Paul Alton MBA

Lifelong Learning, Living and Loving

Home

Dukan Diet

Ad Copy

Articles

Thinking Ahead

Decisions

LongestDay

A Day

Jail Mindset

Dan Alton's Memoirs

DR Mission Trip

David Allen

Automation

Two Businesses

Winter Vacation

Tales of Buddy

Pirogue 2014

Killer Grid Heater Bolt

Video Doorbell

Travel

Copper Canyon 2010

Ireland 2011

August 1_2011 Photos

August 2_2011 Photos

August 3_2011 Photos

August 4_2011 Photos

August 5_2011 Photos

August 6_2011 Photos

August 7_2011 Photos

August 8_2011 Photos

August 9_2011 Photos

August 10 _2011 Photos

Ometepe Monastery

Somoto Canyon 2014

Reports

Heat Duct

Books

Updates

April 2025

March 2025

February 2025

January 2025

December 2024

November 2024

October 2024

September 2024

August 2024

July 2024

June 2024

May 2024

April 2024

March 2024

February 2024

January 2024

December 2023

November 2023

October 2023

September 2023

August 2023

July 2023

June 2023

May 2023

April 2023

March 2023

February 2023

January 2023

December 2022

November 2022

October 2022

September 2022

August 2022

July 2022

May June 2022

April 2022

March 2022

February 2022

January 2022

2021Review

December 2021

November 2021

October 2021

September 2021

August 2021

July 2021

June 2021

May 2021

April 2021

March 2021

February 2021

January 2021

December 2020

November 2020

October 2020

September 2020

August 2020

July 2020

June 2020

May 2020

April 2020

Covid Spring

March 2020

February 2020

January 2020

December 2019

November 2019

October 2019

September 2019

August 2019

July 2019

June 2019

May 2019

April 2019

March 2019

February 2019

January 2019

December 2018

November 2018

October 2018

Peru Part 2

September 2018

SpringSummer2018

February 2018

January 2018

December 2017

November 2017

Fall 2017

August 2017

July 2017

June 2017

May 2017

April 2017

March 2017

February 2017

January 2017

December 2016

November 2016

October 2016

September 2016

August 2016

July 2016

June 2016

May 2016

March April 2016

February 2016

January 2016

D and E House 2015

December 2015

Fall 2015

Bill China

CarolynChina

September 2015

Summer 2015

April 2015

March 2015

February 2015

January 2015

December 2014

November 2014

Going South 2014

summer 2014

Spring 2014

March 2014

February 2014

January 2014

December 2013

November 2013

SeptemberOctober 2013

August 2013

July 2013

June 2013

May 2013

April 2013

March 2013

February 2013

January 2013

December 2012

November 2012

October 2012

September 2012

August 2012

July 2012

June 2012

May 2012

April 2012

March 2012

February 2012

January 2012

December 2011

November 2011

September - October 2011

July - August 2011

April - June 2011

March 2011

February 2011

January 2011

December 2010

November 2010

October 2010

September 2010

Shop/Studio 2010

August 2010

July 2010

June 2010

April - May 2010

March 2010

February 2010

January 2010

December 2009

November 2009

October 2009

Going South 2009

September 2009

Shop/Studio 2009

July - August 2009

June 2009

May 2009

April 2009

March 2009

February 2009

Nicaragua Trip

January 2009

Big Feed 2008

December 2008

November 2008

October 2008

Balloon Ride

August - September 2008

Studio / Shop 2008

June - July 2008

April - May 2008

March 2008

February 2008

Jan-Feb 08 Transition

January 2008

Big Feed 2007

December 2007

November 2007

Sept/Oct 2007

Summer 2007

Spring 2007

February 2007

January 2007

2006 Updates

CanMexCan V

CanMexCan_IV

CanMexCan_III

CanMexCan_II

CanMexCan_I

 
How I Spent My (Virtual) Winter Vacation

You may have heard of “Flight Simulator,” a computer program that allows you to learn the principles of flying an airplane without physical risk to the airplane or yourself. You may be surprised to learn that the same kind of program is being used to learn business principles without financial risk to oneself or the company. In January I took one week’s vacation to focus on the second half of a two-week exam that used a computer simulation of a business competing with other businesses. The simulator provided a disturbingly realistic business environment, quickly responding to “bad” business decisions, but showing gradual improvements in response to wise choices.

For the past two years* I have been pursuing a Master’s degree in Business Administration. Much of this adventure has occurred through use of Lotus Notes, a group-ware software product that allows people to collaborate on work even though they may be at different places in the world. In keeping with this format, the final exam for the second phase of the program was a collaborative/competitive exercise with people placed into teams to compete against rival teams in a business simulation.

The business simulation, PharmaSim, is a “brand simulation” involving cough and cold medication. It can be purchased for individual use or used as a group exercise. Participants make decisions on brand formulation, advertising and promotion budgets, advertising message, target demographic groups for the message, as well as product pricing, volume discounts and sales force numbers.

For the exam, each team discussed (through Lotus Notes) its choices for all of the above for each product, and sent its decision to a person in New York who entered all the teams’ choices into the simulator. The simulator calculated how each team did and generated a new set of information. This information included details of how the teams did against each other, along with general economic and market conditions that the teams based their next set of decisions on.

Two simulators had to be run to handle all the students “writing” the exam. The one I was involved with had five teams competing – four human and one computer. Teams included some people who have “worked” together in other courses and some who have not. The first order of business was to work out who was going to represent the team in different roles and how the group would arrive at decisions. The team agreed on deadlines for submissions from individual team members so the team member putting together a single response from the team had time to do the job and meet the deadlines set out in the exam. To give some idea of the volume of input from our team of nine people, there were seven hundred and ninety-two posting at the end of the first week. In addition there were a few heated, long-distance telephone sessions such as the evening there was a power failure in Winnipeg and the person supposed to put together the team response couldn’t fire up his computer. People devoted different amounts of time to the process. I took every week-day evening in the first week and all-day and every evening after that.

The five competing teams enter the scene after three cycles of the simulation have run. Each “company” has the same product, and the same level of profits and costs and the same level of advertising and sales force. Market share is twenty percent each. Each team starts with the same resources and choices available to it. That quickly changes with the impact of team decisions on influencing consumer behaviour.

A company knew more information about itself than it knew about its competitors, but just as in real life, it knew a fair bit about the marketplace, its competitors and consumer preferences and habits. For the first round each company had the same choices and resources available to it, that its competitors had, but after that it didn’t take long for the situation to change.


 
 
 

Ethik was the computer, which adopted a play-it-safe, don’t-rock-the boat strategy and didn’t offer any new products or make any wild changes in its approach. It got what it deserved. I was one of the nine people on the Allstar team and don’t want to appear to brag so will let the exam administrator, Jonathan Powell, do it for me. He summed up our efforts, as follows:

For the Red industry, I would say that Team A won, both in terms of income, market share, and effectiveness of the marketing strategy.

A delicate balance in PharmaSim is to introduce new or reformulated products so as to remain competitive and capture market share, while not having these same new or reformulated products cannibalize existing product lines or introduce dysfunctional cost structures. Team A was successful in navigating this balance by introducing new products that did not undermine their existing markets, coherently allocating resources on PR, advertising, promotion and sales force, and keeping prices sensitive to inflation.

Team C might have given Team A a run for first place except for two pitfalls. First, Team C did not increase prices to correspond with inflation. While this strategy might have increased sales, it dug into revenue throughout the simulation. Eventually, this would have put pressure on Team C to initiate a less incremental price increase in order to preserve margins. The pitfall here is that a less incremental price increase down the road might very well lead to a decrease in market share. Team A therefore won not only in terms of numbers, but in terms of longer term positioning.

Teams B and D also introduced fewer new products than Team A, and again the method of introduction and strategy implementation is instructive. Team B demonstrated that, as with Team C, cutting prices is not always a good idea. In the case of Team B, lower product pricing was implemented in conjunction with lower advertising. While this lead to reduced expenditures, it also lead to low income overall and did little to position Team B for long-term growth in terms of either income or market share.

Team D took a drubbing by mis-reading the economic environment and not following a coherent strategy. In a period of inflation, Team D kept pricing low. Not a problem in and of itself, but Team D also over-projected sales, and increased sales staff and output accordingly. This increased fixed costs and eroded revenue. Compounding this was that Team D lacked an effective, focused strategy, so that increased expenditures in promotion and advertising had minimal effect on revenue or market share. The end result was that Team D was left ill-positioned to compete against the other teams, particularly the more focused and well positioned Team A.

The simulator was a fun and fascinating exercise, but the real value came in how it forced the thinking process and helped the participants understand how the business principles we have been learning fit together to work in real life. As somebody once said, “there is nothing as practical as a good theory.”


* Article published in year 2000 in a corporate newsletter




 
 
Copyright Paul W. Alton 2006 through 2025 All Rights Reserved
Pages on this site contain Amazon affiliate links
Amazon sells everything from soup to drones.
   Amazon Link 
As an Amazon Associate i earn from qualifying purchases at no extra cost to you.