Last semester, there was a simulation game in one of my business courses.

This simulation game was about selling bikes. In this game, there were a number of worlds. Each world had 5 bike companies. They competited against each other in order to get the highest market shares, the highest sale, the highest profit and the highest stock price in their own world.

Hence, 4 or 5 people formed one group and one group represented one bike company. They had to figure out their own marketing, operation and financial strategies to compete against other companies. There were ten decisions in total that each decision means one year. This meaned each group had to come up their business strategy for each decision. After all the decisions, each group had to hand in a ten page final report to explain thier strategies over the past ten decisions. (Medokusai!) In fact, the professors were not interested in firms' performance in the game but their reports.

My group has undergone a hard time to get a good mark in this game.

At the beginning of the game, we made decisions functionally. This meaned Ms. A was responsible for marketing department, while Ms. B was in charge of operation department.... something like that. We proved that this strategy did not work, since, instead of trying our best to maximize profits, we tried our best to grab as much money as we could for our own department. At the end, we overspent and we went bankrupt after the second decision. (This was definitely not the situation I wanted to see cus' we have spent so much time to create the business plan so that we wouldn't go bankrupt. But.....) (>_<)

The bankrupcy might be a good thing to us, actually. We carefully studied our past mistakes, and we concluded that we need to stop our so-called functional structure immediately. Instead, only one person was in charge of most decisions. That person is......me. I took charge of it not because I was smart but I had the most spare time to fool around with the game. (^^;)

The more we learnt from our past mistakes, the more we knew how stupid our competitors were. Our competitors spent enormous amount of money on advertising just because others also spent that much. They blindly kept boosting up the bike's quality and caused themselves spending too much on operations. On the other hand, our firm chose what we should spend more and what we should spend less. By the fourth decision, our firm recovered completely. During that decision, we had $9 million sales with $5 million profit. Some of our competitors had sales as high as $12 million but had only $6 million profit. We became the most efficient firm in our world.

Another problem most groups had was that they forgot the point of the game. This simulation game was to give us a chance to learn how to make efficient decisions and maximize shareholders' value. However, most groups put too much emphasis on boosting up share price. At the end, they made a bunch of ridiculous decisions just for boosting up stock prices. For example, while one's firm cut off their spending on operation and put all the money to buy back shares. Some firm made their batch size as high as 3000 to reduce set up time and number of employees, but I bet that those people had no idea what batch size meaned (even though they studied business). (Batch size = a number of unfinished products stored in one place before they are moved to another place for process) In this simulaton game, I believed 600 was already the maximum. The higher the batch size it was, the more inefficient the firm would be. Unfortunately (or fortunately), this was only a game, and the prgram didn't seem taking this into much account.

Some groups also seemed having too much "money" that they didn't know how to handle it. In the last decision, some groups were stupid enough to distribute out as much as $12 dividend per share. Have you ever seen a company distributing that much dividend in a real world? How did these guys explain this in their final reports? It's probably something like this: Since our firm will not operate after year 10 (no matter what), we gave out all our money to the shareholders.

In our opinion, the most important thing was to write up a good final report to make the professor believe that all our decisions were reasonable and efficient. We also needed to show that our "firm" could survive through difficulties and recovered quickly.

At the end, our group had the lowest market share, the lowest sales and second lowest stock price in our world. Nevertheless, our report received the highest mark in the class.