BUSINESS-BASED management simulations enable students to use their theoretical knowledge in doing “real business” and provide them an opportunity to run their own businesses using computer programs. Students can analyze market conditions and make various kinds of business decisions as if they were doing so in the real world. Innovative educational techniques like these are the best method for learning to do business, say educators and students at the University of Economics in Bratislava (EUBA).
Two management simulations – the Capstone simulation and the Global Marketplace simulation – were used by the Faculty of Business Management of EUBA this academic year. The majority of students found the course to be interesting and useful since it gave them not only a chance to strengthen their theoretical knowledge and to experience the pressures of management but also to build teamwork.
“This is the first real course where we can apply our theoretical knowledge gained from many subjects,” said Ondrej Blaho, a Slovak fifth-year student at the Faculty of Business Management. “Understanding corporate financial statements, together with their analysis, are a precondition to good and logical decision-making in the company.”
Simon Imbert from France, a foreign-exchange student at the faculty, finds the simulations to be a useful tool that enables him to experience a real business environment with all the challenges it brings to managers.
“This simulation allows me to see decisions that managers can make in a company,” he said. “Most people take management courses and they can then apply what they learned in a real situation during the management simulation. Besides, this simulation enhances teamwork and competition, because each team wants to be the best.”
Both simulations enable students to use theoretical knowledge in doing “real business” by managing all aspects of a business and being responsible for the decisions they make. The simulation is divided into several rounds and in each round the students make decisions in several functional areas of corporate management.
After the decision-making process, the simulation is critiqued either by an administrator or by a teacher and students are given feedback. The overall scoring is done through a comprehensive assessment measure called the Balanced Scorecard. This takes into account results achieved in all functional areas of the company. Students know their standings after each round and they analyze the steps they took in the previous round from detailed financial reports on their company (an income statement, a cash flow statement and a balance sheet). Students also must consider their competitors’ actions and they analyze and anticipate their decisions for the next rounds as well. Each business team receives detailed information on their current situation.
The simulation is usually played for eight rounds and one round represents either a year or a quarter-year in the life of the company. The simulation’s timetable is scheduled in advance and students know the deadlines in which they must make decisions. Usually, each simulation round is scheduled for one week and team decisions are sent on-line to the administrator based in the US (www.marketplace-simulation.com). Students also can engage in international competition, competing with other university students all over the world.
The Capstone simulation (www.capsim.com) is usually self-paced and the teacher adjusts the schedule according to the students’ needs.
Tasks in each round of the simulations
In the first round students organise their team, creating a name for their company and analyzing the initial situation in the market. In the Capstone simulation students analyze a simulated news report and industry analysis providing a detailed view of the sensor industry. In the Global Marketplace simulation, students analyze various surveys showing both the domestic market and foreign markets in detail – for instance, customers’ demands, prices they are willing to pay, averages wages for the workforce, etc.
In the next round students analyze market information, establish strategic direction and set up their first facility (building a plant, designing brands, and setting up sales offices and/or regional web centres).
In the third round students test-market brands and prices as well as advertising and media campaigns. Sales staffing and opening sales offices are preconditions for expected sales. Production needs to be scheduled for each brand as well. The fourth round starts with studying end-user feedback and the competition in various markets. Total performance is analyzed and students may find it necessary to adjust their strategy.
The fifth through eighth rounds are targeted on sales and earning profit and achieving a high Balanced Scorecard. In each round students are given feedback through their evaluations and efforts to expand brands and sales offices in various markets.
In reality, students create the products (computers or sensors) according to the needs and desires of their customers. They focus most on the segment they have chosen and they try to offer the most suitable products related to their chosen strategy. Their goal is to produce the products in the most efficient way.
The students work in teams, sharing responsibilities for the company, and the initial situation is the same for each team. At the beginning of the simulation, students are supported by venture capitalists that provide initial capitalisation for the company. Students can apply for a conventional or long-term loan from a bank and they need to consider the interest which they will pay. If their companies become financially unstable, they can be given an emergency loan from a bank, but this loan can affect their standing and the interest rate is also much higher (up to 25 percent).
During the simulation, teams have to think about the best way to use their production facility. Support and investment into the workforce is a pre-condition for good production. Selling the products is another important part of doing business. Students may open sales offices in their domestic market and abroad. In the Global Marketplace simulation students can open worldwide sales offices but they must consider transport costs, fees and other factors connected with foreign countries’ business environments.
One other very interesting and essential part of doing business is corporate promotion. Students create their own advertisements and they present them in local or regional media.
Zuzana Roby is an assistant professor in the Faculty of Business Management at the University of Economics in Bratislava. She teaches courses related to business and management simulations, a required class for all fourth or fifth year students in the Faculty of Business Management. She has received training in the United States and past teams she has supervised have won awards while participating in the Marketplace simulation, placing in the Hall of Fame. The simulations at EUBA were supported by the VUB Foundation.