Revenue and Profits for the top five European manufacturers
Pricing and Profit Margins
With the pressure on sales and profit margins, there is always a need for strong pricing strategies. To restore dwindling margins, there has been strong efforts amongst automakers to reduce costs and improve productivity. Many companies moved to focussing on the production and sale of high margin models, removing some of the low margin cars from their portfolios.
Over recent years, there has also been a change of pricing strategy throughout the industry, with companies setting realistic list prices rather than inflating them to allow for customer negotiation and cutting some of the aggressive customer-focused marketing campaigns.
Any thoughts that the COVID-19 pandemic may have resulted in large discounts being offered were unfounded. With demand outstripping supply there was no need to offer such incentives, in fact prices increased substantially between 2020 and 2024, with manufacturers aiming to maximise profits. However, competition is once again beginning to bite as the market returns to near full capacity.
In an attempt to address slowing sales and the impact of increasing competition, leading manufacturers have already begun to cut prices on their electric models. Tesla led the way by slashing prices five times in the first four months of 2023. Others are now bringing relatively low-cost electric and/or hybrid cars to market; prices for the all-electric Dacia Spring, which is about to be launched, will begin at £14,345 and Stellantis are offering two Peugeot models for under £24,000. The infiltration of low-cost electric cars from China into the European market, particularly from MG and BYD, is also putting pressure on prices, as well as profits.
为了应对销售放缓和竞争加剧的影响, 领先的制造商已经开始降低其电动车型的价格。 特斯拉在 2023 年前四个月内五次降价,一马当先。 其他公司现在也正在向市场推出相对低成本的电动和/或混合动力汽车;即将上市的全电动 Dacia Spring 起价为 14,345 英镑 , Stellantis 推出两款标致车型,售价低于 24,000 英镑 。 来自中国的低成本电动汽车 (尤其是 MG 和比亚迪) 涌入欧洲市场 , 也给价格和利润带来了压力 。
It is possible that some companies may introduce scrappage schemes that encourage people to trade in older cars for more efficient and environmentally friendly models. In addition, some electricity supply companies are offering incentive packages to employers who offer salary incentive schemes for employees to purchase electric cars.
Marketing
To maintain sales volumes, effective promotional campaigns are essential within the car industry, and choice of the methods to use for advertising must be made very carefully, to maximise impact. Between 2020 and 2023, when manufacturers were unable to meet demand, they took the opportunity to cut costs by reducing their marketing budgets but, with competition resuming, 2025 and beyond is likely to see a return to full blown marketing strategies.
Historically, television has always been the most successful media for advertising by the automotive industry, but its share has been declining slightly year on year. It is now being challenged by digital marketing (the internet, social media, tablets, smart phones) as the preferred option for promotional investment. In addition, many industry observers are predicting major changes in the retailing of motor vehicles using the power and influence of digital technology. With online sales increasing rapidly, some corporations are already restructuring dealerships in anticipation of this trend. More information on the effect of the various forms of promotion is given in Appendix II, page 25.
Forecast
Now that supply chain issues have ended, manufacturers of both components and passenger cars are looking to increase production. However, the backlog of orders that boosted sales in 2023 and to a lesser extent -2024, has been fulfilled and the industry is to be once again dependent on new sales. This is likely to open competition between manufacturers and could possibly result in more discounts being offered, than have been evident in the past 5 years. This is likely to apply more to electric vehicles than ICE cars, as competition is severe, particularly from imports.
Overall, there are concerns about profitability, as pressure is put on prices and wages soar. It is predicted that profits could be 15% to 25% lower than in 2024. Some help will come from an expected fall in raw material costs, but even this is not certain while the war in Ukraine persists, and the impact of tariffs introduce uncertainties.
In terms of sales, the backdrop of high interest rates, inflation and elevated pricing restricted growth to between 2.5% and 5% in 2024, with the growth mainly coming from sales of HEVs.
Promoting and sustaining recovery in the car market will vary between European governments and the measures they take to support car manufacturers, as well as incentives to stimulate growth in the industry. Part of this is the need to boost the roll out of the charging and refuelling infrastructures in all countries. This would stimulate accelerated growth in the EV market, helping both the industry and the environment.
For the car makers, as always, success will also depend on whether new products are good enough to attract new buyers and recapture old ones. Strong growth is historically linked with companies launching several new models, as well as giving facelifts to existing models, with the aim of enticing consumers into purchasing new vehicles. This theory has been proven time after time and the leading manufacturers continue to work on this premise.
New additions to the market in 2024 included the Ford Puma electric which joined Ford’s best-selling Puma range, Also the mid-sized Renault Scenic E-Tech and the clever Renault 5 Electric retro model which has been awarded World Car of the Year for 2025. Others included the Audi A6 and Q6 e-tron SUV, the Mini Cooper EV, and the Volkswagen ID.7, a flagship electric saloon with long-range capability.
Between £25,000 and £35,000 there is the Fiat 500X, a small hybrid SUV and Alfa Romeo’s first all-electric car, the Milano, a small SUV that will become available towards the end of the year (also available with a petrol engine). In the higher price brackets, there is the Abarth 600e (Stellantis), the Cupra Tavascan, a striking coupe SUV, which will be the brand’s second all-electric offering, set to compete with the likes of VW’s ID5, VW’s ID.7, BMW’s iX2., E-Tech, and the Kia EV9,
New cars for 2025 to be offered with a petrol or diesel (ICE) engines are relatively scarce. These include the new Audi A5, the T-Roc 1.5. the small SUV from VW, the Lotus Elmira Turbo SE, and the low volume Mustang GD Daytona.
Facelifted models included the Golf Mk8.5, with revised instrumentation, Hyundai Ionic 5 with new body revisions, wheels, fascia changes and more, Skoda Octavia that will include an Estate model in the range for the first time, the third generation Dacia Duster with the option of a petrol (MHEV) or hybrid engine, Hyundai’s Ioniq 5 N BEV hatchback and the Ford Puma Gen-e, an electric version of the successful Puma that also has an updated design. By the end of the year there will also be three updated Minis available.
All facelifted and new models are being launched with the intention of boosting sales throughout Europe.
When designing new products, manufacturers have the opportunity to exploit consumer demand in terms of fuel choice and emission control. Fluctuating fuel prices primarily tend to impact on sales of the large car market. Rises in taxation levels must also be considered. With emission controls at the forefront of legislation in Europe, the big push is to turn to hybrid and electric engines as the industry standard. Development of long-range and fast-charging batteries is gaining speed and efforts are being made to improve charging infrastructures. However, charging points are still relatively limited in comparison with the ambitious plans to move entirely to electric powered cars.
The high cost of buying an electric car has historically been a barrier for many consumers but a flurry of low-cost vehicles has been entering the marketplace. At the moment these are limited to small cars with a low mileage range but as manufacturers pour money into R&D in these areas, others are sure to follow.
There has been a move to use technology that will supercharge small ICE engines rather than use large, high fuel consumption, large engines. Interestingly, BMW, Toyota, Stellantis and Hyundai are working on hydrogen powered fuel cell engines, known as Fuel Cell Electric Vehicles (FCEVs), alongside the focus on releasing more electric models.
Finally, it should be remembered that when times are difficult, buyers will look for a safe option where reliability is assured, as is the case with BMW, Mercedes and VW.
These factors show a way forward, but economic turmoil coupled with the war in Ukraine, political instability in the Middle East and now US tariffs, means that market conditions are likely to remain unsettled for some time.
It is into this highly chakllenging environment, that you are launching your new automobile company.
BUSINESS SIMULATION PARAMETERS
Introduction
You will have been allocated into a team of between 5 and 8 students and will be competing against the other ‘live’ companies (teams) in your simulation "World", as well as the usual background market competition of the other major players. There will be 5 "Worlds" operating in parallel. The simulation event will run for 4 trading periods, each trading period is a full financial year of 12 months (50 weeks).
You are advised to keep a record of the decisions being made and changed as you work in case they need to be referred to at a later stage. A decision form summarising the decisions to be made is given in Appendix V on page 32 and is also available on Canvas. You will be able to view the decisions that have been submitted in all rounds/years via the simulation (see the Decisions Report from the Results drop-down menu).
Using the “what-if” forecasting model you will be able to evaluate your business decisions before submitting them for processing in the master simulation. When the decisions are processed, the decisions made by your competitors will have a direct impact on your business performance and results. Therefore, being aware of the nature of the market, the environment and the competition will be important considerations.
The Starting Position
All companies (teams) will sell cars into the European marketplace. Production facilities are in the UK. You have :
A green field site
£500 million in the bank raised from the issue of 5 million £100 shares.
No production facilities
No workforce
In the first year of operation two different models of car must be produced. A maximum of five models is allowed but only one new model can be introduced each year (see the section on New Models on page 13 for more details).
The Simulation Economic Environment
The currency is £ sterling.
All costs rise with inflation annually. Inflation at the start of the simulation is around 2.2%. The economic outlook is very uncertain, both in Europe and globally.
The Marketplace
The marketplace is the European Community which currently has the capacity of between 11m and 16m new car sales per annum, with a prediction of between 12.5m and 13m for the forthcoming year.
A GUIDE TO MAKING DECISIONS
Company and Model Names
Initially a name must be given to your company. This cannot be changed after the first year without consultation with administrators.
Names must also be given to the two models that will be produced in year 1. These can be changed if required.
The names of the company and models have no bearing on success within the simulation. The only reason to make changes to either, is if you decide that you want to implement a rebranding project.
Selection of Target Market
Market research informs us that statistically the car market is divided into 16 sectors relating to the car platform/size and the target age group, as identified in the following grid. The first objective is to identify where each product's potential market lies. This is probably the most important decision to be made by the company as it will be used as the basis for many other production and marketing decisions.
Car Size Buyer's Age Group | Small e.g. Fiat 500
| Medium e.g. VW Golf
| Large e.g. Audi A6
| Luxury e.g. Mercedes AMG
|
Under 25 | 1 | 2 | 3 | 4 |
25 to 40 | 5 | 6 | 7 | 8 |
41 to 55 | 9 | 10 | 11 | 12 |
Over 55 | 13 | 14 | 15 | 16 |
One of the sectors must be selected for each car model as the target market. Once a sector has been chosen the size of car cannot be changed, however, it is possible to target it a different age group.
Note : When making and submitting decisions online you will have to enter the actual car size and target age group but the market sectors in the table will be referred to in the results/reports.
At the beginning of the exercise, the market share of each sector is as follows:
% of Total Market in Year 1 |
| Small | Medium | Large | Luxury |
Under 25 | 10.90 | 5.60 | 1.80 | 0.20 |
25 to 40 | 10.30 | 11.50 | 5.55 | 1.30 |
41 to 55 | 10.00 | 10.10 | 6.00 | 1.40 |
Over 55 | 11.10 | 7.00 | 5.75 | 1.50 |
Total (%) | 42.30 | 34.20 | 19.10 | 4.40 |
The car sizes are categorised by selling price ranges as follows, although they can overlap. The models at the high end of the price ranges are usually for the luxury and performance derivatives; some may exceed the upper price limit given, including those that are powered by electric and other alternative fuels :
Small: up to £39,000; Medium: £20,000-£48,000; Large: £27,000-£60,000; Luxury: £60,000 to over £100,000.
Setting Selling Price
The simulation works based on a single market price for the car, it does not provide for incremental pricing depending on the number of different options that are selected by the customer. The single selling price must be set taking into account the designs and options to be offered, and the market at which the model is targeted, as well as all other overheads, e.g. R&D, marketing, wages, etc.
In order to sell well and give a healthy profit, a model must be priced higher than its overall production cost but low enough to make it good value for money. The selling price of a basic car, i.e. the shell only, is given on the Cost&Data Sheet, see Appendix III on page 30 for more details.
Although an indication of market selling prices is given in section 6.2, remember that you will be working in a competitive environment and this is likely to have a bearing on your pricing policy. You need good judgement when thinking about the pricing and market positioning of your products.
Product Portfolio Decisions
Design features, including body shape and engine size, may be chosen and options can be made available for purchasers to add to the basic car. The cost of model designs and options are listed on the Cost & Data Sheet.
Designs
Every car produced must be built with a minimum of one of the body designs and one of the engine sizes offered.
More than one design and engine size can be offered to increase customer choice.
There will be a body design and an engine cost added to every car. For cost calculation purposes, use an average of the cost of the designs offered plus an average of the engine sizes offered.
The appropriateness of the shapes and engines offered in relation to the target market will have a direct bearing on the success of the model.
Options
Not all cars will be built with all the options offered - only those chosen by each individual customer (some cars may leave the factory without any additional options at all).
The proportion added will depend on the popularity and appropriateness of the options offered.
The cost of including options per car will only be a percentage of the total. For cost calculation purposes, an average of a 33% uptake can be used.
See page 35 for an example of how option estimates are calculated.
Option Packages
Some of the customer choice options are available in the form of packages. Examples of what these packs include are given in the table below.
Tech/Safety Pack | Forward collision warning system, advanced lane departure warning system, adaptive cruise control with speed limiter, dazzle free rear-view mirror, surround camera, LED lights, park assist, windscreen display, keyless entry. |
Visibility/Winter Pack | Heated front seats, automatic headlights and wipers, power wash headlamps, heated front windscreen and washer nozzles, LED bulbs and auto headlight dip, dynamic fog lights, low washer fluid warning light, electrically heated and adjusted door mirrors. |
Luxury Styling Pack | Leather upholstery, privacy glass, memory and heated seats, heated steering wheel, electrically foldable and heated door mirrors, high quality alloy wheels, advanced navigation system with online access, LED auto dip headlamps, wireless charging pad, signature sound system, premium car mats. |
Research Projects
Research and development investment is an important part of your business decisions.
Investment can be made in research and development projects for each model.
When successful, the new technology will increase the model's value in the long-term.
There is the possibility that the project will fail, except for the following projects which are considered 'failsafe' and guaranteed to succeed :
1. Product Relaunch 21. Ultra Low Emissions
2. Facelift 27. Improved Build Quality
Hydrogen Fuel Cells
If a project does fail it is possible to re-invest and begin again or accept that the investment is lost. Similarly, it is possible to stop a project before it is available (online), but the money already invested will be considered a loss and written off. The cost of each Individual project is given on the Cost & Data Sheet.
R&D projects are divided into two phases :
Phase 1 : The research phase which is comprises the initial work in preparing the project. This is likely to include matters like customer and technical research, prototype development and testing in a laboratory.
Phase 2 : The development phase which involves taking the prototype work and developing it for production. This is likely to include design engineering, application, material selection and tooling for manufacturing.
Details of the times needed for each phase for individual projects are given in the following table.
PROJECT | TIME | PROJECT | TIME |
1 Product Relaunch | 0 + 2 | | 3 + 2 |
2 Facelift | 0 + 1 | 16 Remote Self-Parking | 3 + 1 |
3 Smart Driving Controls | 1 + 1 | 17 Solar Panel Roof | 2 + 2 |
4 Advanced Combustion Engine | 1 + 2 | 18 Lightweight Ceramic Brakes | 2 + 1 |
5 Alternative Fuels/Biofuels | 2 + 2 | 19 Smart Noise Controls | 1 + 1 |
6 Fast Charging Batteries | 2 + 1 | 20 Frost Free Windows | 2 + 1 |
7 All Round View System | 1 + 2 | | 2 + 1 |
8 Carbon Capture Engine | 5 + 1 | 22 Infra Red Night Vision | 1 + 1 |
| 2 + 2 | 23 In-Car Advice System | 2 + 1 |
10 Hydrogen Combustion Engine | 2 + 1 | 24 Car-2-Car Communications | 3 + 1 |
11 Virtual/Digital Mirrors | 2 + 1 | 25 Zero Glare Lights | 2 + 1 |
12 Anti-Theft Tracking | 1 + 1 | 26 Driver Behaviour sensors | 1 + 1 |
| 2 + 1 | 27 Improved Build Quality | 0 + 1 |
14 Wiperless Windscreen | 1 + 2 | | |
TIME (in years) - the first figure is for Research, the second is for Development. Projects in bold are failsafe.
The research phase of projects only needs to be carried out for one model as it is a company venture that can be used for all products. When a project is being researched on one model, the R&D decision screen for the other models will show it as "Being Researched" and it will not be available for selection until the project is online for that model (or fails).
Once online for one model, a project will become available to begin the development phase for other models, as required. The project will show as (researched) on the R&D screen and can be added to the models by selecting it as usual. The project will then come online on the additional vehicles once the development time is complete. Please note that it is still possible that a project will fail for one or more of the other models.
There are three exceptions, which are model specific and research needs to be carried out on every model as required. They are:
1. Product Relaunch
2. Facelift
27. Improved Quality Build
NB: Until the project is online, the box must be checked for it to continue, if unchecked the project will be stopped and the money already invested lost.
The status of all projects and the year they are expected to come online (or failed) is provided on the Research and Development Report in the Results drop down menu in the simulation.
Once online, the Product Relaunch project will become available for selection again after 5 years and the Facelift project after 3 years.
Research and Development costs on the Profit and Loss Statement also include 50% of any investment in a new model (see the section on Production/New Models on page 13).
损益表中的研发成本还包括对新车型投资的 50%(请参阅第 13 页“生产/新车型”部分 )。
Continuous investment in R&D can produce a "Centre of Excellence" capable of delivering projects at significantly lower cost.
持续投资于研发可以创建一个能够以更低的成本交付项目的“卓越中心”。
Production
生产
Factories
工厂
Factories are required to house the workforce and production lines .
The cost of a factory is given on the Cost & Data sheet .
The purchase of the first factory will be shown on the Cash Flow Statement at the end of year 1 (£765m) .
Each factory has the capacity for 4,000 workers (production and management employees) and unlimited amounts of automation
每家工厂可容纳 4,000 名工人(生产和管理员工)并实现无限量的自动化.
New factories are automatically purchased if the workforce exceeds 4,000 or multiples thereof, e.g. if between 4,001 and 8,000 people are employed, two factories will be purchased .
If the number of employees falls to 4,000 or below, additional factories will automatically be sold .
If a factory is sold, it will realise 60% of its book value .
Any number of cars may be produced in a factory .
Car production
The number of each model built will depend on the workforce put on the model, productivity for the model size and investment in automation. Productivity is given as cars/worker/year:
Small cars : 44
Medium cars : 42
Large cars : 41
Luxury cars : 9
NB : these are base figures only. Productivity will be affected by wage rates, investment in training and overtime levels. Good employment practices will result in a generally happy workforce and a rise in productivity rates. The converse will apply.
A productivity target must be set for each model. Low targets may allow time for improved build quality whilst high targets may require overtime and can affect product quality .
The target set will be the maximum number of cars produced in the year .
Automation
Automation can be introduced and purchased in units of £1m (rising annually with inflation) .
The minimum investment in is for one unit .
Each unit is as productive as ten workers, e.g. 4,000 workers + 1 unit of automation will give the equivalent of 4,010 workers. The equivalent workers are not taken into account in the total factory capacity, i.e. 4,000 workers + 10 units of automation will still only necessitate one factory .
Each unit of automation requires manning to be effective – one man per unit .
Automation must be divided between the models – assign a percentage to each one on the decision screen. (This allows some models to be highly automated whilst leaving others to be predominantly hand built.)
To keep the automation working at full capacity it must be properly maintained, which costs approximately 10% of the original investment per year .
Investment in automation is optional and must be entered in the automation decision box .
New Models
Two models are produced in the first year and there are no upfront investment costs associated with these, just the production costs as specified by you .
It is possible to launch one new model each year with financial investment .
The investment must be made the year before production commences .
Decisions relating to the new model are made during the following year/round of the simulation, e.g. invest in year 1, launch model/make decisions in year 2 .
The average investment needed for a new model is given on the Cost&Data Sheet (£400m in year 1) but half to twice this figure is acceptable.
The amount invested will have an impact on the quality and degree of success of the new model.
On the financial statements 50% of the investment will be shown on the P&L as R&D and 50% on the cash flow for production costs. The cash investment is then added to the assets on the Balance Sheet and depreciated by 10% annually.
Once a decision has been made to launch a new model the project cannot be stopped but the launch can be delayed by allocating the minimum 100 workers to the model. The model specification will still have to be made as the workers will be producing a limited number of prototypes and pre-launch products for demonstration purposes.
Personnel
Wages
There is a minimum wage in force (£465 per week in year 1) .
The industry average wage is shown on the entry screen and the Cost & Data Sheet (£715 per week in year 1) .
Redundancy payment is 12 weeks salary.
Workforce
The workforce may be moved from production of one model to another .
If employees are laid off, redundancy payments will have to be paid and bad industrial relations may develop .
It is not possible to reduce the workforce for any one model below 100 .
A working year is 50 weeks .
An acceptable rate of absenteeism is 4 days per year .
Training
Investing in training the workforce will improve their skills and subsequently product quality and productivity.
Management training improves industrial relations.
An average training budget is 2% of the wage bill .
Marketing and Communications
Promotion (Advertising)
The Company and its products can be promoted/advertised via the media listed below.
Television § Dealer Incentives
Radio § Promotional Offers
Magazines/Newspapers § Sponsorship
Digital Media
Products are promoted individually .
There is also the opportunity to invest in Corporate Promotion (via the Company Decisions section of the decision entry screens) .
It is important to choose the areas that will be most effective in relation to the target market .
Cost of Advertising
There is an average cost for each method of advertising (see the following table) .
This average amount is the level of investment required to create enough product awareness to raise sales by a good margin .
Investing less than the average will still have some effect within the marketplace and spending more will further increase customer awareness and sales .
There is a saturation point and investing more than twice the average amount will have a negligible or zero effect .
Type of Promotion | Average Cost (£m) |
Television | 30.00 |
Radio | 10.00 |
Magazines/Newspapers | 15.00 |
Digital Media | 35.00 |
Dealer Incentives | 75.00 |
Promotional Offers | 80.00 |
Sponsorship | 70.00 |
General market research on promotion/advertising methods is given in Appendix II (page 25).
Product Image
The company must decide on the image to be portrayed by each model .
One or more of the perceptions below must be given a weighting relating to the way in which the company wants each car to be perceived by the marketplace:
Comfort § Safety
Speed § Green
Style § Hi-Tech
The total for each model must be 100% (it is possible to have a 0% weighting for some areas if they are not appropriate) .
The overall perception should have optimum appeal to the target market, as well as relating to the designs, selection of options and R&D projects for the model .
Market and Competition Research
Once the simulation has started it is possible to purchase research information on the marketplace and competition as follows.
Market Research
Invest in general market research that is generated by the computer (£5m in year 1) .
The market research comprises market predictions and information on competitors’ investments, expenditure and products.
Data on Competition
Invest in detailed data on the competition (£10m in year 1) .
The data on competition report provides details of all products in the marketplace, their pricing and sales, performance and information relating to more general business and financial performance .
Market Perception Report
Invest in a Market Perception Report (£5m per model in year 1) .
The report provides feedback on the effect of your promotion, popularity of your chosen options, designs and R&D projects and provides information on the requirements of the marketplace .
Finance
Funding
To support the funding of this enterprise you have £500m in the bank raised from shareholder equity. This will be insufficient when the following costs are taken into consideration:
factory : £765 million
automation : £1m per unit
market research : £5 million (computer generated)
data on competition : £10 million (computer generated detailed data)
market perception report : £5 million per model (£10m for two models in year 1)
wages : minimum £465, average £715 per week
raw material, designs and options, research & development, costs - see separate Cost & Data Sheet for these details.
Raising money
It is possible to request a loan from the bank or to issue new shares to cover any cash shortfall .
In the event of the bank balance at year end being negative, an overdraft will automatically be granted .
Loan/overdraft interest rates
Interest on loans will be charged as follows:
negotiated loan : inflation + 5
overdraft : inflation + 8 (minimum 15%)
Share Issue
It is possible to raise money from the stock market by issuing new shares - a maximum of 10% of the issued share capital in any one financial year.
Shares can only be issued if the current share price is above the share face value of £100.
A share issue is notified a year/round in advance, the success of the issue will depend upon the performance of the share price in the current year/round.
Issuing shares may dilute the equity of the company and adversely affect the share price and should therefore only be done if the company needs extra cash.
The share price is dependent on three factors:
the performance of the company
the dividend paid
the demand for the share.
It is important to bear in mind that you need to obtain shareholder approval before seeking fresh equity investment.
Loan Repayment
Loans can be repaid from positive cash balances as and when you wish to do so.
An overdraft is paid off when the bank balance rises above zero. It should be noted that overdrafts are fully repayable on demand and are not considered to be a part of core business funding.
Investment
Bank Account
Interest rate on balances in credit : inflation + 1.5
Gilts
You may invest in gilts.
Gilts must be held for five years/rounds, with a fixed rate of interest being paid over that period.
At the end of the five years/rounds, the original investment value is repaid.
The interest rate will depend upon the prevailing inflation rate in the year/round the gilts were issued. The figure is given on the News Bulletin report, it is calculated as:
Interest on gilts : 2.5 x inflation (minimum 6%)
Shares
Shares in competitors can be purchased.
Not more than 10% of the issued shares of any company can be bought in any one round, but as large a stake as required can be accumulated over a number of years/rounds.
Shares must be bid for in multiples of 1000 by entering the maximum price you are prepared to pay for those shares.
Shares purchased can be sold at a later time. Any proportion of the shares held may be sold by entering the minimum price you are prepared to accept for them.
When buying or selling shares, the number bought or sold will depend upon the stock market demand for them and the price you are prepared to bid or accept.
Dividends
A dividend per share may be declared each year if the company is in profit, i.e. showing a positive retained profit. This may be calculated with reference to the profit projections provided by the whatif model, otherwise an estimate of post-tax profit should be calculated, a proportion allocated for distribution to shareholders and this figure divided by the number of shares issued to give the dividend per share.
Dividends are shown on the P&L Report at the end of the year in which they are announced but are not taken out of the cash flow until the following year.
The figure entered in the decision screen is the price to be paid per share, not the total amount.
Tax
Corporation Tax is charged at 22% of pre-tax profit.
Organisational Overheads
All organizations have overheads. Such expenses cover management costs and expenses, administration, communications, IT, HR, financial and legal management and all the other costs associated with the day to day running of a business. In the simulation, overheads are calculated using the following formula:
10% x wage bill +
7½% x materials used +
5% x opening book value of fixed assets
Payment Periods
You must set the number of days that you give customers to pay after an order has been placed and the number of days that you will wait before paying suppliers after purchasing materials.
Giving customers a long credit period will appeal to buyers
Delaying too long before paying your bills will cause suppliers to raise their prices
The maximum period permitted for both parameters is 99 days
Assets
Fixed assets:
Factories
Automation
50% of any investment in a new model launch
All will depreciate at 10% of their book value per annum
Stock assets are valued at materials plus the amount spent on wages to produce the cars left in stock
Stock will cost 15% of each car's production cost to keep them up to specification
FINALLY …
Executive will provide you with a very dynamic learning experience. Each team will develop uniquely, based upon how it interacts competitively, what products are introduced, and how these products are supported. The economy will have its ups and downs, customer needs will evolve, and competition will intensify. A well-planned strategy is essential.
INSTRUCTIONS FOR USING EXECUTIVE
The Executive simulation is run online and contains a number of control features that make sure that your decisions remain within quite a wide range of parameters. It is important to remember that the software is primarily a communication tool that enables you to submit your decisions for processing in an easy and efficient manner. The use of the simulation should not detract from the crucial strategy development and business planning that is key to the exercise.
Once the company's strategy and plan are in place, a set of decisions must be made. These decisions are then entered into the Executive user screens and a POTENTIAL predicted outcome is displayed. If required, the decisions can then be changed before finalizing them and submitting them for processing in the Master simulation where teams will compete interactively.
7.1 Basic Parameters
a. There are 5 groups of teams (worlds) operating in the simulation and there are up to 9 unique teams in each group.
b. Each team will have its own secure simulation file
c. Your game files are unique to the team and cannot be accessed by any competitors, provided you do not disclose your secure links to them.
Executive Operating Instructions
Accessing the software and your team’s game file
The nominated member(s) of your team will receive an email containing a team number, a password and a link similar to:
http://executive.trainingsimulations.co.uk//PlayerLogin/index.php
Click on the link to run the simulation and enter the team password in the relevant box.
The first screen of the exercise will be displayed.
Opening Screen
From the opening screen, there are two main buttons for selection:
'View Market Data', which enables you to view the Cost & Data Sheet for the current round. From round/year 2 this button will read 'Show Round X Results' and will enable you to view the results from the previous round and view the current Cost & Data Sheet.
At the beginning of any new decision-making period it is strongly recommended that the results from the previous year are analysed and used as the starting point for discussions and decisions relating to the current round/year. The new Cost & Data Sheet will also be needed as prices will have risen with inflation since the previous year.
The Reports and Cost & Data Sheet can be saved to a file or printed by using the icons on the top right hand side of the screen.
'Go Straight to Decisions' to begin entering decisions immediately. This option is only likely to be used when re-entering the simulation after a break from decision making.
Other options on this screen:
The bottom of the screen there is the option to view previous round results - from here you can view the results for any year/round;
There is also the option to exchange messages with the simulation administrators by using the message board.
Entering Decisions
To begin entering decisions select the Enter Decisions button, which can be found at the top and the bottom of the screen.
There is a generic help screen on each screen and beside each individual decision box there is a
symbol that gives additional help on that specific element. There is a main category decision box for each model and the company. These can be accessed directly at any time by using the menu bar on the left-hand side of the screens.
Begin by entering the Company Name then move through the Model Decision boxes and finally the Company Decisions Box.
Each category box has a Status button at the top right-hand corner. This will be red and say pending until all decisions have been entered when it will change to green and say complete. It is not possible to proceed to the next stage of the simulation until all these boxes are categorized as complete.
To leave the simulation at any time, and retain any decisions already entered, select the LOGOUT option from the top black tool bar. Log back in once ready to make more decisions or proceed to the next step.
Once all decisions have been entered select the green Proceed button at the bottom of the screen. You will then be able to view a set of projected results.
Viewing Projected Results
Executive will display a forecast set of results for the round and there is also a drop-down menu giving the option to view any of the results from the previous round/year. The previous or projected results can be saved to a file or printed by selecting the appropriate icons.
NB : The predicted results are only a guide to what the possible outcome could be with that particular set of decisions, when processed in the Master simulation, the background competition, the decisions of the other teams/companies and environmental and economic factors will influence the actual outcome.
Once the projected results have been viewed it is possible to return to the main decision-making screens and change any of the data entered. To do this select the Change Decisions button at the bottom of the screen.
This can be repeated as many times as required, however, it is strongly recommended that changes made to decisions to try to improve performance are managed carefully. If too many changes are made at the same time, it will not be possible to identify which one(s) have made an impact. It is best to make as few changes as possible each time the "what-if" model is run.
There may also be a charge for each time you return to the decision screen to make changes. The tutor will inform you of any charge before the decision period begins.
Saving Decisions
To save the decisions and submit for processing select the green Finalise Decisions button at the bottom of the screen. NB: Once this button has been selected it will NOT be possible to view or make any further changes to the decisions.
Viewing, Printing And Saving Results
From year/round 2 onwards the button below will be displayed at the top left hand side of the opening screen. It will give access to the results from the previous year/round and the Cost and Data Sheet for the prevailing year/round.
At any time during an exercise the results from previous years/rounds can be viewed by selecting "view previous round results" at the bottom of the login page.
To print or save any report, display it on the screen and use the icons at the top right hand of the screen.