BUSINESS GAME

1
BUSINESS GAME

• SURF WEAR COMPANY
• SELLING 1 SHIRT
• ALL SHIRTS ARE IDENTICAL
• ONLY THREE COMPETITORS
• PERIOD 1 QUARTER
• ECONOMY
• EXPANDING
• CONTRACTING
• OBJECTIVE!!!
• MAKE THE MOST PROFIT

2
COSTS

• MERCHANDISE COSTS
• FIXED COST - 250,000
• VARIABLE COSTS
• 5 PER SHIRT
• CAN CHANGE
• OTHER COSTS
• ADVERTISING
• OTHER
• 3 PER SHIRT
• CANNOT CHANGE
• BAD DEBT COSTS
• MARKET RESEARCH

3
DECISONS

• PRICE
• ADVERTISING
• QUALITY
• MARGINAL CREDIT
• PLANT EQUIPMENT
• MARKET RESEARCH

4
PRICE

• INTIAL PRICE 15
• MAXIMUM PRICE CHANGE
• 4 PER PERIOD
• DEMAND CURVE BUILT IN
• DOWNARD SLOPING
• ECONOMY
• INTERACT W/COMPETITORS
• HIGHER PRICE SELL LESS
• LOWER PRICE SELL MORE

5
ADVERTISING

• INITIAL - 125,000
• INCREASE OR REDUCE BY 25,000 PER PERIOD
• INCREASE
• WILL SELL MORE
• AT HIGHER COST
• REDUCE
• WILL SELL LESS
• AT LOWER COST
• SHIFTS COMPANY DEMAND CURVE

6
QUALITY

• INTIAL INDEX 1.00
• CAN INCREASE OR DECREASE BY .04 PER PERIOD
• CHANGES VARIABLE MERCHANDISE COST
• INCREASE
• WILL SELL MORE
• DECREASE
• WILL SELL LESS
• SHIFTS COMPANY DEMAND CURVE

7
MARGINAL CREDIT

• CAN CHOOSE TO SELL CUSTOMERS WITH MARGINAL CREDIT
• WILL INCREASE SALES 10 IN PERIOD
• PENALITY
• IF RECESSION 25 OF MARGINAL CREDIT SALES
• IF DEPRESSION 50 OF MARGINAL CREDIT SALES

8
PLANT EQUIPMENT

• CAN INVEST 100,000 IN NEW PLANT EQUIPMENT
• ADDED COST THAT PERIOD
• BENEFIT
• REDUCE FIXED COST 25,000 PER PERIOD
• 2 PERIOD LAG
• CAN CHOOSE ONCE EACH PERIOD

9
MARKET RESEARCH

• CAN PURCHASE MARKET INFORMATION
• TOTAL SALES
• COMPETITORS SALES UNITS
• COMPETITORS SALES DOLLARS
• COMPETITORS ADVERTISING
• COMPETITORS QUALITY
• COST IS
• TOTAL SALES - 5,000
• ALL OTHER - 2000 PER ITEM

10
DEMAND CURVES AND THE BUSINESS GAME

• Economic activity shifts Overall Demand Curve for
  all shirts
• Expanding shifts it to the right
• Contracting shifts it to the left
• Individual Demand Curves shift
• Competitors price
• Shifts your curve to right if higher
• Shifts your curve to left if lower
• Advertising
• Shifts your curve to right if increased
• Shifts your curve to left if decreased
• Quality
• Shifts your curve to right if increased
• Shifts your curve to left if decreased
• Movement along Team Curve
• Slope always downward and to right
• Issue of elasticity?

11
ECONOMY EXPANDING?Everyones demand curve
shifts to the right!
12
ECONOMY CONTRACTING?Everyones demand curve
shifts to the left!
13
COMPETITORS INCREASE THEIR PRICE?Your demand
curve shifts to the right!
14
COMPETITORS REDUCE THEIR PRICE?Your demand
curve shifts to the left!
15
YOU INCREASE ADVERTISING OR QUALITY?Your demand
curve shifts to the right!
16
YOU REDUCE ADVERTISING OR QUALITY?Your demand
curve shifts to the left!
17
ELASTICITY OF DEMANDIs your demand curve
elastic or inelastic?
18
ALL THESE THINGS ARE HAPPENING AT ONCE!!

• Outwit, outsmart and
• defeat your competitors!!

19
GENERAL COMMENTS

• THE OBJECT OF THE GAME IS TO MAKE THE MOST
  PROFIT, NOT SELL THE MOST SHIRTS.
• THERE IS A BUILT IN DEMAND CURVE IN THE GAME. IF
  YOU INCREASE YOUR PRICE, YOU WILL SELL LESS THAN
  YOU WOULD HAVE IF YOU HAD KEPT THE PRICE THE SAME
  AND IF YOU REDUCE PRICE YOU WILL SELL MORE THAN
  YOU WOULD HAVE IF YOU HAD KEPT THE PRICE THE
  SAME. (GROUNDHOG DAY)
• WHETHER YOU ACTUALLY WILL SELL LESS OVERALL
  DEPENDS ON THE INTERACTION OF A NUMBER OF
  FACTORS
• IS THE ECONOMY EXPANDING OR CONTRACTING?
• DID OUR COMPETITORS INCREASE OR DECREASE PRICE?
• WHAT DID YOU AND YOUR COMPETITORS DO ABOUT
  QUALITY AND ADVERTISING?