article, besides showing off the beautiful New Zealand landscape, will allow you to come to your own conclusion by bringing up factors you should be considering.

Within MikesBikes-Introduction, you need to wait a few rounds before you are even presented with the financial decisions but with MikesBikes-Advanced it is available straight away.

To answer this question quickly, there’s not really a ‘best’ time to offer dividends, but often a firm will establish a habit of paying out a certain proportion of the previous period’s earnings as a dividend, while retaining the remainder to invest in increasing the firm’s future earnings. The proportion of earnings retained for investment will depend on the firm’s growth prospects. A mature firm in a mature industry will often return a very high proportion of its earnings as a dividend because there are few growth opportunities. While these are vast generalizations, you need to figure out if distributing dividends is right for your firm. 

The main purpose of issuing dividends within MikesBikes is increasing your firm’s Shareholder Value (in the real world you are providing a return on your Shareholder’s investment in your firm). Before you begin thinking about how much dividends to issue, you NEED to ask yourself the following questions:

  1. Are you Financially Strong?
  2. Is there something else you can do with the profits?

In answering the question “Are you financially strong” review your Cashflow and Income Statements. Look to see how much cash you have at the end of your previous rollover; how much cash do you currently have? Do you have enough for the amount of dividends you are thinking of issuing? How stable is your Income? Might you need that cash for future expenses?

So you have decided that you have some spare cash. You can do quite a lot with that which might yield a higher return on your firm’s Shareholder Value than issuing dividends. While this article won’t go into complete analysis on how to evaluate these different options, we are simply bringing up alternative options for this cash:

  • Investing further in your firm by expanding into new markets
  • Purchasing another company (MikesBikes-Advanced only)
  • Pay off your firm’s debt to lower the interest payments (Note: it is expected that your firm has at least some debt)
  • Ramping up your marketing decisions to take a larger market share

While evaluating these options be sure to think about how Shareholder Value is calculated within MikesBikes. Typically, Shareholder Value is a measure of the current Share Price (which is based upon your firm’s Profitability, Earnings per Share, and the Debt to Equity ratio) plus the value of all past dividends paid, including interest.

If none of these options make sense, then you might decide to return some of these profits to shareholders through a dividends payment.

Be sure to check out our Facebook page and tutorial videos for further assistance on playing the simulation.

Professor Darl Kolb

Problems With The Modern Classroom And How Business Simulations Can Resolve These

Traditional methods of teaching via pure theory have dominated the educational landscape for generations, but technological advancements have disrupted not just how we do things, but also how we process information and learn. That is, there are now significant drawbacks of traditional teaching methods negatively affecting students’ learning.

Identifiable limitations of traditional/theory based education include:

1. Lack of theory connecting to real world application;
2. Dry nature of theory disengaging the fast-paced learner of today;
3. Lessons being viewed as an object to be passed on;
4. Little opportunity to experiment with theory;
5. Limited ability to reflect, observe and act.

Business scholars have long contended that the acquisition of theory by students is not a sufficient learning outcome. Rather, it is the application of this theory through direct experience that leads to the development of crucial management competencies such as interpersonal skills; critical thinking, workplace readiness and professional confidence. Methods in which direct experience is gained has evolved with the rise of technology and web 2.0. Today we use technology and the internet to entertain ourselves, as well as improving productivity. It is posited that as the current generation joins the workforce, the demand for e-learning will continue to increase as managers are increasingly referring to technology for solutions.

It can be argued that today’s business is very complex, requiring sophisticated skills; and that experience based learning is very productive in teaching business students. The Association to Advance Collegiate Schools of Business (AACSB International) founded in 1916, has long identified the value of experiential learning.

Why is experiential learning considered a huge leap forward in engaging the students of today? Experiential learning is described as an “outward-facing curricula and experiential education can create the critical intersection between classroom and business learning that keeps faculty and students connected to rapidly changing business models” . More than just informing students, their ability to critically and actively engage in research must be triggered through experience. This will lead to students using personal skills and tacit skills for their own knowledge creation.

While theory is necessary to create a base of knowledge, practical application is required to test a student’s understanding and experience these concepts at a deeper level while facilitating learning outcomes which they can take into the workplace.

Importantly, the Control-Value theory suggests that achievement emotions affect cognitive abilities, learning strategies, motivation, and self-regulation. Positive emotions allow students to enjoy themselves while learning, and peak their interest in developing professionally. Achieving positive emotions associated to learning can be difficult in traditional teaching methods. In stark contrast to positive emotions, the negative counterpart hinder the learning experience. Emotional responses like anxiety, frustration, shame or anger stunt desires to learn. However, it can also be argued that experiencing negative emotions can actually motivate students to perform better. Self-policing a controlled response to negative outcomes and emotions, students can accept that failure while difficult, is an opportunity to update tactics and strategies, to ultimately achieve success.

Experiential learning tools like business simulations give students the opportunity to experience the relevance of their learnt subject matter first-hand. Giving students more control and responsibility for their own learning can enhance their ability to learn from past experience. This is where simulation based learning become essential. Experiential Learning focuses on the learning process for the individual, through observation and interaction with the subject they are learning about rather than the traditional process of learning from a textbook. This also somewhat releases individuals from the burden of winning at the end of the game, to instead experience adaptive decision making as is often required in real-life situations. Simulations have flexible learning environments – different things can be learnt from the same game, and different participants can learn different things.

A good business simulation will allow students to:

1. Apply theory in a real-world setting. Allowing them to bridge the gap between learning and decision-making.
2. Engage in a challenging environment. To survive and succeed, they need to adapt and improve to changing conditions relating to their products, the competition, and the market as a whole.
3. Retain knowledge and develop skills. Absorb the lessons learnt to identify the actual consequences of decisions in the real world.

Business simulations bring practical reality and excitement to the classroom. Students obtain a vicarious exposure to the problems faced by real management teams. They gain immediate, concrete experiences, providing a base for their own observations and reflections in an environment that fosters positive attitudes toward learning.

 
– By Danny Master, Ian McPherson and Brook McFarlane

 


 

Ettinger, A., Holton, V., & Blass, E. (2006). E-learner experiences: what is the future for e-learning? Industrial and Commercial Training, 38(4), 208 – 212.

Finch, D., Peacock, M., Lazdowski, D., & Hwang, M., (2014). Managing emotions: A case study exploring the relationship between experiential learning, emotions, and student performance. The International Journal of Management Education, 13, 23 – 36.

Haro, S., & Turgut, G., (2012). Expanded strategy simulations: Developing better managers.  Journal of Management Development, 31(3), 209 – 220.

Kolb, A., Kolb, D., (2005). Learning Styles and Learning Spaces: Enhancing Experiential Learning in Higher Education. Academy of Management Learning and Education, 4(2), 193 – 212.

Image displaying the question "How do i maximize my total marketing contribution?"

Music2Go Tip: Improving Total Marketing Contribution

Image displaying the question "How do i maximize my total marketing contribution?"Landing on this page means you have come searching for answers to the question: “How do I maximize my total marketing contribution?” 

To answer this we first need to establish an understanding of what Total Marketing Contribution is and why it is important.

What is Total Marketing Contribution? Why is it important? 

Total Marketing Contribution is typically how you are graded or compared to your peers within your course (there are other indicators but instructors typically opt to grade you on this). While your marketing contribution is calculated as…

Marketing Contribution = Sales Revenue – Cost of Goods Sold (CoGS) – Marketing Expenses.

To get your Total Marketing Contribution you just sum up all the marketing contribution your firm has generated for the duration of your simulation (so far).

How do I maximize my Total Marketing Contribution? 

There are essentially four methods you can use here:

  1. Increase Sales Revenue while CoGS and Marketing Expenses remain constant
  2. Reduce your CoGS while Sales Revenue and Marketing Expenses remain constant
  3. Reduce your Marketing Expenses while Sales Revenue and CoGS remain constant
  4. Increase Sales Revenue while reducing your CoGS and Marketing Expenses.

Typically, you will want to aim for the fourth method used above.

To increase your Sales Revenue while reducing (or at the very least maintaining) your marketing expenses you need to ensure your Marketing Budget is spent as efficiently as it possibly can be.

How do I spend my Marketing Budget efficiently? 

Make sure you are reaching your customers through the most effective methods and appealing to their desires/wants/needs. Check the market information report, check to see what the market segment you are marketing to has the highest sensitivity to (higher sensitivity means higher change in sales volume). Check the Media Viewing Habits of the market segments, and take into account the media reach of the different media types.

When you have sales promotion available to you (after the first rollover), check the how old your product is within the Distribution Cover and Sales promotion report and see how to target your sales promotion based on your product’s lifecycle within the Market Information report.

When evaluating your decisions from the previous period you can look to reports like:

  • Some Product Details (or All Product Details)
  • Product Awareness Increase By Media
  • Distribution Cover and Sales Promotion (once Sales Promotion comes available to you)

(Note that market research reports will come out of your marketing budget so purchase these reports wisely). 

How do I reduce my Cost of Goods Sold? 

The best method for reducing your Cost of Goods Sold is conducting product development to reduce the cost of your product you’re selling. Consider the following critical points:

  • “Is the Research and Development cost worth the reduction in the production costs?”
  • “This will reduce my production costs but I need to reduce my price to remain competitive, thus reducing my gross margin per unit. Is it worth it? If I reduce my price and the production costs to maintain my gross margin per unit, will this increase my Sales Revenue anyway?  Is this market segment sensitive to changes in price?”

When evaluating your firm to see if you need to further reduce your firm’s production cost through product development, you can review the following reports:

  • Product Contribution
  • Pricing Overview

 

While there is no ‘one-way’ to win any of our simulations; be sure to check out our tutorial videos and the player’s manual for advice on how to best implement a strategy your team has chosen.

If you have any questions about the simulation feel free to get in touch with us at help@smartsims.com or fill out a contact us form.

Image of question on piece of paper: "Does the leftover marketing budget rollover to the next period?"

Music2Go Tip: Leftover Marketing Budget

Besides the view of the Auckland skyline and the iconic Skytower, it is likely you have come to this page searching for the answer to the question: “Does the leftover marketing budget rollover to the next period?”

The short answer? No. It is therefore in your best interest to spend the entirety of your marketing budget (see Budget Spending report under Forecast Results to see how much of your budget you have spent).

Be sure not to overspend on your budget as well. If you do spend more than has been allocated to you then the simulation will cut back on your spending for you which may not be in the manner you would like!

 

How do you get a larger budget?

Your budget is given to you based on either 50% of your last year’s gross margin (see the Industry Benchmark report under key reports for this figure) or $25 million, whichever is higher (up to a maximum of $50 million).

Alternatively, you can launch a new product which provides your firm with an extra $10 million to fund the launch campaign (but this comes with its own expenses). This funding only lasts for one year.

 

While there is no ‘one-way’ to win MikesBikes or Music2Go; be sure to check out our tutorial videos and the player’s manual for advice on how to best implement a strategy your team has chosen.

If you have any questions about the simulation feel free to get in touch with us at help@smartsims.com or fill out a contact us form.

Picture with text overlaying saying how to forecast sales within MikesBikes Advanced

Forecasting Sales within MikesBikes-Advanced

The video above will demonstrate how to make a Sales Forecast for an existing product and a new product, as well as the complementary production decisions for both.

Just a note that for our example in calculating the Planned Production units for our existing product, you will see that we have Closing Inventory. However, if you have no units of Closing Inventory, you do no need to subtract any units from your Sales Forecast to calculate your Planned Production.

We have provided you with the script for the video below to read through:

“In MikesBikes Advanced you will be required to enter a Planned Production decision for each of your products. Your Planned Production will be your Sales Forecast minus any existing stock.

Planned Production = Sales Forecast – Existing Stock

How do I conduct a Sales Forecast?
A Sales Forecast is a prediction of the number of units we believe we can sell in the year ahead. This is calculated by predicting our market share for the year ahead; being the percentage of the total market we believe we can secure.
Estimated Market Size Next Year x Percentage Market Share

What is our market share?
So what we need to do first is to identify our current market share through the Market Summary report. We can see that for our RC Rockhopper product, we had a market share of 49.8% of the total unit sales last year.

What is the estimated market size next year?
We then need to find out what the total market size will be for the year ahead. If we look at the Market Information report, we can see the forecast demand for the year ahead is 45,000 units.

Calculating our Sales Forecast
Therefore, in this example our Sales Forecast would be 49.8% of 45,000 units. Being 22,410 units.

Note that if you believe that based on your decisions for the year ahead you can increase your market share from last year, you would adjust this figure.

For this example, we believe our market share will remain constant therefore Sales Forecast will be 22,410 units.

Calculating our Planned Production
Now that we have a Sales Forecast we can calculate our Planned Production.

We can see on the Product Summary report that we have 1,698 units of Closing Inventory.

Therefore, our Planned Production is 22,410 minus 1,698 units. Being 20,712 units.

This is entered this into the Products screen under “Pricing”.

How do I conduct a Sales Forecast for a New Product?
For a new product, the challenge is we do not have any existing sales to calculate a Sales Forecast from.

Therefore, a Sales Forecast for a new product can only be based on the Forecast Total Market Size.

In this example, we are wanting to launch into the Leisure market.

The Market Information report tells us that for the year ahead, the Forecast Demand for the year ahead is 26,000 units.

If we then look at the Market Summary report we can see that there were no competitor products in this market last year. However, given the opportunity an empty market creates, we should assume that at least one other competitor will also launch into this market.

Considering this Single-Player scenario only has one other competitor we can aim to produce 50% of the Leisure market’s total size which is 13,000 units. Click Apply”

 

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

Fun and easy

Smartsims’ New Website

Smartsims Logo

It has been a big year for the Smartsims team! We have updated our logo and are now ecstatic to announce the launch of our new website!

There are many new exciting features that are a part of this! You may have already noticed:

 

Resources Section

Under the resources menu you will find: Case Studies, Articles, Simulation Resources and Hall of Fame. You will likely be familiar with the Hall of Fame and Articles. However, we are most excited about our new Case Studies page. Here you will find interviews with instructors sharing their experiences using our software; journal articles; and interviews with students.
 
 

Featured Case Study:

Preview for Case Study "Why students love SmartsimsS"


 

New Product Imagery and Product Logos

We have great new logos and product imagery for our products. If you’d like to take a look, you can find these new logos on the following pages:

Product Logo and Image for MikesBikes Intro       Product Logo and Imagery for MikesBikes Advanced

Product imagery and logo for music2go marketing       Product Logo and Imagery for AdSim

Launch of MikesBikes Accounting

Product Logo and Imagery for MikesBikes Accounting
Our most recent addition to our product line, MikesBikes Accounting, is a business simulation designed to support learning objectives of management accounting courses. We have more information on this product here. Feel free to get in touch with our team by filling out a form if you’d like to learn more.

New Responsive Design

This will allow you to easily view our website on any device while maintaining the same experience.

If you have any questions or comments feel free to get in touch with us by filling out the form below.
 

 

Why is calculating total capacity so important

Calculating Total Capacity

Why is calculating your Total Capacity important?

While the simulation shows you your firm’s current total capacity, you can use this calculations to predict the amount of bikes your firm can produce in upcoming years; work out if you need to reduce or increase your capacity or; question whether there is an imbalance between your factory and workers.

In MikesBikes your factory is most effective when the capacity of your workers is well matched to the capacity of your plant. If your Factory Workforce and your Plant Capacity get out of balance then it is likely they will not be working to their full potential (possibly costing your firm more than is necessary).

Total Capacity SCU = Squareroot (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 instance, 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 favor one over the other too much then you might find this is inefficient. So check your Manufacturing Responsiveness report when deciding whether to employ more workers or to purchase more Plant.

How do I calculate my Total Capacity?

Example 1
Factory Workforce Capacity = 25,000 SCU and Plant Capacity = 25,000 SCU
Total Capacity = sqrt (25,000 * 25,000) = 25,000 SCU

Example 2
Factory Workforce Capacity = 35,000 SCU and Plant Capacity = 15,000 SCU
Total Capacity = sqrt (35,000 * 15,000) = 22,912 SCU

Example 3
Factory Workforce Capacity = 40,000 SCU and Plant Capacity = 10,000 SCU
Total Capacity = sqrt (40,000 * 10,000) = 20,000 SCU
 
Be sure to note that this total capacity won’t be completely what is available to you. Your factory faces inefficiencies (if you’re using MikesBikes-Advanced then this will be things like breakdowns, reworking, setup, raw materials stockout and training) which will mean you don’t get to use the full 100%. Check out the manufacturing guide for more information on how this will affect your decisions.