Email: cmichelsen@labsag.co.uk

1. presents Email: cmichelsen@labsag.co.uk

3. A definition of business simulations Computer programs: Capable of reproducing the economic behaviour of the world of business through the use of complex mathematical functions formulated within a dynammic time frame.

4. Main function Execution Decision-making Results Analysis Theory Concepts Tools Principles & Prescriptions Real business world ..Business simulations bridge theory and practice provoking learning through the discovery of actual economic reality

5. First recorded justification for the use of practice in learning: • “I hear and soon I forget” • “I see and I remember”... • “I do it and then I understand!” CONFUTIUS

6. ANTECEDENTS • John Dewey “Education and Experience” • 1956 first business simulation: American Management Association. • 1989 Largest simulation ever: NATO Excercise Ace 89 lasted 11 days, involved 3,000 officers taking decisions in a computer environment. Deployed armies of seven countries without firing one shot. • 1996*: 11,386 instructors used business simulations at american universities; 7,808 companies used them for management development. os. • A.J. Faria, R, Nilsen “Business simulation games: current usage levels”, en A.L. Patz, J.K. Butler (Eds) “Developments in business simulation and experimental excercises”, Omnipress, Madison Wis, 1996 pp. 22-28

7. PUBLISHED STUDIES OF THE EFFICIENCY OF SIMULATIONS: • 1962 Harvard Dr. James McKenney • 1966 Dr. Anthony Raia compares (1) Conference method (2) Cases + simple simulator (3) Casos + complex simulaor complejo concluding: “they are effective educational tools”. • 1969 Meier,Newell, Paser: “Simulations have educational value” • 1975 J. Wolfe “a mix of cases and simulations is vastly superior to the usen of case alone” . • 1981 Dekker y Donetti: first meta-analysis • 1999 June Lee’s meta analyseed 19 efficay studies published between 1976- and 1992.

8. Lee’s main conclusion: “66 % of the students that used simulations showed significantly higher academic achievemnt scores measured by post simulation exams, compared to students in control groups that were not exposed to simulations”. Fuente: June Lee “Effectiveness of Computer-based Instructional Simulations: A meta analysis” International Journal of Instructional Media” Vol 26, March 1999

9. Brian Cameron (“Effectiveness of Simulation in hybrid and on line networking courses”, The Quarterly Review of Distance Education Vol. 4 (1) 2003) • Conclusions: • Simulations allow the application of knowledge to problem solving.. • Improve the transfer of knowledge. • Increase the understanding of abstract concepts. • Increase the motivation of students. · • Upward thrust : “the educational effectiveness of simulations is particularly high among students with poor performance before the simulation”. Virou et al “Combining software games with education: evaluation of its educational effectiveness” , Educ. Tech & Society Vol 8(2) 2005

10. Problems in the use of business simulators • One simulation is not enough for an entire curricula of courses :integration is defective if the parts to be integrated do not have enough experiential content. • Most scenarios are general and too abstract. • The academic user must train himsef in the use of a simulation • No one delivers the methodology to insert simulations into an entire business curricula. • “Real time simulations” induce endless trial-and-error instead of basic analysis. • Costly process: systems engineers are requiered to process and interpret results. • High investment in instalations: one PC per student. • High cost per student: licence fees per student start at $ 60 and can go up to $ 180.

11. All problems solved by Labams • LABAMS is a simulation platform with 9 simulations including 6 functionally specialized simulations and three general management “integral” sinulations, all with varying degrees of comlexity. • All scenarios are drawn on real business enterprises. • The LABAMS site licence includes training and on-line assistance in the use, process and interpretation of simulations. • The LABAMS staff recommends how, and where, to insert simulations in a university curricula. • LABAMS uses the “batch” mode of processing input data which does not allow for trial and error. Participants must be committed to one set of decisions by a specified date and time. • Academic staff can process LABAMS simulations. Process is a fast and easy click and menu driven task requiring less than 3 minutes performed from a laptop conected to the Internet. • LABAMS works through the Internet not requiring a PC per student. • LABAMS licence cost is not calculated “per user” and does not have a limit on the number of user-participants. The six year site licence lowers the cost per student to less than $ 1.- per user per simulation.

12. Labams Version 5.0 2010 Macroaecon: demo simulation of macroeconomics Integral Simulations Functional Simulations Operations:Simpro MRP Industrial General Management Cyclon4 General Management of Servicies Finance: Simdef B2B Mkt. Logistics: Marklog Hospitals Simserv-2 Hotels Simserv-1 Communications Adstrat Glogal Corp. Strategy Advanced Brandestrat Marketing: Markestrat Market Res. . Basic Brandestrat

13. DEGREES WHERE LABAMS CAN BE USED • BUSINESS ADMINISTRATION • INTERNATIONAL BUSINESS • ECONOMICS • INDUSTRIAL ENGINEERING • ACCOUNTING • MARKETING • OPERATIONS • FINANCE • ENTRENEURIAL STUDIES • MANAGEMENT OF SERVICES • M.B.A. DEGREES

14. Contributions of LABAMS: • A virtual business environment within which decisions must be taken under time pressure. • Team competition motivates participants to take decisiones in one management area, or to coordinate several. • Participants are shown the importance of analysis and the search for decision-making models. • Learning occurs from feedback, verification of results, competition and even imitation. • Lateral learning: both the winners and the losers impart a significant lecture during the final open session as they explain what they did and what thyey did not do. • A theoretical course acquires an experiential parallel execution-oriented component, which students relish. • The consequences of decision-making allow the professor to use examples in class. • Academic staff will have more time available as less cases can be used in a single course.

15. HOW LABAMS WORKS Exclusive Internet webpage www.labamsxxx.com Participant results ID’s + paswords Results . Decisions Professor Initialisation PROCESS PC/laptop loaded with Labams simulation programs PC anywhere connected to Internet

16. To boot..... • Allocation of students to simulated companies • Automatic issue and email of ID’s/pwds • Intialisation of the simulation Firm 1 Grupo 1 Firm 2 Professor Firm 3 Firm n ID + Password Read & study Manual Analyse firm’s business past

17. LABAMS operation Firm 1 Decisions sent at a specfic date and time through webpage using firm’s id and password Grupo 1 Firm 2 Firm 3 Firm n

18. Professor Firm 1 Decision Data Uploaded To webpage Special reports for professors Grupo 1 Firm 2 Firm 3 Firm n Public & private results published at the webpage. Participants download their results.

19. LABAMS SCENARIOS VERSION 5.0 2009

20. LABAMS scenarios • MACROECON • A simulated American economy made up of ten corporations allows participants to discover clearly and with precision how the macro economic aggregates emerge from the decisions taken by corporations, the behavior of consumers and the impact of various fiscal policies. • The model allows for experiments on the effects of several different fiscal policies.

21. LABAMS escenarios COMMUNICATION STRATEGY with Adstrat • The new managers of the firm are given the responsibilities of managing a consumer products corporation which competes with two other corporations, much like Unilever and P&G, marketers of deodorants in the ultra competitive personal care market. Competition is no longer based on a single physical attribute as the technology is very mature, and instead centers on differentiation strategies based on the benefits perceived by consumers as ideal. • Adstrat’s scenario demonstrates that behind much creative advertising there is more quantitative perspiration than imaginative inspiration. • Each simulated company selects an advertising budget, a media plan, a price level and one of several creative strategies. The central task of the management team is to develop a communication plan for its deodorant which should specify the amount to be invested in advertising, which combination of media to use, which creative strategy to implement and at which price to sell at the retail level.

22. In order to develop an overall communication strategy participants are given access to three submodels: • the Budgetary Estimator, • the Media Selector, • the Calculator of Competitive Media Reaction. • Each of the five potential strategies has different response functions in terms of awareness, preference and purchase intention. • The winning team is that which accumulates greater profits.

23. LABAMS scenarios FINANCIAL MANAGEMENT with Simdef Simulates the management of a corporation producing a mineral commodity in an emerging country. The global market, specifically the LME (London Metal Exchange) sets the price level for the commodity every quarter following a long S shaped demand curve. The corporation uses large production installations which depreciate continuosly demanding constant and large injections of capital. At the beginning of the scenario the market price level is at the most favorable point of the S curve, production capacity is comfortable and the corporation’s stock is well priced in the stock market at $ 36 a share. In less than a year though, economic perspectives change endangering the financial health of the firm.

24. The new executives must purchase capital in a well developed capital market: contracting short and medium term bank loans, issuing common or preferential stock, issuing bonds and marketable securities. Should they chose not to use these options money is automatically provided by very expensive equity funds. • Managers must produce short and long range plans, select forecasting options, and choose among capital investment projects to improve productivity. • The central managerial problem is to acquire cheaply capital and to allocate it efficiently while mantaining a healthy financial structure. • The winning team is that which obtains the highest stock market price for its common stock.

25. LABAMS scenarios MARKETING MANAGEMENT & STRATEGY with Markstrat Participants become managers of a distributor at the wholesale level of minor domestic appliances which is in turn one of three profit centers of a large global corporation. The other two profit centers are Manufacturing and the Global Research & Development Center. Interaction between the distributor and the other two profit centers is regulated through transfer prices. Distribution, however, is the key contributor to the corporation’s overall profits and thus it is measured by net profit contribution. The new managers are given a marketing budget with which to manage advertising, sales force, new product development, market research, and inventory planning. The distributor competes with four other firms in the same market with very similar products and brands.

26. “Push Marketing”: five very well defined segments, three distribution channels, and initially about 50 salesmen to cover retailers. • “Pull Marketing”: total advertising budget, proportion of it to be invested in copy testing and advertising research, development of new products, perceptual map positionning addressed to the ideal points of the five segments. • All five competing distributors start the simulation from a different but equivalent strategic position, each with two products, of a possible portfolio of five products. • Strategic plans are drawn using fifteen market research studies which include consumer panels, experiments and an “unfolding” perceptual map featuring segment ideal points and brand positions in the same two dimensional map. • The team that achieves the largest accumulated profit contribution is declared the winner.

27. LABAMS scenarios • BRANDSTRAT BASIC: MARKET RESEARCH, BRAND MANAGEMENT • BRANDSTRAT ADVANCED: GLOBAL BUSINESS POLICY • Brands of up to nine simulated global enterprises, protected by formal patents, compete in a global market made up of five clearly defined world regions: Europe, Latin America, England, Asia and the USA. • All company areas are simulated: production, finance, sales, marketing, human resources, and a complex distribution channel. • Marketing decisions cover setting diferential or uniform global price levels, discounts and rebates, sales promotion, sales force management, advertising themes and media, and new product development. • Fifty market research studies can be ordered including concept testing, market testing, perceptual mapping and conjoint analysis..

28. LABAMS scenarios • SERVICES GENERAL MANAGEMENT with Simserv • To provide managerial experience in non.industrial organizations, Simserv simulates the management of three hotels in a Mexican resort or three hospitals in California. • Partipants must analyse a scenario where there is data for the past ten years in the community where the organizations operate. • The new managers face the task of managing organizations which could compete head-on or collaborate flexibly. • The analysis of the environment’s history, as well as of margins, will permit the design of strategies of growth or contraction in the number of beds and the number and types of ancillary services. • Unlike industries where decisions are expressed in production units, in Simserv decisions are expressed in patient or guest-days based on the manager’s forecasts of demand over the next yearly season. The computer model calculates automatically the personnel required for each quantity of guest days. • Winning in Simserv entails achieving the largest growth in total capital.

29. LABAMS scenarios • B2B MARKETING & LOGISTICS with Marklog • Marklog simulates the market for intermediate goods common in industrial markets where transactions are made among organizations instead of consumers. • The scenario focuses on a textile organic dye produced deep in the mountains of the west coast of Latin America since ancient pre-columbian times, which competes with chemical ingredients in the largest textile market of Latin America, far out east in Sao Paulo, Brasil. • Decisions are taken in sets of four weeks. Dye shipments can be made through ten alternative transportation modes: from air to sea, each with different costs, risks and estimated arrival times. • Inventories can be set at the plant in the west or close to customers in the west, but inventory excesses are charged against profits at premium capital costs. Market reaction is very sensitive to service quality. If service levels drops, customers in Sao Paulo will switch immediately to chemical dyes. • Marklog demonstrates the contribution to profits of B2B marketing and the logistics function. The winning team is that which accumulates the largest amount of profits,

30. LABAMS scenarios PRODUCTION MANAGEMENT with Simpro • Participants take over the management of a small industrial company dedicated to the manufacturing of metal parts for the auto industry, whose financial and marketing problems are drastically minimized after winning a long term contract which leaves them free to focus decision-making on operations and production. • The new managers receive operating data from the old management team and must at once decide how to program the production of three products in the two lines of machine tools for the next operating day, how to allocate human resources selecting operators from a pool of 28 available, deciding hours of work and how much of them to be dedicated to the training of workers, as well as determining the level of investments in maintenance, inventory and quality control.

31. At the end of every simulated day production output is known, together with the number of rejects, costs, efficiencies, downtime and overtime for all the simulated companies participating in Simpro, thus managers will be able to compare their performance with other competing companies. • As the simulation continues, participants study the operations management techniques included in the manual and apply them to their operations. • Decisions fed by the new management team to the simulator represent one day of operations but every three days a truck calls to load up the production of parts. If the company is unable to deliver the required amount it will be severely penalized under the terms of the contract. • Not being allowed to change technology because of the strict specifications of the contract, managers must device intelligent ways of managing their industrial company, trying to obtain lower costs than managers of other simulated factories because the “winning” team in Simpro is the one that achieves the lowest average costs. . • .

32. LABAMS scenarios • INDUSTRIAL GENERAL MANAGEMENT with Tenpomatic • Simulates an industrial company assembling a consumer product for three different markets. • • Production is initially located in Area 1 from which sales are made in all remaining areas, although management can open factories in each of them. • •Managers receive very detailed data on the eight previous quarters of operations from a rather comprehensive management information system. • •All functional decisions are simulated: production, finance, sales and marketing, centering decision making on coordination and strategic planning. • •The winning management team is that which obtains the highest profits and the best stock price. • .

33. PRODUCTS DELIVERED UNDER A SITE LICENCE • PARTICPANT’S MANUALS. • ANALYSIS AND RECOMMENDATIONS ON HOW TO INSERT LABAM’S SIMULATORS IN A UNIVERSITY’S CURRICULA.OF COURSES. • RECOMMENDED MODUS OPERANDI (FREQUENCY, DEPTH, AND SEQUENCE) . • TEN COMPUTER PROGRAMS COMPILED FOR THE EXCLUSIVE USE OF THE UNIVERSITY. • EXCLUSIVE WEB PAGE CONCENTRATING THE TRAFFIC TO AND FROM SIMULATIONS INCLUDING URL AND HOSTING. • TRAINING OF ACADEMIC AND SYSTEMS STAFF IN THE USE OF LABAMS. • PARTICIPATION IN INTERNATIONAL COMPETITIONS. • TWO YEARS OF ON-LINE SUPPORT IN THE PROCESSING AND INTERPRETATION OF ALL LABAMS SIMULATIONS.

34. Labams Version 5.0 2010 Macroaecon: demo simulation of macroeconomics Integral Simulations Functional Simulations Operations:Simpro MRP Industrial General Management Cyclon4 General Management of Servicies Finance: Simdef B2B Mkt. Logistics: Marklog Hospitals Simserv-2 Hotels Simserv-1 Communications Adstrat Glogal Corp. Strategy Advanced Brandestrat Marketing: Markestrat Market Res. . Basic Brandestrat