Micromatic Simulation
Team and Solo Versions
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Mgmt 481
Introduction
Simulate the workings of a small
manufacturing business
 Each team (? in total) will play against
each other
 Computer just process each companies
individual decisions
 Administrator (me) acts as owner, banker
and industry regulator, union negotiator,
etc.

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Mgmt 481
Goals
Understand the importance of a business and
strategic plan to guide business decisions
 Understand the relationship between the
three main financial statements
 Understand the relationship between
marketing, operations and finance
 Understand the operational issues of
production, inventory, plant and labor force

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Mgmt 481
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

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Mgmt 481
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)
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Mgmt 481
Four Functions of Management
Planning
Controlling
Leading
Organizing
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Mgmt 481
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
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Mgmt 481
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
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Mgmt 481
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,
Mgmt 481all by Company, Future Sales Potential
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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
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Mgmt 481
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
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Mgmt 481
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.
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Mgmt 481
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
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Mgmt 481
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
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Mgmt 481
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?
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Mgmt 481
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
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Mgmt 481
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

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Mgmt 481
Company publicly held
Company is in start-up position – only one
quarter’s (Quarter 0) info is available
 John & Emily Anderscott developed business but
as limited partners not allowed to perform any
management duties
 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
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Mgmt 481
The Simulation Environment
Each decision period is 3 months (1 quarter)

Teams make approximately 50 - 100 decisions
per Qtr
Three stages:
1.
Forecasting Stage:

–
Test “what-if” and modify decisions until have best
case
Processing Stage:
2.
–
Administrator accesses decisions of ALL companies to
determine market share allocations and individual
company profitability
Results Stage:
3.
–
Mgmt 481
Teams analyze actual versus forecasted performance.
Use this analysis to forecast next quarter.
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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

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Mgmt 481
My Role

I will be your
–
–
–
–
–
Banker
Board of Directors
Regulatory Advisor
Union President
And other roles as necessary
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Mgmt 481
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.
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Mgmt 481
Marking Scheme
Variety of methods to assign marks

Team performance

The Strategic Plan (See Assignment 1)

Industry Analysis paper (See Assignment 2)

Presentation of Company strategy & performance
(last week of classes)

Team assignments (log book, periodic reports,
etc.)

Joint Peer evaluation and division of points
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Mgmt 481