Decision-making guide
Copyright© Cesim Oy 2000-2020
1. Simulation platform introduction
1. General user interface options
2. Home
3. Decision checklist
4. Decisions
5. Results
6. Schedule
7. Teams
8. Readings
9. Forums
2. Decisions
1. Main objective and winning criterion
2. Best practices for good teamwork
3. Market outlook
4. Sales
1. Sales - Market Report
2. Sales - Markets
3. Sales - Additional deliveries
5. Production
1. Production by area
1. Shifts
2. Production – Quality control
6. Finance
1. Suggestion for capital structure decisions in case you have accumulated excess cash
7. Projections
1. Income Statement
2. Balance sheet
8. Calculation of key financial ratios
Simulation platform introduction
General user interface options
1. Profile - Here you can change your email, password and add a personal picture to be displayed on
various parts of the user interface. You can also change your account's language and time zone, and
determine the automated email notifications you wish to receive. Please enter a valid email address to
avoid missing out on important information from your instructor or teammates. You will also need it
should you require the "Forgot my password" feature.
2. Help - Here you can reach the Cesim Support team if you run into problems or issues relating to ingame functionality. For any content-related questions, contact your instructor.
3. Logout - Use this button to log out.
Home
1. Results summary - These graphs show your performance in relation to the competition.
2. Activity - This section shows you recent activities, including the history of decisions submitted and the
rounds' deadlines.
3. Tasks - If your instructor has assigned a quiz or a peer evaluation to your course, you will find it here.
Should you be required to submit document(s) to the platform, the link will be shown in this section.
4. Messages - Forum posts will be shown here.
Decision checklist
The Decision checklist displays all decisions made in the game. It shows both a Team Decision Area and the
individual Student Decision Areas. Each team member has a decision-making area, where they can input any
figures and see the effects they have on the projected results. By default, the students always start with their
own Student Decision Area when logging in to the game. When the deadline passes, the round results will be
calculated based only on the Team Decision Area.
The Decision checklist offers several tools to manage the decision-making process:
1. Round-based drop-down menu - Use the drop-down menu to select the desired round. You may select
previous rounds in order to review the decisions made during those rounds, although modifications
will be disabled.
2. Legend - The different colours of the cells will help you to identify the active decision area and
whether a change has been made to the decisions.
3. Go - This button allows a player to view another teammate’s Student Decision Area, or the Team
Decision Area. Any modifications will be automatically recorded in their respective area. Any
modifications made in the Team Decision Area will be used as final decisions when the round ends,
should no further actions be taken. Be careful about relying on direct modifications to the Team
Decision Area. If any team member overwrites (copy as team’s decisions) existing decisions in the
Team Decision Area with their own, there is no backup for the overwritten decisions. Making plans on
your personal Student Decision Area ensures the decisions are safe, as your teammates cannot
overwrite decisions in your own area with a single click.
4. Copy as team's decisions - This button copies a player’s decisions from the Student Decision area to
the Team Decision Area. Once copied, the previous set of decisions cannot be recovered. Decisions
can be copied from the Student Decision Area to the Team Decision Area as many times as needed
prior to the round deadline. If decisions are made directly into the Team Decision Area, then no
additional steps need to be taken, as they will be automatically used to calculate the results when the
round ends.
5. Import - This button transfers the decisions made in a Team- or other player’s Student Decision Area
to the importing player’s own Student Decision Area. Once imported, the original decisions of the
importing player cannot be recovered.
Decisions
The Decisions are split into sub-categories (e.g. Demand, Production, etc.). Some areas should be filled in
first, as they affect other areas.
There are two general types of input fields:
1. Decision cells - The decision cells can appear as input cells, drop-down menus, checkboxes or buttons.
2. Estimation cells - Estimation cells are where you can enter sales estimates, personnel turnover, etc.
These estimations act as a basis for the budgets shown in the system.
The system automatically updates the budgets and calculations as you make decisions and/or estimations.
Results
The round results are calculated as the deadline passes, using the decision sets in each team’s decision area.
The results from previous rounds, including possible practice rounds, are accessible and you may also
download the results as presented in an Excel file or as a slideshow of main indicators.
1. Universe-based drop-down menu - This allows you to choose any universe in the course. A universe is
a group of competing teams affecting each other’s results.
2. Round-based drop-down menu - This allows you to choose the desired round results.
3. Excel - Here you can download an Excel file showing the results of the chosen round.
4. Print - This button allows you to print the results of the round.
5. Slideshow - This button will allow you to view a slideshow of the key indicators of the round.
Schedule
The Schedule page displays a timetable of the rounds’ deadlines. The results are calculated as soon as the
deadline of the round passes. Unless otherwise restricted, decisions can be made on each round as soon as the
previous round’s deadline passes.
An instructor can choose to have up to three practice rounds for a course. Once the practice round(s) are over,
the game will reset to the initial market situation. The initial decisions for the first actual game round are
imported from the first practice round. Other than that, the practice rounds have no effect on the results of the
actual game rounds.
Teams
The Teams page contains the teams' compositions across all the universes of the course. On this page, you
may also edit your own team’s information, such as the team name, slogan and/or team description.
At the start, when no deadlines have passed, you can join any team that has an empty slot. Simply click the
Join Team button. After the first deadline has passed, only the instructor can move participants between teams.
Readings
This section contains documentation that participants need to read and comprehend in order to enjoy the game.
The generic reading materials include this decision-making guide and a case description. Instructors can also
upload additional materials here.
The case description gives information regarding the business case that is being played on the course. It gives
a general understanding of the company, industry, trends and challenges.
Forums
The forums are a great place for players to contact their instructors or fellow players, especially in situations
where face-to-face time is limited.
There is a Team Forum, a Universe Forum and a Course Forum. The Team Forum allows your team members
to see posts and reply to them. The Universe forum only exists if multiple universes feature on the course, and
can be seen by all players in the respective universes. The Course Forum is available for every player
registered on the course.
Instructors can view and reply to forum posts in the three sections. As such, the Course Forum is a good place
to ask questions that everyone on the course can benefit from, while the Team Forum is the ideal place to
discuss sensitive team-related issues.
Players will be notified by email whenever something is posted on their team forum area (unless they choose
to disable this function in the Profile section).
Decisions
Main objective and winning criterion
The goal of the simulation is to maximize the total cumulative shareholder return. This includes the change in
the share price, dividends paid out to shareholders by the company, and the accumulated returns that the
dividends would generate for the shareholder if invested elsewhere. The Cumulative Shareholder Return is
given as an annualized percentage. It is important to note that paying out dividends early means that you have
less own capital to profit from and/or to increase the share price with, but that the returns will have a longer
time to accumulate.
Best practices for good teamwork
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For each round, appoint a "CEO" who is ultimately responsible for coordinating the team effort and
submitting the final decisions. Circulate the CEO role from one round to another.
Pay special attention to timing. Each team member can work independently, but be sure to coordinate
efforts for maximum synergy.
Use the Team Forum to exchange ideas about strategy and decision-making. The forum will store your
correspondence so that you can refer to it later on while deciding how to implement your strategy.
Agree on an internal deadline for each round, by which time each team member will have made his/her
own decisions and suggestions. This deadline should leave enough time for the team to select the
optimal decision prior to the actual deadline.
Use the Decision checklist to inspect and select the final team decisions. Here you can see all teammembers' decisions side-by-side. You can also access each team-member's Student Decision Area.
You can use a team-member's decisions set as the starting point for the team decisions, and then make
the necessary adjustments. You can also directly edit team decisions in the Team Decision Area.
Market outlook
1. It is essential to read the market outlooks before you start to make decisions. They contain important
information on current market trends and possible future developments.
2. At the top of the page you'll find the “Projections” button. Here you can find your projected results
with regards to projections (balance sheets and income statements), main ratios and the simulation's
parameters. These parameters (costs, exchange rates, tax rates, etc.) are presented for the current round
and the previous one. You can take advantage of this information e.g. when planning for taxes,
logistics and investments.
Note
Quantitative parameters, such as tax rates, are forecasts for the round and they tend to be fairly accurate.
Market development, on the other hand, can differ from Market outlook, since markets are influenced by the
actions of competitors. Therefore, market growth may not materialize exactly as predicted.
Sales
Sales - Market Report
1. Here you set the delivery priorities. This decision becomes important if you do not have enough
products available to meet the global demand. If your supply runs out, the market that you have set as
your lowest priority (here 3rd) will be the first to be under-delivered. Markets prioritized 2nd and 1st
follow this rule accordingly.
Profitability analyses for individual countries can help determine which markets should have higher
priority. Remember to account for transportation costs when making profitability analyses as they vary
between different areas.
Additional deliveries are always delivered first and thus do not need to be prioritized here. Assuming
there are enough available products, the additional delivery will come from the first production area.
2. Now you can proceed to input the estimated demands for different markets. The Deliveries column
shows you how many products can be delivered based on your current Market Prioritization and
Production decisions. Unsatisfied demand column shows you the difference between estimated
demand and available deliveries.
3. The Logistics table provides you with detailed information of how inventories, production amounts
and deliveries will look if the demand estimates were realized.
The following logic is used in the logistics:
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Market areas that have production capacity will be delivered first from that factory to minimize
transportation costs.
Market areas without production capacity will be delivered from the producing areas in relation
to their remaining inventory.
Delivery terms for additional deliveries are “Ex Works” from the first production area, which
means that the buyer covers all freight and transportation costs. If there is an insufficient
amount of products in the first production area, they will be transported from the second
production area, in which case the transportation cost from Production Area 2 to Production
Area 1 is paid by your company.
Sales - Markets
1. You have the option to estimate demand for each respective market area, or adjust it if you have
already estimated demand on the Market Report page.
2. Set the price of the product here – you are free to input the price while bearing in mind that no
dumping is allowed.
3. The Demand Factors chart shows information about client preferences regarding the respective market
areas and products. The horizontal axis tells the relative importance of different demand factors and the
vertical axis shows your own position in relation to other competitors.
The horizontal axis is based on a logarithmic scale with a base of 10. Moreover, the Customer care
factor is always set at 1. This means that if, for example, price is shown at 2, then the price is factored
to be 10 times more important than customer care.
4. Here you can see the budgeted product-level profitability. This is based on your sales estimates and
decisions regarding pricing and promotion.
There are two different types of promotional opportunities available: advertising and customer care.
The effectiveness of these two approaches differs between different markets and products. To
understand which markets or products benefit most from promotional activity, you should carefully
analyze the results and actions of your team and your competitors.
Both promotion methods have a residual effect, meaning that investing in advertising and customer
care does not just provide benefits in this round—there is a positive effect on future rounds that
diminishes over time.
Promotion investments also have a positive effect on the total market size.
Food for thought
When you make your decisions regarding promotion, you should analyze the sales margin that you can
generate with that product in the specific market. However, in the medium term you must be able to pay for all
the product’s promotion with the sales margin that the product brings in. A useful rule of thumb is to allocate
approximately 10% of the sales margin, depending on the effect of the promotion in the market. You should
expect to spend a further amount during the launch of a new product.
Sales - Additional deliveries
Some additional deliveries to bulk-buying customers are periodically announced. If you want to participate in
the bidding, you need to provide a price per unit quote and decide upon the selling effort on this page.
Participation is voluntary and setting a price or selling effort at zero ensures that you will not participate.
Only one team can get the deal per round, per product. The customer makes the decision based on price,
quality of the product and the selling effort. The selling effort indicates the amount of money you spend to
prepare the offer and influence the client. If you decide to participate and your offer is accepted, you enter into
a binding agreement where you have to deliver.
Delivery takes place from the first production area during the next round. For example, if you bid during
round 1 and the round’s results indicate you got the deal, you must deliver during round 2. Delivery terms are
“Ex Works”, which means that the buyer covers all freight and transportation costs. Additional deliveries are
always delivered before any other sales.
Ten percent of the total value of the bid is paid during the round in which the bid is accepted and the rest
(90%) is paid during the next round, when the delivery takes place.
Production
Production by area
On the Production page, the main decisions to be made relate to your production capacity and the planned
production amount per product.
1. Here you get to decide on investments relating to production. You must make separate decisions for
building and machinery investments. Buildings become available following a one period delay.
Machinery becomes available immediately. Production capacity is limited by the machinery capacity
or building capacity (whichever is lower).
The existing machinery and/or building capacity decreases over time according to the amount defined
by Parameters in the “Projections” tab.
You are given the opportunity to invest in cost-efficiency improvements, which improve production
efficiency per person.
Here you get to decide on investments relating to production. You are asked to make separate
machinery investment decisions for both products. New machinery becomes available immediately.
The capacity of the existing machinery decreases over time according to the amount defined by
Parameters in the “Projections” tab.
You are given the opportunity to invest in cost-efficiency improvements, which improve production
efficiency per person.
2. Production volume is decided upon here. Note that your total production amount (for both products)
cannot exceed your production capacity. If the total production amounts exceed capacity, the amounts
produced are automatically scaled between the two products.
Production capacity also depends on the productivity of your employees. In order to have precise
capacity estimates, you have the option of inputting an estimate for the production efficiency.
Shifts
Production within a company is divided into three shifts. As these shifts occur at different times of the day,
different wages will have to be paid to people working in the more inconveniently timed shifts. The indicated
production capacity for a company is the absolute maximum output if all shifts are utilized. In other words,
full capacity is reached if the machines are running 24 hours a day.
Once the level of production has been decided, the cheapest shifts will always be utilized first. If a single shift
cannot satisfy demand, more shifts will be utilized. You can find the exact salary costs for each shift by
checking the Parameters in the “Projections” tab.
Production – Quality control
Quality control is decided for both products separately. Naturally, customers value high quality products, but
the exact requirements vary between different areas and products. To understand which markets or products
benefit most from investments in quality control, carefully analyze the results and actions of your team and
competitors.
Quality control investments have a residual effect, meaning that investment does not just provide benefits in
this round—there is a positive effect on future rounds that diminishes over time.
Finance
The Finance page provides you with more detailed information regarding your team’s financial situation,
including a cash flow statement. You are also tasked with making the relevant financing decisions and
estimates.
There are two available sources of financing for your company, debt and equity.
The issuing and buybacks of shares are made according to the market valuation at the start of the round. The
number of shares issued (repurchased) affects the issue (buyback) price.
There is a minimum end-of-year cash requirement. You can find the exact figure for minimum cash required
by selecting “Parameters” in the “Projections”. If cash falls below this level, the financial department
automatically fills that gap with short-term debt. Short-term debt is automatically paid when possible and it is
usually more expensive than long-term debt. You can find more information about the difference between
interest rates for short- and long-term debt (Premium for Short-Term Debt) by selecting “Parameters” in the
“Projections”.
Try to keep in mind that the idea is not to minimize the cost of debt, but to maximize the return on equity. The
winner of the game is determined by the cumulative total shareholder return, which measures the return that
the team is able to generate for the shareholders during the simulation rounds.
1. Here you make decisions about share issues and buybacks, as well as deciding upon dividends.
2. Here you can increase or decrease the amount of long-term debt. You are also asked to estimate your
long-term borrowing rate, which can substantially affect your projected financial statements.
Suggestion for capital structure decisions in case you have
accumulated excess cash
After financing group activities in the three areas, check the cash situation in the USA. If you have excess
cash, you can consider the following logic:
1. Check the capital structure. As a rule of thumb, you should try to keep the equity ratio (equity divided
by total assets) within the range of 40-60%. If it is less than 40%, it is more beneficial to repay debt
than to pay a dividend. If it is more than 60%, you are probably not fully benefiting from the tax shield
effect (related to Weighted Average Cost of Capital, WACC).
2. Decide upon the amount of cash and/or short-term debt required as a "safety buffer" for your
operations. The more uncertainty you have in your sales estimations, projections and budgets, the
higher your cash buffer should be. The short-term loan premium should be compared to the difference
between the interest of both cash and long-term debt.
3. Pay dividends according to your dividend policy.
4. If you still have excess cash, pay it out to the owners. You have two complementary alternatives:
o Buying back shares - If you buyback shares, you improve the earnings per share (repurchased
shares are immediately cancelled). Note that you should buy back shares over a long time
period. If you attempt to buy a large amount at once, you will create demand in the market and
the average buyback price rises.
o Pay extra dividends - Dividend payment will be taken into account as part of the total
shareholder return. (I.e. Money is transferred from the company cash-box into the shareholder's
cash-box.)
The weight between share buy-backs and extra dividends is mainly driven by taxation. Since we only consider
corporate tax in the simulation, the recommendation is that you set a dividend policy that is in line with your
long-term profitability.
Of course, timing is a key factor. The old investor rule of "buy low, sell high" applies in corporate equity
transactions as well.
Food for thought
The reason why you should maintain an approximately equal amount of equity and debt on your balance sheet
is that by doing this, you minimize your cost of capital. The smaller the cost of capital, the higher the net
present value of all your company's future cash flows, thus the higher the market value of your company. In
other words, the lower the cost of capital, the more investment opportunities that exceed the cost of capital
(i.e. more business).
Projections
The projections are easily accessible from any decision-making page. Simply select the button in the top-right
corner of the page. Projections update continuously as you make decisions or estimations. They form the
projected results for the round, hence the name “Projections”. The actual results calculated at the deadline will
differ due to the projections never being entirely accurate.
Income Statement
1. The “%” column shows that row’s figure as a percentage of net sales. For example, if net sales are 200
and gross profit is 120, this column would indicate 60% (120 / 200 = 60) in the row of gross profit.
2. The “∆%” column indicates the year-on-year percentage change.
Balance sheet
1. The “%” column indicates the percentage of total assets comprised in this row. For example, if the
long-term debt is 78 000 and the total liabilities and equity are 120 000, the first column from the left
would indicate 65% (78 / 120 = 65).
2. The “∆%” column indicates the year-on-year percentage change.
Calculation of key financial ratios