Bonds do not reduce taxable income, but the interest paid on them does.

The rate for the long-term bonds will always be less than short-term loans. However, there are some "risks" associated with bonds:

• You will lock in a fixed rate for at least 3 years (when the bond becomes callable).
• The interest rate charged may be different (higher or lower) by the time the bonds are issued.
• There is a penalty for calling bonds early, equal to one year of interest.

Another consideration is that, if your firm intends to call the bond(s), all bonds issued in the same year must be called together (no partial calls).

You are not required to call your bonds by the end of the simulation because your firm is an ongoing business.

Not directly, but as licensor, there are several issues you want to keep in mind that can affect your profits.

The most important is the unit price of the licensed vehicle. You may want to run a pro-forma to determine if your margin will justify moving forward with the deal.

Any time you change your manufacturing mix, you will incur retooling costs. When you produce a vehicle under license, you do not simply use the old production line and slap a different nameplate on the vehicles as they come off the line. Instead, you create a new production line. This allows you to upgrade the licensed vehicle (as per your agreement) independent of your own products. While you do benefit from the experience with the vehicle it is based on, you will incur some retooling costs.

Additionally, producing a vehicle under license will increase your overall production. Make sure your manufacturing capacity can handle it or you will receive an over-capacity charge. Information on production and manufacturing can be found in the Internal - Manufacturing screen, the Competition - Manufacturing screen, and the Decisions - Manufacturing screen.

Lastly, the license agreement may include a License Fee. Typically, this benefits the licensor for additional costs, but entering a negative number will benefit the licensee. The license fees will appear on the Income Statement under Licensing Fees.

While selling to fleet buyers does not impact the perception of your firm as measured by firm preference, B2B contracts may impact your internal operations due to changes in production levels of vehicles which may require retooling, or adding additional capacity. You should also plan carefully regarding margins in the B2B markets.

No. The bonds are long-term bonds that mature beyond the time-frame of the simulation, therefore, you only have to be concerned with making the interest payments. You may call them if you like, but remember there is a penalty equivalent to one year's interest payments for calling them early.

Below is a list of the default simulation options available for BizCafe. More information can be found in the Simulation Options document (attached), as well as the BizCafe Instructor Manual. For the scenario, we recommend using the option that best fits your local minimum wage.

Registration: Student Pay or School Pay?
Price: $29.95 USD per student

General Settings
Scenario: 4 ($10.25 minimum wage)
Weekend Openings: starting 2nd period (3rd decision)
Multiple Product Sizes: starting 6th period (7th decision)
Creative Design: On
Events: Off
Peer Evaluation: Off

Practice Rounds
Play: Individual
Type: Benchmark (vs. computer)
Periods: 2
Replays/Restarts: 3 replays per period/0 restarts

Live Rounds
Play: Team
Type: Direct Competitive (students compete directly against each other)
Periods: 9 or 13
Special Incidents: On (default order)

Assignments Module
Various quizzes and assignments are available for instructors to enable for students in this system, many of which are auto-graded (see attached BizCafe Assignments Summaries for list of available assignments). Other options include: assign individually or as a team, open and close dates/times (as well as the option to allow late submission, with penalty), allow multiple attempts, and a pass/fail option. The Assignments Module is accessed by clicking Launch Assignments from your course site, followed by View->Assignment Library from the module (you will then see a full list of what is available and can click into each assignment for more information). The Instructor Guide to the Assignment Module will be available to help assist you with the setup process and you can also reach out to our support team for assistance.

No. Once a report is purchased, it can be viewed by anyone on the team for no additional cost.

However, the output from many of the reports is based on parameters set by your team. Although you won't be charged for creating an exact duplicate, it is important to coordinate with your teammates so you don't accidentally produce a similar report you don't need.

Yes. Imported vehicles can be sold on the B2B market.

No. Imported vehicles can only be sold domestically.

Focus groups are only available for customers that have already emerged. However, you can run a concept test on one of the emerging customers, which provides some similar information.

No. The Delivery class is only for the fleet buyer (B2B) and has no impact on the consumer market.

Yes. Dealers are independent businesses looking out for their own interests, so they will try to make the most profitable deal possible. A vehicle is typically sold above the MSRP under the following circumstances:

1. Demand is high relative to supply or market conditions indicate a higher price will be accepted by buyers.
2. Dealer margins are tight on the vehicle relative to industry standards for the relevant product class.

No. Your market research tests are private and can only be viewed by members of your team.

Yes, as long as your license contract allows this.

Not directly. Each of your dealerships is an independent business and their success impacts your success. They make the actual sales to customers and are set up on a regional basis (North, South, East, and West).

You can help your dealers make sales by making certain top-level decisions, like increasing regional and brand advertising, training and support budgets, and dealer discount percentage.

Other factors that affect how many sales are made are the number of dealerships in your network and the quality and range of your vehicle offerings.

In a sense and ONLY if the Licensing option is activated. If the Licensing option is activated (instructor optional), you can license a vehicle from another firm. As part of the licensing agreement, the licensor can develop, upgrade and/or produce a vehicle for your firm using their facilities.

Yes. These are two different markets with different purchase processes. Whether or not a vehicle is currently for sale in the Consumer market, you will be prompted to enter a separate price in the Decisions - B2B Marketing screen. This price has no effect on your vehicle price in the Decisions / Marketing screen.

No, you can't remove or sell a development center once it has been built, but there is no on-going cost for having it if you don't use it.

If you've decided to build a new Development center but it has not yet been built, you may "undo" the decision by going to Decisions / Product Development and checking the box to "Cancel" the construction.

For a minor and major upgrades, no. If inventory is very high, you may want to consider delaying the minor upgrade a year and lowering production to minimize inventory levels before initiating the upgrade or doing a major upgrade to give you an extra year to sell off inventory. You can do a cost reduction upgrade without writing off existing inventory, but this upgrade doesn't allow you to change the vehicle specifications.

Yes, you can make minor changes to any major upgrades or new products in the 2nd year of development (or 3rd if a new class vehicle). The change will not delay the launch of the product or upgrade.

Yes. In addition, all firms can qualify for the same contract if they fit the requirements. The preferred supplier will win double the guaranteed units, and all other suppliers will be secondary and win the guaranteed contract units. You can see which firms have qualified in the Market - B2B Contracts screen.

No. All firms begin with 3 vehicles that have been in the market for a few years and no upgrades or new vehicles in process (in the development centers).

Yes, just like in real life, both customer preferences and competition changes each year. In some periods there will be more change than others.

Development of a new vehicle does not automatically increase your capacity. If you believe the sales/production of the new vehicle will take you over capacity, you will need to increase capacity yourself.

No, development costs are spread evenly over the life of the project. However, "tweaking" the vehicle before launch will add more costs to the back-end, but will not delay the project.

Increasing dividends may or may not increase the share price—it depends on whether investors are more interested in income or growth. That said, an increase in stock price would increase the market value of the firm, since the number of shares is unchanged.

No, stock price itself does not impact customer preferences. However, it is frequently an indication of other factors that do impact the likelihood your vehicles will be purchased.

Yes, StratSim does take into account a company's overall positioning. For example, it is much more difficult for a firm that is known for its economy products to attain good sales for a new luxury vehicle than for a firm with an established track record with higher end vehicles. However, you may have as many as 10 years to change the positioning of your firm. It's worth taking time to consider the best path to get you to your long-term desired position.

The new customer list stays the same until a new customer emerges, and then it is replaced with the next one. As a general rule, there will always be 3 new customers available.

If you are referring to the tax shield benefits of interest or depreciation, yes, they are included. However, there is no loss-carry forward effect in StratSim.

The Test Market is used to determine the impact of price, advertising, and promotion on sales, where the product features are held constant. The characteristics of the existing product are used, not any planned changes (upgrades).

To determine the value of your current capacity, go to the Balance Sheet, and subtract Accumulated Depreciation from Plant and Equipment. Divide this value by 10 to compute 10% of your current capacity's value.

Alternatively, if you choose to automate, your Pro-Forma will automatically update, showing you the cost to do so.

The likely to buy percentage is a good way to begin to estimate demand, but note that this study is run "unbranded" and therefore does not take into account distribution, awareness, advertising, promotion, firm preference, etc (see the Concept Tests page of the manual in the Tools section).

The customers you're testing the concept with are in a particular customer segment (e.g., families) and interested in a particular vehicle class (e.g., family). The "Likely to buy" is reported as a proportion of the customers you're testing.

The Test Market study helps you measure the potential impact of changes in three of your marketing mix variables: Price, Advertising, and Promotion. However, it is backward looking (meaning using the previous period’s competitive vehicles, marketing mix decisions, and customer data). Therefore, it will only help you measure potential sensitivity to these marketing mix decisions.

The study provides an estimate of market share, sales, and net contribution with the proposed changes to your marketing mix decisions. In effect, if we had priced, advertised, and promoted the vehicle differently, what would have been the outcome? The estimated change in contribution includes (is net of) increased spending levels. Note that it does NOT consider the impact of any planned upgrades to your vehicle.

The forecasts are based on the best economic forecasts money can buy, and are just as reliable as those in the real world. Actual sales will be influenced by a number of decisions that competitors in the industry will make (new products, upgrades, pricing, marketing, etc.) Remember that vehicle forecasts on the pro-forma are based on what YOU enter.

Anyone may name the company at first. Once you have finalized your Startup decisions, the team leader may rename the company only once. If you have not finalized your Startup decisions, click the Startup Decision option under the Introduction menu on the left of the simulation screen (you will be able to do this once you are in the simulation and have paid).

Use the Pro-Forma report and select Product Contribution from the list of screens. Remember to enter your sales forecast and manufacturing decisions for accurate projections. This will estimate the cost for your current (and cumulative) production levels, whether above or below 100,000 units, and will include the impact of any Technology investments.

Stock price is an indicator of the current position of the firm. Profitability, growth, future potential, as well as market risk, are all factored into stock price. Please carefully consider your current position, your strategy, and the execution of your strategy. Since stock price is an overall measure of the current position of your firm, you will want to consider all factors that go into making your firm a profitable one, thinking long-term.

On the input screen for technology, there is an "Est. Cost Savings of Increase (mill)." The estimated savings is per year for the entire firm, based on your current product line, forecasted sales volume, and technology profile.

Please note, that the technology investment only affects the COGS, not the development costs. Also note that other factors also affect COGS (volume, specifications, inflation, etc.)

There is no surefire way to make a new customer market emerge. The key is providing the customer with a good product at the right price with good awareness. The Market / Microsegments page provides the only information available for new customers, though it is somewhat limited. You may also want to use some of the market research to learn more about the emerging customers.

Also note that only one new customer can emerge each period. The new market will go to the vehicle that provides the best fit, and the best support. Other factors such as the size of the market and advertising budget also play a role.

First, in the context of a Concept Test, a concept is either a new product concept or a development project.  It must exist in one of these two areas of your product development decision screen.

Next, the feedback on a concept is based on how a chosen microsegment thinks about your concept.  Specifically, whether they are likely to buy it or not based on the current vehicles on the market. One important caveat to the concept test is that it is always comparing your concept vehicle (unbranded) vs. other existing vehicles in the market (also unbranded). Therefore, the concept test does not take into consideration advertising / awareness, vehicle availability, promotional plans, dealership coverage or experience. The test also does not consider any upgrades, new products, etc. that the competition may be planning. The likely to buy percentage provided represents the percentage of the selected microsegment that would be likely to purchase your concept, new product, or upgrade, all things being equal.

Licensing is an instructor-selected option. If this option is enabled, you can license vehicles from other firms in your industry to sell under your brand. Research can be done within the simulation (in the Market, Competition and Tools section); however, negotiating the contract will mostly take place outside of the simulation in person with the other team, or by phone, email, Skype, etc. We do not dictate the terms of the contract, but keep in mind the limitations within the simulation.

Once you agree on a contract, the licensee must go to the Decisions / Licensing screen and click 'Add' to enter terms of the contract. First you must enter a name. (Note: this is the name of the vehicle you will sell, not the vehicle you are licensing, so it must begin with the first letter of your firm.). Then you are prompted to choose the vehicle you want to license.

Based on the contract you negotiated, you will enter the units, contract price, and vehicle specs. As part of the contract, the licensor may need to modify the vehicle in question. Expenses such as these can be factored in by entering a licensing FEE which is paid to the licensor to offset additional costs. Once the contract has been entered, check the EXTEND OFFER box.

After the offer is extended, the licensor must review the license requirements per the contract and accept the agreement (or do nothing and ask the licensee to modify the license). This should all happen in the SAME PERIOD. To accept, go to Decisions - Licensing, click Accept, and enter the vehicle model to license.
Once you click OK, you CANNOT undo this decision, so keep an eye on price and units to make sure they correct. As soon as you click OK, the simulation will automatically add production of the licensed vehicle to the licensor's plants.

The Licensee then needs to pricing and advertising budgets for the licensed vehicle in the Decisions - Marketing screen. Results from these sales will be available next period.

Start with understanding what insight you hope to gain from the study – in other words, the question you want to answer using conjoint. Are you designing a new product? Are you trying to determine the best upgrade option? Do you want to better understand what a consumer is willing to pay for a particular attribute?

Next is the choice of microsegment to survey. This follows directly from your strategy. Each microsegment has different needs and different trade-offs.

The next choice is which attributes to include in the study. Do you need additional insight on vehicle choice? Size? Price? ISSQ? You can only choose 3 of them at a time.

Finally comes the range of values. If you’re looking at upgrade options, start with your current model and then look at feasible configurations from there. If you’re focused on new product choices, what is a reasonable range to select?  Do you have some basic information about the microsegment that will help you set this range?  Are you willing to do a follow-up study? 

Remember, there are a limited number of conjoint studies you can run each period, so assessing which questions are most important to your strategy is critical.

First, remember that in this simulation, as in the real world, you are making decisions in an uncertain environment with less than perfect information. That can be difficult and frustrating. But there are very few situations where all of the inputs of an NPV calculation are truly known. If they are "known," it just means that someone has gone through the work of coming up with the assumptions and estimates, which is what you will have to do to some extent when you play the simulation.

Second, with regard to the risk-free rate, you'll need to make an assumption about approximately what it would be, based on the cash rate (what interest rate they can get in a money market account) and the prime rate. You can use a range of rates here to determine sensitivity or pick something that is "average." You are correct that Beta is not provided. As you know, Betas are estimates of risk in the financial world as well; they are not known constants. To get out of the dark completely, you could use the Beta estimate of one of the auto companies or an average for the industry. However, because the simulation is a bit more volatile than the real world, you'd probably want to increase it a bit from that. Using the "real world" is generally not advised in the simulation, but this might be better than nothing if you need a benchmark.

With regard to future cash flows of a project, you will have to make estimates beyond a year. (Note that the first year forecast is also an estimate.) Depending on the particular investment you are considering, your estimates may be fairly accurate or more difficult to nail down.

Click on the Decision Summary for the current period in the simulation, followed by the period you wish to view the Decision Summary for in a previous period using the drop down menu near the top right corner of the simulation.  This will take you to that Decision Summary.

The preferred supplier is the one who meets all the requirements at the lowest price. If you are the ONLY supplier, you will automatically become the preferred supplier as long as you produce a sufficient amount of units.

Please note that B2B units will be allocated before consumer sales, so you should keep that in mind when setting production levels.

In StratSim there are two primary ways to learn about how a particular customer segment perceives an existing product: the Focus Group and the Perceptual Map. For new concepts, products in development, or upgrades, you would need to use Concept Tests.

When you enter an upgrade on the Decisions / Product Development page, you see the current development expense listed next to the vehicle. The development cost is allocated evenly over the course of development. For a minor upgrade, the current expense is also the total expense. For a major upgrade, the total expense is double the current period's expense. You can choose to remove the upgrade project before it commences without incurring a cost, or you can let the project proceed.

To find out the actual production cost, use the pro-forma product contribution report which takes into account the product changes, production volume and other future things that impact costs.

Generally, the bond rating reflects your current default risk as a company. The best way to improve it is to have a successful strategy and execute it well. This will improve your ability to generate a stream of income, etc. and improve your bond rating. Restructuring might help, but perhaps at the expense of your stock price.

You may replace short-term debt with either long-term debt or cash raised by issuing stock. Alternatively, income from operations, improvements in managing inventory, etc. will also improve your cash position. Think of short-term debt as a revolving line of credit - it is automatically issued if needed and automatically paid off each period.

First, you will need to determine the consequence of non-compliance. How many sales were potentially lost? How much money was potentially lost? Answering these questions is often difficult to estimate. You will probably need to get the instructor involved and it is important to have all terms agreed to in writing.

If both parties can come to an agreement over potential damages, we can reimburse and/or fine the parties involved WITH INSTRUCTOR APPROVAL. Just have the instructor email us.

Please note this is a last resort and it is our hope that with instructor mediation, both parties can come to an amicable agreement.

Company fleet buyers have a significantly different purchase process than individuals. In order to qualify for a contract, your company must meet ALL the requirements for that B2B client.

The first step is to determine which contract(s) you wish to bid on. The requirements for each B2B contract can be purchased in the Market / B2B Contracts section. You may already meet all of the qualifications, but also very likely you may need to modify a current vehicle, build a new one, or increase your distribution coverage to qualify.

The next step is to hire a sales force to build a relationship with the client and obtain a request for quotation; this is done in the Decisions / B2B Marketing screen. To target particular client contracts, check the box next to the client's name. Please note it takes one year to build a relationship. You may want to use this time to work on meeting all requirements.

Once the simulation advances to the next period, you are ready to bid on a contract. Go to the Decisions / B2B Marketing screen to see your available contracts. You will be prompted to choose a vehicle for the contract. If you meet all the requirements, you will be awarded the guaranteed units for the contract. If not, you can continue to try again each period, as long as you continue paying your sales force.

Please note if you are the only supplier, or offer the lowest vehicle price, you will become the 'preferred' supplier, and will be awarded DOUBLE the guaranteed units.

When entering licensing decisions, just input your requested changes. For example, if you want to upgrade Interior and the I/S/S/Q of the current vehicle is 4/3/2/2, enter 5/3/2/2. The licensor will then have to upgrade the vehicle, or reject the contract. Please note that Major upgrades will take two years and may delay a license.

Therefore it may be a good idea to discuss your expectations with the licensor. As licensor, you may want to include a License fee in the agreement to offset potential development costs. Or charge more on a per unit basis.

The easiest way to calculate the cost of retooling your plant for changes in production is to go to Decisions / Manufacturing, enter increased production for the vehicle, and see what the retooling cost will be. Be sure to reduce the production input for the vehicle once you have the information you need.

The other way is to run a pro-forma based on estimated sales. This is particularly helpful to determine the retooling cost of an upgrade. Click Select Report, choose the Cash Flow Report, and view the Plant Retooling line item.

Use the Pro-Forma report and select Product Contribution from the list. Remember to estimate your manufacturing decisions for accurate projections.

All of the information you need is found in the Market section. You'll want to look at the forecast units under Market / Microsegments (forward looking) as well as analyze historical trends and consider customers who are interested in that class and their expected growth rates. Remember when analyzing historical market data that vehicle stockouts impact sales.

Flexible production helps mitigate over/underestimates in vehicle production levels by up to 10%.

Specifically, if demand is greater than supply, flexible production will automatically increase production up to 10% to help satisfy the unmet demand. Conversely, if your supply produces more inventory than can be sold in 120 days, flexible production will automatically decrease production by up to 10% to meet the 120 days inventory.

If production falls between 0-120 days inventory, production levels remains unchanged, as if the flexible production checkbox was disabled.

Do note that if production is increased beyond your manufacturing capacity, you will incur over-capacity charges.

The perceptual map provides a two-dimensional overview of how a microsegment views the market. In the map, you will see an estimate of the ideal vehicle for the microsegment relative to the leading vehicles competing for that microsegment.

Notice that there are no fixed dimensions to the map (e.g. an X and Y axis). This is due to how the map is created. It statistically attempts to derive the relative positions of the vehicles based on similarity / dissimilarity ratings and then graphically displays that in a two-dimensional map. Now, because a two-dimensional map cannot capture all the dimensions of how the vehicle is viewed by that microsegment, there is a measure called “Stress” which basically measures how well the map captures these relative positions in two dimensions.  Stress of 0 means that the relationship is conveyed perfectly (in other words, this microsegment is totally focused on two dimensions only). As the stress increases, one should be more careful about relying too much on the map. Stress above .40 means that not much can be gleaned from the map.

One can also plot various vectors on the map that attempt to explain why products are positioned where they are. Higher r-squared generally corresponds to attributes that are captured well by the map (and often are the most important attributes of the purchase process). The perceptual map can give you a quick overview of how well various products are meeting the needs of a microsegment and how the products are perceived relative to each other (similar or dissimilar) by that microsegment.

In addition to the interest you pay on your debt, you earn interest on your cash. To see the interest rate you are earning on your cash, view the Market > Economic Outlook report, and look at the Cash Rate line. The interest you collect shows up in the Cash Flow statement under the Financial Operations section; look at the Interest Earned line.

The sales of BOTH the licensor and the licensee are reflected in Value Market Share (% of $). This is because Value Market Share (% of $) is based on share of manufacturer sales.

However, only the licensee (the firm who ultimately sells the vehicles in the consumer market) will see their Unit Share (% of units) affected.

B2B contracts are awarded each period based on the bids received for the contracts. You can expect the contracts to continue throughout the simulation, but the price requirements will change to take into consideration inflation, and, of course, some of your competitors may enter the B2B market which may impact preferred provider status.

It takes one year for increases in capacity to become available so plan accordingly.

The Decisions / Manufacturing screen lists your current Capacity and your coming online capacity. If your total production exceeds your current capacity, you will receive an over-capacity charge in the Cost of Goods Sold line on your Income Statement.

It takes one year to build the development center. If you make the decision to add a development center in the current period, you will be able to use it next period.

It takes 1 year to open/close a dealership, and another year for the increase/decrease in distribution to impact results. As an example, if you make the decision to add dealerships in Period 1, it will not impact results until the results for Period 3.

Pending dealership openings/closings will appear on the "Scheduled Change" line on the Decisions / Distribution screen, and the Planned Openings line in the Competition / Distribution screen.

The only direct cost is the sales force, which is around $500K per client. However, overhead, retooling, product development, expanding distribution, etc., may all also come into play.

Check the note at the bottom of the Decisions / Distribution screen for the exact amount. Part is an on-going cost and part is for the change.

StratSim is based on the automobile industry and many of the scenarios are modeled to reflect more mature markets such as North America, Europe, or Japan . Needless to say, much of the complexity of the industry has been simplified to allow participants to focus their time and energy on strategic issues. However, we've retained as much realism as possible to make it easier to quickly understand the overall environment.

That said, faculty and students should only use historical perspectives as a way of relating to the market, rather than for analytical purposes. The same is true for economic indicators in the simulation.

Generally, what we are trying to provide is an even opportunity experience for all teams that reflects, in a simplified way, a realistic market and market dynamics.

If you're playing in a team and some of your team members have not yet purchased the simulation, the simulation won't allow you to enter decisions. If you suspect this is the case, please see your professor.

You can change the location as much as you like without consequences in the starting quarter. Once the simulation has advanced, you will not be able to change your location.

No. Production and delivery of licensed vehicles, and deduction and addition of license fees occur automatically in StratSim.

However, your contract may include details or requirements that cannot be enforced by the simulation, such as non-compete clauses, upgrade intervals, distribution restrictions, etc. Therefore, it is up to both parties to monitor each other and communicate to ensure everyone adheres to the contract. Unless your instructor takes on the role of the legal system, there are no lawyers, and there is no way to sue.

Once an agreement is accepted by the licensor it CANNOT be changed until the next period. This means the contract price cannot be changed (selling price is set be licensee), units cannot be returned, licensed vehicles cannot be upgraded or modified, etc. Carefully consider all ramifications before entering into a contract.

You will be able to change the license agreement next period when it is up for renegotiation.

No. Once a license is agreed on, the licensor produces a completely new vehicle (albeit a vehicle based on a current product) with your name on it. The licensor is now producing two separate vehicles: the original (with THEIR name), and the licensed vehicle (with YOUR name). The licensor can choose to upgrade the original without any input from the licensee. In other words, the development process is tied to the NAME of the vehicle.

It is up to the licensee to request an upgrade to the licensed vehicle using the Decisions / Licensing screen. The licensor will then need to perform an upgrade in the Decisions / Product Development screen before they can accept the license in the Decisions / Licensing screen.

The licensee. The vehicles have your brand name and are sold in your dealerships therefore you will be stuck with the vehicles if you don't sell all of them. While excess inventory may temporarily increase costs on your end, you may continue selling them after the licensing agreement has expired.

For this reason it is important to carefully estimate demand when projecting unit sales of a licensed vehicle.

Yes, but only after two of the three years of development for the project have elapsed. A class counts as existing after a vehicle in that class has been in development for two years. That is, when you have a new product in a new class selling next period--the project will say "Launching Now"--you can start a new vehicle in that class, and it will take two years of development time instead of three. When in doubt, the development time will be listed for concepts and on the Timeline.

If all other things remain unchanged, yes.

When you reduce capacity, you are actually selling off some of your plant and equipment. So your plant depreciation will continue, but the amount will be lower due to selling off equipment unless the plant was already fully depreciated (as oldest plant and equipment are sold off first).

We use a straight cumulative net income with no discount rate.

Yes. In the Market > Consumer Segments analysis, each consumer market has a primary and secondary 'desired class.' This means the customer will consider both vehicle classes when making purchasing decisions. Usually, the first vehicle class listed (primary) is somewhat preferred over the second (secondary).

Yes, you can undo most decisions and change them BEFORE the decision round due date. The exceptions are market research studies and tools, which once purchased, cannot be undone or modified.

Once the decision round has been advanced to the next period, however, you cannot retroactively change anything. It is important, therefore, to review, and possibly print, take a screenshot, or export your Decision Summary before each round ends to verify everything is correct. If you are playing as a team, remember that your teammates can make changes also, so you will want to coordinate your efforts.

No, these sales do not impact the marketplace. It is strictly a way to clear out the old model quickly (selling off to car rental companies, CarMax, overseas, etc.). It does always result in a 10% loss to you, but it does not compete for market share.

The interest rate will depend on the market's evaluation of the risk of your firm. In the pro-forma, you can experiment with different levels of debt to see probable impacts on the interest rate. Note, however, that the final rate is also dependent upon how things go during the year, and it will always be less than the short-term debt.

Yes, to a point. There is a limit to how many vehicles each dealership can sell in a given year, so increasing the number of dealerships will allow you to sell more vehicles, all things being equal.

Increasing dealerships will also provide you with improved coverage in each region. Dealerships are first added to the locations that will have the biggest impact on sales. At a certain point, however, the market will become saturated and some of these dealers will overlap each other. This could hurt the sales from the surrounding dealerships and cause sales per dealer to decrease, which can cause several negative side effects at the dealership level.

Accounts receivable does not work on a fixed percentage, but instead varies depending on how well your team treats your dealerships. If your dealers are happy, they will pay their debts quicker. You can use the Period 1 receivable percentage as a baseline with the understanding that it will fluctuate throughout the game.

Pricing is one of the most difficult decisions in marketing and strategy as it must take into consideration elasticity of demand (how the consumer will respond to changes in price), long-term implications of pricing decisions, competitive price levels now and in the future, and your internal cost levels.

The tools that are most helpful in pricing decisions are the Test Market (backward looking, but indicative of price sensitivity in the current landscape), Conjoint Analysis (to test how a particular microsegment will respond to different price levels), Concept Tests (for new or upgraded products), and the Pro-Forma (to see potential impact of different forecasted sales on margins and contribution using forward looking estimates of cost).

Of course, competition and customers will likely change so these studies provide guidance, but they don’t take into consideration competitive or customer changes.

You can change the financing start-up decisions as much as you like without consequences in the starting quarter. Once the simulation has advanced, you will not be able to change financing decisions.

You may cancel a project to free up a development center, but you will have to start over again when you decide to start developing it again. The other option is to begin building a new development center (it will take one year to complete).

Remember that your firm's performance is a function of your performance within industry and across industry on net income and market value. The stock market is determining the value of your firm into the future by assessing the discounted value of your future cash flows. These assessments are made each period, including the final period. In other words, even though the game will end, there are two forward periods to consider plus the market's assessment of the state of the firm in the final period. Our best advice based on past participants is to continue to run the business as if it were to continue indefinitely.

Generally, activating flexible production makes sense. Just be sure to take into consideration possible over-capacity charges.

The Concept Test's "Likely to Buy" percentage is useful in gauging current demand for a vehicle but is unrelated to the new group of customers represented by potential emerging microsegments. The Concept Test is unbranded and does not take into account distribution, awareness, advertising, or promotion, which are all influential when trying to make a new microsegment pop.

No, plant depreciation occurs over a 10 year straight line. Since the game is played up to 10 years, you can count on depreciation remaining constant (unless you increase capacity) over the course of the game.

Unfortunately not. Once purchased, studies cannot be returned or refunded. Any member of a team can purchase reports, so it is important that you coordinate with your team and carefully consider the research you want.

Keep in mind that your company is making billion-dollar decisions each period; $50,000 for a report is miniscule by comparison.

You and your team can choose among the following options:

1) Postpone the launch by not manufacturing the product. The cost is missing out on sales for that year, although you can still advertise to build brand equity.

2) Produce over-capacity. Any production above capacity will be assessed an automatic over-capacity charge.

3) Reallocate some manufacturing capacity from your current vehicle production to the new one.

Dropping a brand should be done with care, since you have built up equity in the brand that can only be replaced at great expense over a long period of time. Consider the fact that BMW thought it better to buy the Mini Cooper and build on it rather than develop its own brand from scratch.

When you take over management of a firm, you inherit its customer base, product portfolio, competitors, development capabilities and financial position. In addition, you also inherit people's perception of your firm based on years of experience. Your future vision of the company may or may not match the current company that you are managing, and changes that you make will not change others' view of the company overnight. So, repositioning of your firm, though achievable, does take time.

Dealer ratings (1-100 scale) reflect the customer experience at the dealership. Product offerings, training, coverage, and profitability affect these ratings.

Gross/Dealer is probably the most important factor influencing your Dealer Rating because that represents the revenues that the average dealer has to run their business. Gross/Dealer includes the margins they make on vehicles sold (difference between retail price and dealer invoice), number of vehicles sold, and revenues from the service department.

So, if you improve margins and/or increase sales volume (per dealer), ratings will eventually go up. Dealer ratings are long-term in nature, so if you squeeze margins/lose sales in a given year, the ratings won't suffer drastically, but in the long-run they will.

General and Administrative expenses—in addition to Marketing as well as Research and Development expenses—are not directly attributable to production. General and Administrative expenses include overhead from sales and the dealership network. It also may include overhead costs related to involvement in international markets. Dealership training and the cost of changes in the number of dealerships are the result of your decisions, but most G&A expenses are not under your direct control.

Investing in your technology capabilities has two benefits: your firm will be able to develop products with better attributes, AND higher capabilities reduce the base cost of products, all else being equal.

Unsold inventory ties up cash (see the Balance Sheet and Cash flow Report), and runs the risk of becoming obsolete resulting in an inventory write-off if the product is upgraded or discontinued.

Firm preference is determined by dealer ratings, range of products offered, firm technology capabilities, age of products, actual sales, and firm publicity -- in short, all the things that make a customer want to do business with a firm.

The main measures of customer satisfaction in StratSim are:

- Firm Preference: Overall satisfaction measure for the firm. In effect, which company do consumers prefer to do business with?
- Dealer Rating: A measure of consumer satisfaction with the dealership experience
- Focus Group: specific feedback on various aspects of the product

ou should review the Licensing section of the StratSim manual for further details, but we've included some important notes below:

- A firm can only license a maximum of TWO vehicles FROM other firms. There is no limit, however, on how many vehicles you can license TO other firms.

- Once an agreement is accepted by the licensor it CANNOT be changed until the next period. This means the contract price cannot be changed (selling price is set be licensee), units cannot be returned, licensed vehicles cannot be modified, etc. Carefully consider all ramifications before entering into a contract.

- While a multi-year contract can be negotiated, licenses MUST be renewed each period within the simulation. This means the licensee must re-offer the license AND the licensor must re-accept the license every period. This is done in the Decisions - Licensing screen.

- Classes with multiple competitive industries cannot license vehicles to or from other industries.

- License contracts can require that vehicles be upgraded once, or at set intervals throughout the game. That said, the upgrades must be done BEFORE the licensing contract is accepted. In other words, licensed vehicles must match what is in the licensing agreement or the simulation will not allow the agreement to be offered.

- Unit requirements must be set. In other words, no open-volume license contracts.

- Inventory remaining after the licensing agreement ends can be sold by the licensee (as long as the contract allows this). It cannot be returned to the licensor.

- Lastly, production and delivery of licensed vehicles, and deduction and addition of license fees occur automatically in StratSim. However, your contract may include details or requirements that cannot be enforced by the simulation, such as non-compete clauses, scheduled upgrade intervals, distribution restrictions, etc. Therefore, it is up to both parties to monitor each other and communicate to ensure everyone adheres to the contract. Remember, there is no court system in StratSim, there are no lawyers, and there is no way to sue. If a contract is broken, there may be no recourse.

All firms start with 2 development centers, but you may build one new development center each period. It takes one year to build a development center and the maximum number for each firm is 5.

If your development centers are full and you'd like to start another project, you can wait until one frees up or you can cancel an ongoing project.

"Launching Now" indicates that development is complete and the firm is ready to start marketing and producing the new or upgraded model. While the project is still in the development center, the firm will need to enter Marketing (price, dealer disc., etc.) and Manufacturing (production level) decisions. After the simulation is advanced, the team will see sales results for the launching vehicle.

If operations, current cash, and bonds/stocks issued do not provide sufficient cash for you to cover expenses, a short-term loan will be automatically issued for the amount necessary to cover any shortfalls. The short-term borrowing will be at a higher rate of interest than long-term debt, so it is to your advantage to plan cash flow needs accordingly.

If you continue to see high short-term debt, it is an indicator that you do not have enough cash to fund all your expenses and you should consider ways to increase your cash position. Section 3 of the StratSim manual describes these ways in detail.

Running a pro-forma may help you determine your cash needs for the next period.

Decreasing capacity will decrease future maintenance and depreciation costs. However, you will only get half the book value of the capacity you sell off. All other things being equal, you will have more cash available if you sell the capacity than if you don't, but the total value of your assets and retained earnings will decrease. You will see half the book value of the capacity written-off in the Income Statement, and you will see the cash from the sale in your Cash Flow. All other things being equal, you are essentially purchasing higher net income in the future.

Decreasing capacity takes effect immediately at the next advance. This is different than increasing capacity, where the change is delayed by a period.

In terms of maintenance cost, the oldest, most-expensive-to-maintain capacity is sold off first. This capacity is the most depreciated, but, for simplicity, Accumulated Depreciation on the Balance Sheet is adjusted assuming that each unit is equally depreciated.

If two teams have the lowest bid on the same contract, the simulation considers dealership coverage and firm preference next. If all items remain the same, there is no preferred buyer.

COGS includes all costs associated with production of the vehicle.

Variable costs (labor and materials) are impacted by your product design, technology capabilities, and production volume.

Fixed costs in COGS include retooling, depreciation, and over-capacity charges.

You can reduce the variable COGS through vehicle upgrades, investing in technology, and increasing production levels. Fixed COGS can be reduced by accurate forecasting and consistent management of production and capacity to reduce retooling and over-capacity charges.

Microsegments are the intersection of consumer segments (Market / Consumer Segments) and vehicle classes (Market / Vehicle Sales), and allow finer segmentation of the market. The Microsegments reports provide detailed information about each customer's vehicle preferences.

"Days inventory" is an estimate of the number of days of inventory available at year-end based on yearly sales and is derived by the formula (365 x units inventory / sales). Generally auto companies aim for approximately 30 days of inventory, but this may vary based upon development/upgrade plans for a particular vehicle.

Support/Dealer on the Distribution pages refers to how much is spent in support of dealerships for training and regional advertising. It is calculated as follows:

Support/Dealer = Regional Corporate Advertising / # of dealers + Training and Support / Total Dealers

Your capacity in the international regions will be determined by your domestic plant capacity. Each vehicle will be limited to twice the amount of your total domestic capacity. For example: if your total domestic plant capacity is 1M - each vehicle will have a limit of 2M in the international regions.

A Development Center is used to create and develop concepts, and to upgrade existing vehicles. The attributes of your vehicles (I/S/S/Q) are limited by your technological capabilities. Once a concept or upgrade is ready to launch, it is sent to your manufacturing plant for production.

Your Manufacturing plant produces your vehicles for sale in the consumer market. The higher your technological capabilities, the cheaper it is to produce your vehicles due to innovations and efficiencies in the production process and product design.

If your total production levels exceed your manufacturing capacity, you will receive an over-capacity charge. Keep in mind that it takes a year to build new capacity, so plan ahead.

Base Cost = estimated unit cost based on 100,000 units of production.
Unit Cost (COGS) = actual cost to manufacture based on actual volume.

The cash rate is interest a firm receives on short-term cash balances; prime rate is the rate a firm pays on short term loans (if it is a "prime" customer).

"Inventory Disposed" and "Inventory Write-off" are two steps of the same process, and they happen very close together. Remaining inventory is disposed of at the end of the first period. The COGS breakdown reports the inventory's value (Starting Inventory) as normal, while also zeroing it out via disposal (Less Inventory Disposed).

Then, at the beginning of the second period, the write-off is recorded under Extraordinary Items as a negative figure equal to approximately 10% of the inventory's value, the cost of the write-off.

It is true that the specs of both vehicles will be identical. However, the licensed vehicle has your firm's name on it, even though it is produced in your competitor's production plants. Therefore it is seen as part of your product portfolio and gets the benefits (or drawbacks) of your overall corporate profile (including perceptions such as dealer ratings, firm preference, and corporate positioning.

The expected price range of a type of vehicle represents how much a customer thinks they will have to pay for a type of vehicle. It reflects the beginning of the purchase process, wherein preconceptions affect what vehicles a customer considers. In effect, expected price range is primarily a positioning issue before the actual buying process begins.

See the Market - Economic Outlook report for the current cash rate.

If you are playing in benchmark mode, it is the team leader's responsibility to advance the simulation after decisions have been entered for each period (and if your instructor allows it, the team leader has the ability to replay and/or restart the simulation).

The team leader also has the ability to lock decisions each period, after the team has entered them.  This isn't a requirement, but does prevent other team members from going in later and adjusting decisions after they have been approved for the period by the team.  To lock decisions, the team leader will need to go to each Decisions page (Operations, Pricing, etc. through Special Decisions) and click the lock icon at the top of the screen (clicking it again will unlock decisions for the team).  The decisions will remain locked until the simulation is advanced to the next period.

Other than these functions, the team leader's role may be to organize and coordinate the team, but that is up to the instructor and the team itself.

If a firm purchases a CD in period #0, they'll see the interest income in period #1, as well as their "Investment Purchased". In period #2, they'll see their "Investment Maturing" (as listed under their financial statements).

All other factors being equal, cutting dividends will have a negative impact on stock price, but if the cash that is freed up is used to boost income (and therefore equity), then it could improve stock price. In short, it depends on what you do with the money saved by cutting dividends.

New customers represent new business. A new microsegment does not take away demand from existing segments.

No, increasing your technology capabilities will not directly impact the specifications of any existing product, but it will give you the capability to develop products with higher specs. You must use upgrades in the development centers to change the attributes of your current vehicles.

A major upgrade allows you to modify a vehicle by:

Size: +/-10 in the 1st year of development; +/-2 in the 2nd year.
HP: +/-20 in the 1st year; +/-5 in the 2nd.
I/S/S/Q: +/-2 in the 1st year; +/-1 in the 2nd (as long as your technology capabilities allow).

A major upgrade takes 2 years and can give you time to sell excess inventory before it is written off.

A minor upgrade allows you to modify a vehicle by:

Size: +/-2
HP: +/-5
I/S/S/Q: +/-1 (as long as your technology capabilities allow)

A minor upgrade is the quickest way to upgrade a vehicle. Sales will be impacted as soon as the simulation is advanced, so be sure to set your Marketing and Production decisions the same period you enter the minor upgrade. Note that additional inventory will be written off.

The price you're entering is the MSRP. Please note that because the Concept Test doesn't take into account distribution details, customers give feedback assuming that they would pay the MSRP without any discounts provided by a dealer.

The estimated savings are on a per year basis and apply to manufacturing (not development). They impact the entire firm, based on your current product line, forecasted sales volume, and technology profile.

Note that investing in your technology capabilities has two benefits: Your firm will be able to develop products with better attributes, and higher capabilities reduce the base cost of products, all else being equal.

When you accept the license agreement (by clicking the Accept button), the licensed vehicle and units will automatically be added to your production schedule, and you will not be able to change the number, since you are bound by contract to deliver the vehicles.

Increasing the production capacity, on the other hand, is a decision you make separately. Keep in mind that if you increase capacity this period, it will not be available until next decision period, so you may be running over capacity for a year.

Overcapacity charges are found by clicking the "Cost of Goods Sold" link on on the Income Statement.

The Industry News section on the Dashboard contains information about changes in the competitive environment, including any new, upgraded, or licensed vehicles introduced. In addition, there will be a message in Industry News one period in advance of the launch for NEW CLASS vehicles only.

You may also want to think about other clues for discerning whether or not competing firms are active in R&D development.

In the Decisions / Manufacturing screen. You only set one production number for any particular vehicle, so be sure to produce enough to meet expected demand in the domestic region, as well as any international regions you have entered. If you do not produce enough, demand will be met in the international market FIRST and in the domestic region second.

The cost for market research will show up under Extraordinary Items on the Income Statement. The detail view will show the cost as "Reports."

If the B2B module has been activated for your class (instructor-selected), you can purchase contract information for each of the B2B clients in the Market / B2B Contracts section.

Alternatively, when you hire sales force and target particular contracts, your sales force will provide similar information the following period as part of the request for quotation process.

In general, the simulation tries to keep expenditures as current as possible, so opening dealerships and increasing technology capabilities are expensed in the current period.

R&D is expensed over the course of the product development project (1, 2, or 3 years) and production capacity is depreciated over 10 years. The simulation speeds up depreciation/amortization rates mainly to make sure most investment decisions impact the firm during the simulation rather than after they've retired. This may not be in compliance with GAAP, but it improves accountability for decisions in the simulation.

The offshore partner pays the extra fees. That is, the price you enter for the agreement is the cost per unit to you. The partner will calculate the tariff and shipping, and factor that it when deciding if a deal is worth pursuing.

All companies can develop the full range of size and horsepower preferences for vehicles throughout the course of the simulation. There is no need to further develop these capabilities, only refine them to better meet the needs of particular customers.

Retooling represents the process of adapting your production line to manufacture a specific product. Retooling costs are the direct cost of making alterations to your production equipment.

You'll be charged retooling costs when you perform a vehicle upgrade OR increase production volume of a vehicle.

Sales force allocation is limited by the number of retail outlets in a given channel. You will only be able to assign 1 sales force to the channel per retail outlet. The number of retail outlets per channel is listed by country under Environment / Distribution in the simulation.

Typically, going over the annual budget happens in the final fiscal quarter of the year. When you have the least amount remaining in your annual budget.

To find where every dollar went in that entire fiscal year, you'll want to review the beginning of the following year. For example, proceed to Quarter 4 to review Year 1, Quarter 8 to review Year 2, and Quarter 12 to review Year 3. At any time, you can use the steps below to find where every dollar went:

Step 1: Click on the Decisions tab at the top of your screen (in Q4, Q8, or Q12 for the previous year's entire annual budget)

Step 2: Click on the Budget tab on the bottom left of your screen

Step 3: Click on the left arrow to review the previous quarter where you exceeded the budget

Step 4: Hover over the Total amount under Year-to-Date

The Vehicle Sales report shows, among other things, how many vehicles of each type of class were purchased. The Microsegments report shows, among other things, how many vehicles a particular customer-type purchased.

Sometimes customers will purchase vehicles outside of their primary, and even secondary, desired class. You can use the Tools - Sales by Customer report for detailed information.

There is a difference between the Interior Styling, Safety, and Quality (I/S/S/Q) of a vehicle, and the Size and Horsepower. For the former, more is always better. Who doesn't want a better quality vehicle?

But for Size and HP (performance), the customer does not always want more (this goes for Price as well). If I am looking for an economy vehicle, I do not want a 250 horsepower engine, because I won't be able to get the gas economy I want. Likewise, a bigger car means more weight, different handling, and lower fuel economy.

So, on the I/S/S/Q more is always better whereas for size and performance, each customer has a more specific preference.

If you are producing vehicles in a plant located abroad, these are not included in the totals and thus are not affecting your capacity utilization percentage. Capacity utilization is looking at the total domestic plant capacity and the total domestic vehicle production.

The base cost is an estimate of the per unit cost of the vehicle based on 100,000 units of production. If you produce fewer units, the per unit cost will likely be higher, and if you produce more units you can expect to have a lower per unit cost. You can enter your manufacturing decisions and then view the Pro-forma Product Contribution report to see what the estimated per unit cost would be at that production level.

Simply, the team had not taken into consideration their staffing projections so they were understaffed.

Aiming to just 0 out the Staffing Overage/Shortage (in the Staffing Decision) isn't enough. That only considers the current staffing needs without considering changes in Projected labor required due to changes in productivity and production goals. Here is a tip students receive in Quarter 1 advising them on Staffing Projections if they were understaffed in Quarter 0.

Once they go to Staffing (see screenshot below), they see:

• (Current) Employees Available
• Total (Current) Required
• Estimated Required Next Quarter

With this example, we see there are not enough employees for each level to meet an increased expectation of employees needed.

Please also note that Overtime will not exceed $5,000 in a quarter.

Yes and no. A new or significantly upgraded vehicle MUST be created in the class that the New Customer report indicates in order for the customer to pop. After the new customer pops, they will buy other vehicles, including other classes, on the market that meet their needs, just like the other customers. The numbers will vary based on how well the new vehicle meets their overall needs.

No, the flexible production box will only modify up to 10%, so it is possible for inventory to be outside the 0-120 day range.

For example, assume you initially have 355k units of inventory, set production for 250k units, and sell 365k units. Without flex production you would end up with 240k units. With flex production enabled, you would produce 225k units, which would only bring you down to 215k units.

Whenever a vehicle is put into development, engineers will try to streamline production and reduce the cost of the vehicle, all other things being equal. However, increasing the size, HP, and/or specs (I/S/S/Q) of the vehicle will increase the base cost of the vehicle. You will be able to see a good estimate of the new unit cost on the development screen in the "Base Cost" column as you make changes. You will have to decide if that additional cost is valuable in the eyes of your target customers.

For the above reason, there are diminishing returns in base cost reduction when performing multiple consecutive projects on the same vehicle.

No, there is a minimum amount of cash that the company requires for on-going operations. This varies depending on the operating conditions of the company and cash needs.

No, the simulation does not account for synergies between vehicle classes.

You will, however, receive an advantage when producing vehicles of the same class. That is, the 2nd (and subsequent) vehicle you develop within a class will take less time and cost less money to develop.