Micromatic Management*
Prof. A D Amar, PhD
Seton Hall University
*Based on Timothy Scott, Minnesota State Univ., Mankato, MN
Introduction
• Simulate the workings of a small manufacturing
business, integrating operations, marketing, and
finance.
• Each team in this class will play against each
other
• Computer just processes each company’s
individual decisions in relationship to the others
• Administrator (the professor) acts as the owner,
banker, industry regulator, union negotiator, etc.
Goals
• Understand the importance of your business and
strategic plan to guide decisions
• Understand the relationship between the three
main financial statements—Income Statement,
Balance Sheet, and Stockholder Equity Statement
• Understand the relationship between marketing,
operations, and finance
• Understand the operational issues of production,
inventory, plant, and labor force
How to approach the simulation
Management is a balance of art (intuition) and
science (analysis of facts) combined with group
dynamics
To Succeed you should:
• Manage your time efficiently (stay focused)
• Manage your business – do not guess at your
decisions
To Succeed you should
• Learn from your failures
• Decision rules are the same for every round
• Must learn to capitalize of success and recover from
mistakes
• Do not worry if a little confused at start
• you will quickly move up the learning curve
• Simulation requires applying your knowledge not just
listening as in lectures (fundamental shift)
Four Functions of Management
Planning
Controlling
Leading
Organizing
The Manager as a Planner
Must develop the Vision
• Mission Statement & Statement of Goals &
Strategies
• Who are the customers, what are their needs and
how will gain competitive advantage
• What are your corporate values
Low price /
Premium price /
High volume
Low volume
The Manager as a Planner
In the Simulation you are responsible for the
planning in five main areas
1.
2.
3.
4.
5.
Marketing
Production
Finance
Sales Forecasting
Management Dilemmas
Marketing – Production – Finance
– Sales - Dilemmas
Marketing Decisions
•
Pricing
•
•
Price sensitive marketplace unless enticed by stronger marketing
efforts (oligopoly)
Promotion
•
•
Local newspaper advertising, trade publications, ad message,
salesreps, WWW promotion, product features and quality
Market Research
•
•
Can buy Market Research Information (9 types)
Price, local newspaper advertising, trade publications, quality,
WWW, salespersons, product features, units sold, all by
Company, Future Sales Potential
Marketing – Production – Finance
– Sales - Dilemmas
Production Decisions
•
•
•
Ordering Raw Material (order + carrying cost)
Product Research and Development
# of Units to Produce
•
•
Must have raw material, plant capacity & # of workers
# of production workers to hire, fire or layoff
•
•
•
Begin with 54 workers; can add overtime
Amount of production capacity to buy or sell
$ to invest in Training
•
Improve productivity
Marketing – Production – Finance
– Sales - Dilemmas
Finance Decisions
•
Short Term Loans (Line of Credit)
•
•
Finance current operations
Long term Bonds (mortgages)
•
•
Finance expansion of plant capacity
Short Term investment deposits or withdrawals
•
Can invest excess cash into stable & conservative short term
securities
Marketing – Production – Finance
– Sales - Dilemmas
Sales Forecast Decisions
•
Based your quarterly sales forecast on your current
and future mix of pricing, advertising & investment
in product quality
•
•
•
Use this forecast to set production parameters; but no
guarantee you will reach these forecasts
If you misjudge your competitor's actions you will not
make the forecast
Added complication is you do not know what the
economy will do.
Marketing – Production – Finance
– Sales - Dilemmas
Management Dilemmas
•
Periodically will introduce various management dilemmas
•
•
•
•
Range from employee theft to union relations to substance abuse
There is no right answer in these dilemmas
Responses to the dilemmas will result in different consequences
Consequences can effect worker productivity, sales, cost of raw
materials or interest rates
The Manager as an Organizer
Must develop the Organizational Hierarchy
• Organizational Chart
• List of duties & responsibilities for each position
• Staff the position
• Remember the dual role (student -> friendship) and (manager > work)
• Teams that have an established chain of command do
better than “the herd”
• Herds tend to take narrow view and focus only on a
single issue
• Organized groups (specialized functions) tend to keep broader
focus and are much more efficient
The Manager as a Leader
Must decide how to influence and motivate members
• Goal Setting
• Balance of individual’s goal and organizational goal
•
•
•
•
Will you have management hierarchy or team approach?
How will you manage your company?
How will you balance the workload?
Your peers will evaluate your leadership ability in both a
public and confidential manner
• How will you motivate under performing members?
The Manager as a Controller
Must deal with issues of control
• Must establish a reporting system
• Must develop performance standards
• Must monitor key performance parameters and
take corrective steps if necessary
• Must know the breakeven points for the
manufactured product
The Business Environment
• All companies start from identical point
• All companies manufacture identical products
• Manufacturing process consists of forming raw
material (components) into finished consumer
product
• Produce a commodity => No customer or brand
loyalty => you must “earn” each quarters sales
Company publicly held
• Company is in start-up position – only one quarter’s
(Quarter 0) info is available
• You will deliver reports to the board of directors
• Initially no difference exists between you and your
competitors’ products
• This will change as you modify promotion, pricing, and
product improvements
The Simulation Environment
• Each decision period is 3 months (1 quarter)
• Teams make approximately 50 - 100 decisions per Qtr
Three stages:
1. Forecasting Stage:
•
2.
Test “what-if” and modify decisions until have best case
Processing Stage:
•
3.
Administrator accesses decisions of ALL companies to
determine market share allocations and individual company
profitability
Results Stage:
•
Teams analyze actual versus forecasted performance. Use
this analysis to forecast next quarter.
To Do:
• Read in detail the summary and study the
decisions and reports and get familiar with the
software.
• Decide on Company name, organizational
structure, individual job titles and responsibilities.
• Begin to develop a mission statement & strategy,
areas of responsibility, and duties
The Professor’s Role
• Roles
•
•
•
•
Banker
Board of Directors
Regulatory Advisor
And other roles as necessary
As Administrator I Can Control
• Economic variables (industry demand, costs, and
weightings of performance variables)
• Introduction of management dilemmas
• The amount and availability of loans and mortgages
• Frequency and Amount of fines (lost passwords, late
submissions, failure to get proper prior approvals, etc.)
• Introduce “External Substitute” products. If everybody
takes a low promotion strategy I can introduce external
substitutes which creates a loss of demand for ALL
companies.