GLOBAL OPERATIONS an exploration of business strategy

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GLOBAL OPERATIONSan exploration of business
strategy
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GLOBAL OPERATIONS

• The strategic development of a high technology
  business - the Virtual Patient (VP)
• With decisions covering
• which markets to serve
• product development
• capacity planning
• funding
• information needs

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Global Operations The Issues

• business/market/product portfolios
• financial measures business success
• gap analysis
• fast to market
• customer/market needs
• operational efficiency
• cash flow survival

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The Simulation

• Preparation
• familiarisation
• define responsibilities
• set objectives
• decide strategies
• Decision Making
• submit decisions
• business simulated
• analyse results
• research markets
• Review Debriefing
• make directors report
• review results

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The Situation

• new business
• one million equity from parent company
• new, high tech product (the Virtual Patient)
• strategic management
• several competitors
• test marketed in Europe
• can sell globally
• can borrow up to 50 of equity
• financial items measured in Account Units (AUs)

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The Global Markets

• Europe
• North America
• South America
• Japan
• SE Asia
• India
• Middle East
• Africa
• All are different in terms of potential and need
• Currently like todays world but may change.

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Operations Information

• No factory
• Factory Capacity bought in blocks of 1,000
• 5 to 9 blocks cost 100,000 AUs per block
• 10 to 24 blocks cost 90,000 AUs per block
• 25 blocks and above cost 75,000 AUs per block
• Material Costs - 50 AUs per unit of production
• Direct Labour Costs - 25 AUs per unit of
  production
• Indirect Costs - 20 AUs per unit of capacity
• Production Overheads - 20,000 AUs per year
• Multiple Product Cost - 20,000 AUs per product
• Depreciation - 10 per year.

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Financial Information

• Other Expenses
• Market Overheads are 20,000 AUs per market
• General Overheads are 50,000 AUs per year
• Royalties are 5 AUs per unit sold
• Current Bank Interest
• Term Loans - 12 plus 1 arrangement fee
• Overdraft Interest - 20
• Interest received on cash balances - 6
• Interest premiums will be charged if gearing gt
  50
• Other Information
• Tax rate 33
• Long term parent company requires a 12 dividend

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Product Information

• Current Product is Model 1
• Subsequent products are Model 2, 3 etc.
• Later models are more sophisticated
• But will cost the same to manufacture
• To develop Model 2 will cost 300,000 AUs
• But later models will cost more.
• Ultimately can sell several products
• Only one model may be offered to a market

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Decisions

• Market Decisions
• whether to serve or not
• if served
• Price
• Promotion
• Product
• Other Decisions
• Product Development
• Production Capacity
• New Long Term Loans
• Dividends

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The Results

• Company Reports
• Preliminary Results
• Full Results
• Market Report
• Other Information
• Profit Loss Account
• Balance Sheet
• Key Measures
• Competitive Report
• Comments
• Business Research
• Company Reports
• Market News

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Market Research

• Competitive Report
• Market Potentials
• Economic Trends
• Test Markets
• Other Research
• Research is charged for.
• Produced during each decision period.
• No research until second year.

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Observations

• it takes time to understand
• but the business still must be run
• so your decisions will not be perfect
• time will be a constraint
• but, by the end you should be just in command of
  your business!
• your business competencies will be challenged
• and you should have fun.