Hello. I have a business game and my part is to do the finance income statement, i will send u the file. I have only medium cars

2021/2022 Page 1

The EXECUTIVE Simulation Brief Guide (Operations Module) BACKGROUND Each team has the opportunity to build and run its own company. Participants enter and save a set of decisions that the simulation analyzes, the results are then printed in the form of an annual report showing company trading and accounts. The decisions made involve a wide range of business skills, including finance, marketing, strategy, effective interpretation of information, negotiation, time management and presentation skills. Moreover, the simulation highlights the importance of working effectively as a team. Executive is fully interactive, teams are working in a live marketplace, competing against each other as well as the background competition that represents the large global car manufacturers. It provides the opportunity to explore, experiment and then evaluate knowledge, judgement and decision making. The main decision areas comprise :  financing the venture and financial control;  the sector of the market to be sold into;  the technical specification of the cars to be sold;  the selling price;  the size of the workforce;  the amount of cars to be produced;  marketing/advertising the cars.

THE STARTING POSITION  A green field site  £500 million in the bank raised from the issue of 5 million £100 shares.  No production facilities  No workforce  All companies (teams) will sell cars into the European marketplace.  Production facilities are in the UK.  The currency is £sterling.  All costs rise with inflation annually.  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, page 5 for more details). THE MARKETPLACE The marketplace is the European Community and 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 grid below. 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.

Market Sectors – Car Categories Car Size

Buyer's Age Group

Small e.g. Peugeot 208

Medium e.g. VW Golf

Large e.g. Audi Q5

Luxury e.g. Jaguar F-Type

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

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.

April TRAINING

EXECUTIVE

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Separate market research about the European car industry provides the initial size of these sectors. The sizes change over time and up-to-date information is provided on the Company Report that is generated at the end of each year. 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 £27,000; Medium: £16,500-£36,000; Large: £23,500-£70,000; Luxury: £50,000 to over £100,000. PRODUCT DESIGN AND OPTIONS The cost of the raw materials needed to make the basic car are given on the Cost & Data Sheet. Design features, including body shape and engine size, must be selected for each model, and options can be made available for purchasers to add to the basic car. The designs and options selected are intended to increase the perceived value of the car at additional cost (detailed on the Cost & Data Sheet), which should be taken into account when setting the retail price. They should be chosen carefully, with due consideration given to the target market. 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  The percentage "take up" of each shape and engine size will depend on their popularity and the additional cost will

vary accordingly  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 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 Option Packages Some of the customer choice options are available in the form of packages. Details of these are given in the table below.

Tech/Safety Pack Forward collision warning system, lane departure warning system, adaptive cruise control with speed limiter, blind spot information, dazzle free rear view mirror, surround camera system, high beam assist, front and rear parking sensors, park assist, find key in car park.

Visibility/Winter Pack

Heated front seats, automatic headlights and wipers, power wash headlamps, heated front windscreen and washer nozzles, LED auto dip headlights, 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 headlamps, enhanced bluetooth and wireless charging, signature sound system, premium car mats.

Some options are offered individually as well as part of a pack. This is because some buyers may not want to buy the whole pack, just one element of it. However, the packs offer good value for money and encourage customers to spend more than if they were just going to choose one option. RESEARCH AND DEVELOPMENT Investment can be made in research and development projects for each model. When successful it will increase the model's value in the long-term. However, both time and money must be spent on each project and it is possible that they will fail. There are five 'failsafe' projects that are guaranteed to be successful : 1. Product Relaunch 2. Facelift 10. Fuel Efficient Engine 21. Ultra Low Emissions 27. Improved Build Quality If a project does fail it is possible to re-invest and begin again or accept that the investment is lost.

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R&D projects are divided into two phases : Phase 1: The research phase which is concerned with 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 is concerned with taking the prototype work and developing it for

production. This is likely to include design engineering, application, material selection and tooling for manufacturing.

At the end of each year an R&D report will be provided that gives the year that the project is expected to come online (or whether it has failed). A project can be stopped at any time before it is available (online) but the money already invested will be considered as a loss and written off. 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 15 Driverless Car 3 + 2

2 Facelift 0 + 1 16 Remote Self-Parking 3 + 1

3 Smart Driving Controls 2 + 1 17 Lightweight Roof 3 + 2

4 Advanced Diesel Engine 1 + 2 18 Lightweight Ceramic Brakes 2 + 1

5 Alternative Fuels/Biofuels 2 + 2 19 Smart Noise Insulation 1 + 1

6 Long-Range Electric Car 3 + 1 20 Frost Free Windows 2 + 1

7 BiDirectional Charging Unit 3 + 2 21 Ultra Low Emissions 2 + 1

8 Zero Emissions Engine 5 + 1 22 Infra Red Night Vision 1 + 1

9 Lightweight Engine 2 + 2 23 In-Car Advice System 2 + 1

10 Fuel Efficient Engine 2 + 1 24 Car-2-Car Communications 3 + 1

11 Virtual/Digital Mirrors 2 + 1 25 Green Painting Process 2 + 3

12 Anti-Theft Tracking 1 + 1 26 Driver Sensors 4 + 1

13 Breathalyser Interlock 1 + 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.

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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. 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 5). Continuous investment in R&D can produce a "Centre of Excellence" capable of delivering projects at significantly lower cost. SELLING PRICE AND PROFIT MARGINS The simulation works on the basis of 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. The purchasing power of the target market should also be considered. In order to sell well and give a healthy profit, a model must be priced higher than its basic production cost but low enough to make it good value for money. As a general rule, margins will increase in line with the size of the car, i.e. small cars are likely to achieve the smallest gross margin and luxury cars the highest. PRODUCTION Factories  Factories are required to house the workforce and production lines  The cost of a factory is given on the Cost & Data sheet  The cost of purchasing the first factory will be shown on the Cash Flow Statement at the end of year 1 (£670m)  Each factory has the capacity for 4,000 workers (production and management employees) and unlimited amounts

of automation  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. The oldest factory is the first to be sold.  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

 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 amount of cars produced in the year  Productivity can be improved by investing in automation, paying better wages and investing in training

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

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 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 (£360million in year) 1 but half

to twice this figure is acceptable.  The amount invested will have an impact on the 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 (£390 per week in year 1)  The industry average wage is shown on the entry screen and the Cost&Data Sheet (£600 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

 It is important to choose the areas that will be most effective in relation to the target market.  Promotion investment is automatically distributed equally between the models to maximise its effect. Cost of Advertising  There is an average cost for each method of advertising (see 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

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Type of Promotion Average Cost (£m)

Television 14.00 Radio 6.00 Magazines/Newspapers 11.00 Digital Media 10.00 Dealer Incentives 85.00 Promotional Offers 70.00 Sponsorship 65.00

MARKET AND COMPETITION RESEARCH It is possible to purchase research information on the market and also acquire data on the 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, an investments sheet and expenditure by other teams Data on Competition  Invest in detailed data on the competition (£10 m 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 FINANCE Funding To support the funding of this enterprise £500 million will be insufficient when the following costs are taken into consideration :

 factory : £670 million  automation : £1 million per unit  market research : £5 million (computer generated)  data on competition : £10 million (computer generated detailed data)  wages : minimum £390, average £600 per week  raw material, designs & options, research & development, costs (see Cost & Data Sheet for details).

A loan from the bank can be negotiated to cover any cash shortfall. In the event of the balance at year end being negative, an overdraft will automatically be granted but at a punitive rate of interest. A negotiated loan is paid off automatically as long as the bank balance is in credit – 50% of the cash balance at the end of each year will be used to pay off the outstanding debt. Interest rates are charged as follows (%) :  negotiated loan : 5 + inflation  overdraft : 8 + inflation (minimum 15%) Interest on a balance in credit is paid at a rate of inflation + 1.5%. 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

Tax Corporation Tax is charged on profits at 22% and payable in the following financial year.

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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. The simulation is designed to be a challenging but fun experience. Enjoy and learn!