Business Simulation

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Business Simulation Activity : 

Business Simulation Activity Will it be rags or riches?

Prep Time : 

CEO- Organize all of the information on your planning sheet Local or National Elasticity – Product of need or want? Healthy, green, or N/A? Head of Marketing- Explain how your product will be marketed, including: Who is your target audience? Age, gender, SES, other specifics Do you have anyone endorsing your product? Who? Accountant- Describe your product costs in detail How many workers (how many minimum wage) Monthly cost for operating business What % is labor compared to the others Reliant on great deals of power? High, Medium, Low Raw Materials? Yes or No Competition Analyst- List your people and supplies on the numbered sheet Quality, value, or combo How much direct competition do you have? Many companies, a few companies, none currently Location comparison Main road, side-street, unimportant Prep Time

Learning Target : 

I can explain how both external and internal factors affect businesses. Learning Target

Success or Failure? : 

Each roll of the dice is a business quarter ¼ of the year After rolling, you will be guided by letters and numbers that connect to your prep sheet Ex: (A-b) leads to Need or Want You will then determine the change that occurs from each event Keep track of that on your prep sheet Success or Failure? Year 1 Initial Value: 100% % Change Q1: ___________ % Change Q2: ___________ % Change Q3: ___________ % Change Q4: ___________   End Value: _______________ -3% -4% +20% 118% +5%

Selection Board : 

Selection Board Year 1 Year 2 Year 3 Year 4 Year 5

11 (A-b) : 

11 (A-b) Flooding and unusually strong storms this season have caused many people to panic. Instead of spending as usual, their spending patterns have changed. If you are an item of… Need +5% Your product is now in greater demand! Want -5% People are too concerned about their safety! Selection Board

12 (A-c) : 

12 (A-c) Move over Global Warming! A new theory called “Individual Warming” was just explained in a new book. It claims that pollution and unhealthy eating lead to an increase in brain temperature that causes illness and disease. Healthy/Green- You gain 10% Being healthy and good to the environment is awesome! Unhealthy/Pollutant- You lose 10% Your products are not nearly as desirable! Selection Board

13 (D-a & A-b) : 

13 (D-a & A-b) The economy hit another downturn and depression is inching nearer. It is especially difficult for businesses that are selling goods of quality and want. Quality & Want -20% Quality & Need -10% Combo & Want -15% Combo & Need +0% Value & Want +0% Value & Need +10% Selection Board

14 (D-c-ii) : 

14 (D-c-ii) A major corporation in your location shuts down causing hundreds to move away. Urban -1% Suburban -3% Small Town -15% If Location (D-c-i) is “unimportant” 0% Selection Board

15 (A-a) : 

15 (A-a) A new trade embargo with China causes a drop in the availability of resources for national companies National -5% You lost cheap products and labor Local +5% You gained support from many Americans feeling extra “patriotic” Selection Board

16 (B-a-i) : 

16 (B-a-i) New studies support that parents who allow their children to purchase items they like are more likely to earn $100,000/ year as an adult, than those who do not. Target Audience of kids and teens +7% Your parents do want you to be successful! T.A. of adults -1% Some spending shifted from them to their kids Selection Board

21 (A-a) : 

21 (A-a) Tim Tebow randomly tries out your product and gives it a great review while being interview in front of a national audience National +15% Local +12% Selection Board

22 (A-b & B-a-i) : 

22 (A-b & B-a-i) Spending trends in America show that males and females are spending very differently in recent months Males, more on want, and less on need Females, more on need, and less on want Male & Want +4% Male & Need -4% Female & Want -4% Female & Need +4% Selection Board

23 (B-b-ii) : 

23 (B-b-ii) Your celebrity spokesperson took to Twitter this month to express their discontent for the government. Since they are the face of your franchise, it has brought many complaints against your company. If you have endorsement -7% If none 0% Selection Board

24 (B-a-iv) : 

24 (B-a-iv) Recent fads are taking a dive in the market place. People are back to buying their typical goods. Fad -10% Typical +5% Selection Board

25 (D-b) : 

25 (D-b) Bad news! Your competition received a tremendous review in the newspapers. Many -5% Few -15% None -0% Selection Board

26 (D-b) : 

26 (D-b) Bad News! For your competition that is… A top competitor got caught in a scandal involving immoral business practices Many +2% Few +7% None +0% Selection Board

31 (D-c) : 

31 (D-c) Good news! For your competition that is… Road work and detours are not good for your business Main-Street -5% It is a nuisance to your business, but not too major Side-Street -20% People are being directed away from your business… Unimportant +0% Selection Board

32 (C-d) : 

32 (C-d) You think gas prices were high in 2011? Now they have jumped up to over $5/ gallon. This isn’t just impacting people, it also affects businesses… High -5% Business costs way up, and consumer spending is down Medium -3% Business costs go up some, and consumer spending is down Low -1% Consumer spending is down Selection Board

33 (B-b-ii) : 

33 (B-b-ii) Your celebrity spokesperson was caught on video…. …rushing into a burning building and saving the lives of an entire family. Wow! Not only are they famous, but everyone who has been supporting them is benefitting as well! Endorsement +7% No Endorsement +0% Selection Board

34 (B-a-iii) : 

34 (B-a-iii) An increase in minimum-wage has raised the cost of your workers. 2 minimum-wage workers and less -0% It is relatively insignificant to your business 3-9 minimum-wage workers -2% 10-20 minimum-wage workers -4% 21 minimum-wage workers & up -7% Selection Board

35 (C-b-i) : 

35 (C-b-i) Your property has major problems with electrical and plumbing damage Owning -15% You have to pay for the repairs and you lose business during the time of repairs Renting -5% You lose out on your business while repairs are being completed Selection Board

36 (A-b & B-a-ii) : 

36 (A-b & B-a-ii) A new survey that comes out claims that one way to combat Alzheimer's and Dementia is to encourage the elderly to increase the amount of shopping they do, especially for unnecessary items. Want & Elderly +7% Need & Elderly +4% All others +0% Selection Board

41 (C-d) : 

41 (C-d) Great news… …a very unexpected breakthrough occurred with both natural gas and nuclear energy The cost of power has gone down dramatically High +5% Medium +3% Low +1% Selection Board

42 : 

42 A new competitor moved into the area They are very similar to your product in quality and value, but they are new to the area and they are quickly drawing a lot of attention You need to decide whether or not to increase your advertising to compete What do you do? Give up between 1-10% for advertising Stay put After choosing what to do, go to Part II. Selection Board

43 : 

43 It is an average quarter, so take 2% growth and be happy! Selection Board

44 (D-a) : 

44 (D-a) Economic times are changing dramatically… …new policies have caused unemployment to drop to record lows, and as a result, the economy is booming, especially for high-quality goods! Quality +17% Combo +12 Value + 8% Selection Board

45 (C-a-i) : 

45 (C-a-i) Your minimum-wage workers are unhappy They have banded together to demand a raise, or else they will all quit What do you do? Do you tell them they should quit? Do you offer to increase their pay (will cost you a percentage) Go to Part 2 Selection Board

46 (B-a-iv) : 

46 (B-a-iv) 60 Minutes just did a report on unique products in America In it, many of the products were shown in a very positive light, including yours (if it is a fad) Fad/Unique +10% Stable/Common +0% Selection Board

51 : 

51 A local accounting company in the area presents you with an offer: For 7%, they will analyze your business to find ways to be more efficient moving forward What do you do? Go to Parte Dos Selection Board

52 (A-c) : 

52 (A-c) New government legislation is looking to favor companies that are “going green” “Green” +4% Other -1% Cost savings for your competition is money lost for you Selection Board

53 (A-a & A-c & C-a) : 

53 (A-a & A-c & C-a) In trying to spur business spending, the government repeals some business regulation legislation. It affects the following groups: National +2% Cheaper overseas labor/resources are made available Pollutant +2% No more restrictions on your plants! Raw Materials Yes +2% More available materials Selection Board

54 (B-a-iii) : 

54 (B-a-iii) Tax cuts favoring the wealthiest Americans create a larger market for goods targeted at the wealthy causing: Wealthy +8% More money available to spend Middle and Lower Class +2% The trickle down effect brings in some business from these groups Selection Board

55 (B-a-i & B-a-ii) : 

55 (B-a-i & B-a-ii) Dr. Phil hosts a TV special focused on the benefits of shopping as a family. The result is a desire for products that target multiple genders and ages. Both & parents and kids/teens +4% Both & kids/teens, but not adults +2% All others +0% Selection Board

56 (D-c-ii) : 

56 (D-c-ii) A massive natural gas reserve was discovered in a small-town outside of the city, so… Urban +0% Suburban +2% Small-town +25% Massive influx of people brings a tremendous amount of business to a location that would not have had it otherwise Selection Board

61 : 

61 A local newspaper columnist reviews your product The review is well… …not good, causing many to question the quality of your goods You can increase advertising and coupons to try to protect from potential losses (-8%) The Result Selection Board

62 (C-e-i) : 

62 (C-e-i) Fantastic growing weather has brought about a surplus in the raw materials needed for your product. Because of this: Yes for Raw Materials +3% A penny saved is a penny earned! No for Raw Materials +0% Selection Board

63 : 

63 Business wasn’t booming this quarter keeping you at the same % as last quarter Selection Board

64 (D-c-i) : 

64 (D-c-i) New office buildings have been built right off of the main roads in your area, bringing in new consumers Main Road +6% Side-Street +3% Unimportant +0% Selection Board

65 : 

65 Lucky you, your business seems to be benefitting by the weather. +5% Selection Board

66 : 

66 A terrible event occurred There was a major terrorist attack on the oil fields of the Middle East that has reduced the world’s supply of oil by 50% Gas prices reach the highest prices they have ever been $12/gallon Not only is your business hurt, but consumers are feeling the pain as well To see more, go Here… Selection Board

Part II. : 

Part II. If you selected between 1-3% Your investment was not returned and the competition still succeeds and you lose another 2% If you don’t increase advertising -7% If you advertised with a 4-10% investment, you kept them from overtaking your business You gain back 6% from your efforts Selection Board

Part 2 (C-a-i) : 

Part 2 (C-a-i) If you choose to let them leave More then 10 minimum-wage workers -5% It is difficult to replace them, and they go to the news with their story Less than 10 minimum-wage workers -0% They don’t have enough clout to significantly damage your store, because you can replace them quickly enough If you meet their demands More than 10 minimum wage workers -2% Cost is expensive, but no backlash Less than 10 minimum-wage workers -3% Selection Board

Parte Dos (C-c & C-a) : 

Parte Dos (C-c & C-a) If you accept their offer Monthly costs greater than $ 50,000 You save 2% for each quarter the rest of the way throughout the simulation Monthly costs less than $50,000 You save 1% for each quarter through the end of the simulation Cut 10% of your labor for remainder of simulation Selection Board

End of Year 1 : 

End of Year 1 Your investors are very aware of the current condition of your company and want to make sure it succeeds If <90% They take half of your shares Your % is cut in half Impacting %s going forward are all cut in half Both good and bad You can bounce back after one year If your halved percent exceeds 50% If >90% Your investors infuse increased advertising with endorsements that help to bring in 10% more business Also add endorsement to your sheet Selection Board

End of Year 2 : 

End of Year 2 Investors are in your business again. This time they are a bit more demanding… If <110% They take back ½ of the % of business permanently Your % is cut in half Impacting %s going forward are all cut in half Both good and bad If >110% Your investors purchase green machinery for increased efficiency Change to green (half-half for unhealthy food) Add 2% each year for cost savings Selection Board

End of Year 3 : 

End of Year 3 Selection Board A well-known national corporation wants to buy you out with the following offers: <105% You are offered .8x current worth 105-129% You are offered 1.1x current value 130-159% You are offered 1.3x current value 160% & up They will offer you 1.5x your current value

End of Year 4 : 

End of Year 4 A second large corporation is serious about buying you out with the following offers: <115% You are offered your current value (owning 1.1x) 115-139% You are offered 1.25x current value (owning 1.4x) 140-169% You are offered 1.5x current value (owning 1.75x) 170% & up They will offer you 2x your current value (2.5x) Selection Board

End of Year 5 : 

End of Year 5 It is your last chance to sell-out! <125% You are offered 1.1x current worth (1.2x if owning) 125-149% 1.5x current value (1.7x if owning) 150-174% 2x current value (2.35x if owning) 175% & up 2.5 your current value (3x if owning) Selection Board

Here… (D-a & A-b) : 

Here… (D-a & A-b) Quality & Need -10% Quality & Want -20% Combo & Need -5% Combo & Want -10% Value & Need -2% Value & Want -7% Selection Board

The Result : 

The Result If you paid 8% You regain 6% for a loss of 2% overall, but your business is protected going forward If you did not, you lose 3% for each of the next 4 quarters

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