ENSIM:
A Management Simulation
Case With Environmental
Constraints
A. G. Kefalas, The University of Georgia
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A. G. Kefalas, The University of Georgia
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Mission Statement

The overall mission and challenge to
the participants in to run a
PROFITABLE & ENVIRONMENTALLY
SOUND COMPANY
A. G. Kefalas, The University of Georgia
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Relationship of .....
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It is never too late ! Or is it ?
A. G. Kefalas, The University of Georgia
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Brief History of Human Concern
for the Physical Environment
The Age of Environmental Awareness:
The Romantic Sixties
 The Age of Institutionalization:
The Legislative Seventies
 The Age of Contemplation & Analysis:
The Sobering Eighties
 The Age of Action:
The Ecopreneuring Nineties

A. G. Kefalas, The University of Georgia
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Corporate Strategies to Institutionalize
Environmental Concern
Addition of the environmental concern
into the corporate code of ethics
 Restructuring the corporate hierarchy by
adding a new environmental unit
 Restructuring the corporate resources
allocation model

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Business Objectives & Goals
Profitability as the most important
goal:
Profit = Revenue - Costs
+
 Survival is the most important business
objective
 Business enterprise which consistently
shows a loss is socially undesirable

A. G. Kefalas, The University of Georgia
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Strategies to Accomplish Goal
Growth Strategy :
Focus on Revenues
 Efficiency Strategy:
Focus on Costs
 Organic Strategy:
Focus on Revenues
Focus on Costs

A. G. Kefalas, The University of Georgia
increase R
decrease C
increase R
decrease C
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The Basics of a
Wealth-Creating System
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Long-Term Goal

Increase the Entreprise’s Value
Networth =
Total Assets - Total Liabilities =
Equity
MAX
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A Competitive Simulation
Situation

Four teams of
managers operate
competitive companies,
trying market and
production strategies,
etc. The computer,
furnished with a model
of the complete industry
and market, feeds back
information to the
managers and also
keeps score.
A. G. Kefalas, The University of Georgia
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A. G. Kefalas, The University of Georgia
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The Way to the Market
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Operating Decisions
for each Product
Unit Sale Price
 The dealer’s margin
 Marketing effort expenditure
 Research and development expenditure
 Production volume
 Raw material order

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Operating Decisions
for the Firm (1)






Expenditure to purchase competitor
information
Labor relations expenditure
Management training and development
expenditure
Air pollution abatement expenditure
Water pollution abatement expenditure
Expenditure for new plant and equipment
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Operating Decisions
for the Firm (2)






Bank loan request
Bank loan payment in excess of the minimum
payment
Bank notes (purchased or redeemed)
Blocks of bonds offered for sale
Par value of bonds bought back
Dividend declaration
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A. G. Kefalas, The University of Georgia
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Strategic Plan

Vision

Mission

Goals or Objectives
WHAT?

Strategies
HOW?

Justification
WHY?
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Monthly Decisions





Category One:
Operations and Productions
Category Two:
Research and Training
Category Three:
Marketing
Category Four:
Investment and Finance
Category Five:
Ecology
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Category One: Operations
a) Productive Capacity
b) Production Volume
c) Controlling Plant Capacity
d) Expenditure for new Plant Equipment
e) Finished Goods
f) Raw Materials
g) Raw Materials Order
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Category Two:
Research and Training
a) Labor Relations
b) Labor Relations Expenditure
c) Product Research and Development
(R&D)
d) R&D Expenditure
e) Managerial Efficiency
f) Expenditures for Management Training
and Development
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Category Three: Marketing (1)
a) Determination of Market Demand
b) PM = f(Price, Dealer Margin, R&D,
Advertisement, Economic Index)
c) Industry-Price
d) Firm-Price of Product
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Category Three: Marketing (2)
e) Dealer’s Margin
f) Dealer’s Margin for E and Marketing
Expenditure for Q
g) Marketing Effort
h) Marketing Expenditure for Q and E
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Acquiring Competitor
Information
a) Information in Participant’s Summary:
Price of each Product
 Dividend declaration
 Stock price
 Earnings per share
 Air and water pollution fines
 Days shutdown for excessive pollution
 Duration of any labor strike

b) Expenditure for Acquiring Competitor
Information
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Category Four:
Investment and Finance (1)
a) Liabilities
b) Bank Loans and Bank Notes
c) Bank Loan Requested and Excess
Loan Payment
d) Bank Notes Purchased
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Category Four:
Investment and Finance (2)
e) Bonds
f) Expenditure for new Plant and
Equipment
g) Blocks of Bonds Offered for Sale and
Par Value of Bonds Repurchased
[One Block = 250 Bonds]
h) Dividend Declaration
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Category Five: Ecology
a) Pollution
b) Air Pollution
c) Expenditure for Air Pollution Abatement
d) Water Pollution
e) Expenditure for Water Pollution
Abatement
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Return on Investment
Firm 1
Firm 2
Firm 3
Firm 4
Firm 5
Profit Margin
Asset Turnover
Fin. Leverage
3.20%
0.21
1.19
3.20%
0.21
1.19
3.20%
0.21
1.19
3.20%
0.21
1.19
3.20%
0.21
1.19
Return on Assets
Ret. on Net Worth
0.68%
0.81%
0.68%
0.81%
0.68%
0.81%
0.68%
0.81%
0.68%
0.81%
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Financial Ratios
Firm 1
Firm 2
Firm 3
Firm 4
Firm 5
Current Ratio
Quick Ratio
EBIT to Tot. Ass.
3.63
0.44
0.81%
3.63
0.44
0.81%
3.63
0.44
0.81%
3.63
0.44
0.81%
3.63
0.44
0.81%
Times Int. Earned
6.25
6.25
6.25
6.25
6.25
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Asset Productivity
Firm 1
Firm 2
Firm 3
Firm 4
Firm 5
Inv. Turnover Q
Inv. Turnover E
Total Inv. Trnover
0.35
0.52
0.45
0.35
0.52
0.45
0.35
0.52
0.45
0.35
0.52
0.45
0.35
0.52
0.45
Inv. Hold Period
Sales to Inv.
GMROI
Z Factor
67.63
0.92
0.47
4.77
67.63
0.92
0.47
4.77
67.63
0.92
0.47
4.77
67.63
0.92
0.47
4.77
67.63
0.92
0.47
4.77
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