Introduction to Business Textbook PDF

Introduction to Business Third Edition Dennis E. Schlais Richard N. Davis Kristi A. Schlais Copyright © 2011 by Association Global View No part of this manual may be reproduced by any mechanical, electronic, or photographic process, nor may it be stored in a retrieval system, transmitted, or otherwise copied for private or public use, without written permission from Association Global View. (www.globalview.org) Printed in the United States of America Acknowledgments The authors recognize the enormous value added to this innovative project by numerous project team members. Each member of the development team brought unique talents and strengths to the vision. The resulting vision was to create an introduction to business curriculum that was first, and above all else, for the benefit of the student. The main question driving the team was, "How do students learn?" We do not mean, how do they memorize for tests. But rather, how can we transmit information, knowledge and understanding so each student will exit the course having a strong foundation in business and in critical thinking which will support them in future course work and through life? The end result is an electronic, globally interactive program of study, which allows the student to learn, experience, and feel what its like to be an entrepreneur and a manager within the global business community. We have sacrificed some knowledge content found in standard texts in order for the student to truly experience, understand, and appreciate the knowledge they have gained. We feel that the gain in understanding and the creation of a solid foundation in business is well worth the small sacrifice of rather minor information. The total program experience that is provided should not be judged solely on this text. The experience should include taking advantage of the active learning component, the entrepreneurial strategic business simulation. The business that is started is simulated, but the negotiations and interaction with competitors and partners around the world is real business in real time. Students move from concepts in the text to a view of how real firms apply the concepts through application of that knowledge in the simulation. Enjoy the total experience, learn much, and prosper. Thank you to all the collaborating professors who made this program possible and especially to the students that worked with the development team through two years of testing. Kristi Schlais, Editor Association Global View A non-profit association benefiting students and their curriculum world wide ALPHA TEAM WRITERS: Dennis Schlais California State University Chico Richard Davis, California State University Chico Kristi Schlais, Association Global View INTERNET DESIGN Jean Hulsoor Association Global View Kristi Schlais Association Global View SIMULATION DESIGN Paul Kinney Professor Emeritus, California State University Chico Dennis Schlais, California State University Chico ALPHA TESTING Jane LeMaster University of Texas- Pan American Donna Lees Butte Community College PARTICIPANTS SECOND ALPHA TEST University of Texas- Pan American U.S.A Butte Community College U.S.A. CSUChico U.S.A. HES Netherlands Eisenstadt Austria CHAPTER 1........................................................................................................................................... 7 OVERVIEW........................................................................................................................................... 7 Overview......................................................................................................................................... 8 STEP 1: Create a team...................................................................................................................... 9 STEP 2: Develop a process for decision making................................................................................ 9 STEP 3: File for Incorporation (create a firm).................................................................................. 10 STEP 5: Select Product 1 and/or Product 2 to sell............................................................................ 10 STEP 6: Determine if the firm will market in North American and/or Europe................................... 11 STEP 7: Agree on how large a share of the market(s) your firm intends to control............................ 11 STEP 8: Calculate how much capital (money) the firm must raise to be successful........................... 12 STEP 9: Manage your business over two simulated years (eight quarterly decisions are required)..... 12 The Global View Simulation..................................................................................................................... 13 The World Of Global View:............................................................................................................ 13 Product.................................................................................................................................................... 14 Environment............................................................................................................................................ 14 Political Situation..................................................................................................................................... 15 Economic Situation.................................................................................................................................. 15 The Markets............................................................................................................................................. 16 Administrative Entities............................................................................................................................. 16 Information Sources................................................................................................................................. 17 The Global View Matrix........................................................................................................................... 18 Time........................................................................................................................................................ 20...And Seasonality..................................................................................................................................... 20 CHAPTER 2......................................................................................................................................... 21 THE GLOBAL BUSINESS ENVIRONMENT............................................................................................... 21 The Global Business Environment.................................................................................................. 22 What is business?..................................................................................................................................... 22 Risk and Return:............................................................................................................................. 23 Incorporation............................................................................................................................................ 23 Entrepreneurs And Their Environments..................................................................................................... 25 The Simulation Environment.................................................................................................................... 26 Business Environment:................................................................................................................... 26 Political Environment:.................................................................................................................... 27 Economic Environment:................................................................................................................. 27 Choosing A Firm Location........................................................................................................................ 27 Trading Areas Within the Simulation:............................................................................................. 28 Local Political Environments.................................................................................................................... 30 Global Politics.......................................................................................................................................... 30 Economies At Work:...................................................................................................................... 31 Key Words:............................................................................................................................... 32 CHAPTER 3......................................................................................................................................... 33 MANAGEMENT................................................................................................................................... 33 Management.................................................................................................................................. 35 How to Organize a Business:.......................................................................................................... 37 Human Resource Management in the Simulation:............................................................................ 39 Strategic Management in the Simulation:........................................................................................ 41 The Starting Point for a Business.............................................................................................................. 41 The Starting Point for Your Team:.................................................................................................. 42 Strategy Development.............................................................................................................................. 43 Decision Making:........................................................................................................................... 43 Key Words:............................................................................................................................... 44 CHAPTER 4......................................................................................................................................... 45 MARKETING -- THE 4 P'S..................................................................................................................... 45 Marketing – The 4P’s.................................................................................................................... 46 Infrastructure............................................................................................................................................ 46 The 4 Ps and Web Marketing.................................................................................................................... 47 Product.................................................................................................................................................... 48 Place -- Marketing And Distribution......................................................................................................... 49 Promotion................................................................................................................................................ 55 Retail Promotion:........................................................................................................................... 55 Wholesale/Distributor Promotion:................................................................................................... 56 Producer (Manufacturer):................................................................................................................ 56 The Push Strategy........................................................................................................................... 57 The Pull Strategy:........................................................................................................................... 58 Business Communication and Advertising:...................................................................................... 60 Pricing..................................................................................................................................................... 63 Price Based on Cost:....................................................................................................................... 63 Price Based On Competition:.......................................................................................................... 65 Price Based on Demand:................................................................................................................. 66 Pricing Using Margins:................................................................................................................... 71 Margins on Retail Price:................................................................................................................. 72 Margins on Manufacturer’s cost...................................................................................................... 73 Margins on Cost:............................................................................................................................ 74 Key Words:............................................................................................................................... 75 CHAPTER 5......................................................................................................................................... 76 MARKETING STRATEGY...................................................................................................................... 76 Marketing Strategy........................................................................................................................ 77 Porter’s Four Generic Strategies................................................................................................. 80 Cost Leadership:................................................................................................................... 81 Differentiation:..................................................................................................................... 81 Focus:.................................................................................................................................. 81 Key Words:............................................................................................................................... 81 APPENDIX A:...................................................................................................................................... 82 THE FIRST TRIAL DECISION................................................................................................................. 82 Place........................................................................................................................................................ 82 Product.................................................................................................................................................... 82 Determining How Much Product to Buy:......................................................................................... 82 How to Purchase Product.......................................................................................................................... 85 Peacock Industries:......................................................................................................................... 85 Peacock Prices.......................................................................................................................... 85 Making Your Contract.............................................................................................................................. 86 Contracts Run Time.................................................................................................................................. 86 Special Loans........................................................................................................................................... 86 Promotion................................................................................................................................................ 87 Advertising Budget.................................................................................................................... 87 Size of Sales Force.................................................................................................................... 88 Size of Sales Force in Training................................................................................................... 88 Compensation For Sales Force................................................................................................... 88 Credit Policy For Buyers........................................................................................................... 89 Quality Control Budgets............................................................................................................ 90 Price........................................................................................................................................................ 92 Financing the Firm................................................................................................................................... 94 Desired............................................................................................................................................... 94 Practice Decision Forms........................................................................................................................... 95 CHAPTER 6......................................................................................................................................... 97 ACCOUNTING..................................................................................................................................... 97 Accounting.................................................................................................................................... 98 Balance Sheet........................................................................................................................................... 98 Assets:........................................................................................................................................... 99 Liabilities:...................................................................................................................................... 99 Equity:......................................................................................................................................... 100 Special Stockholder Accounts:...................................................................................................... 101 Important Accounting Concept............................................................................................................... 102 Case Question 1:.......................................................................................................................... 103 Income Statement................................................................................................................................... 103 Key Words:............................................................................................................................. 106 APPENDIX B:.................................................................................................................................... 107 REPORT ANALYSIS............................................................................................................................ 107 Market Group Reports............................................................................................................................ 107 Economic Report.................................................................................................................................... 108 Economic Index:.......................................................................................................................... 108 Consumer Confidence Index:........................................................................................................ 108 Bill Rate:...................................................................................................................................... 109 Prime Rate:.................................................................................................................................. 109 Financial Report..................................................................................................................................... 111 Stock Price:.................................................................................................................................. 111 Dividends per Share (Div/Shr):..................................................................................................... 111 New Financing:............................................................................................................................ 111 Sales and Marketing Report.................................................................................................................... 112 Total Sales (in units):.................................................................................................................... 112 Total Wholesale Orders:............................................................................................................... 112 Total Backorders:......................................................................................................................... 113 Total Advertising:........................................................................................................................ 113 Ending Sales Lost:........................................................................................................................ 113 Average Commission:.................................................................................................................. 114 Average Salary:............................................................................................................................ 114 Prices:.......................................................................................................................................... 114 Sales Reps:................................................................................................................................... 114 Firm Reports........................................................................................................................................... 115 Credit Report.......................................................................................................................................... 115 Credit Rating:............................................................................................................................... 115 S.T. Rate:..................................................................................................................................... 115 Debt-to-Equity Ratio:................................................................................................................... 116 Sales and Marketing Report.................................................................................................................... 117 Total Unit Sales:........................................................................................................................... 117 Wholesale Orders:........................................................................................................................ 117 Backorders:.................................................................................................................................. 117 Returns:....................................................................................................................................... 117 Sales Lost:................................................................................................................................... 118 Sales Reps:................................................................................................................................... 119 Base Salary:................................................................................................................................. 119 Sales Commissions:...................................................................................................................... 119 Product Prices:............................................................................................................................. 119 Market Share:............................................................................................................................... 119 Production Report.................................................................................................................................. 119 Finished Goods Inv.:.................................................................................................................... 120 Inventory Unit Cost:..................................................................................................................... 120 The Income Statement............................................................................................................................ 121 Sales Revenue:............................................................................................................................. 121 Less Restocking Expense:............................................................................................................. 121 Net Sales:..................................................................................................................................... 122 Cost of Goods Sold:...................................................................................................................... 122 Advertising:................................................................................................................................. 122 Quality Control:........................................................................................................................... 122 Bad Debts:................................................................................................................................... 123 Sales Expense:............................................................................................................................. 123 Administrative Expense:............................................................................................................... 123 Inventory/Shipping Charges:......................................................................................................... 123 Interest Expense:.......................................................................................................................... 124 Miscellaneous:............................................................................................................................. 125 Income Taxes:.............................................................................................................................. 126 Balance Sheet.......................................................................................................................................... 126 The Income Statement and Balance Sheet Connection............................................................................. 127 Cash Flow Report................................................................................................................................... 127 Beginning versus New Special Loan:............................................................................................ 130 Confidential Firm Reports...................................................................................................................... 130 Firm Reports for Firm 12........................................................................................................................ 132 Firm Reports for Firm 13........................................................................................................................ 135 Firm Reports for Firm 14........................................................................................................................ 138 Firm Reports for Firm 15........................................................................................................................ 141 Firm Reports for Firm 16........................................................................................................................ 144 Firm Reports for Firm 17........................................................................................................................ 147 CHAPTER 7....................................................................................................................................... 150 FINANCE.......................................................................................................................................... 150 Finance....................................................................................................................................... 151 Finance Concepts and Strategy................................................................................................................ 151 Funding Sources:.......................................................................................................................... 151 The Use of Debt:.......................................................................................................................... 152 To Borrow or Not to Borrow, That is the Question.................................................................................. 153 The Question.......................................................................................................................................... 155 Type of Debt.......................................................................................................................................... 156 Financial Assessments............................................................................................................................ 157 Cash-In-Hand......................................................................................................................................... 158 Return Expected..................................................................................................................................... 159 Risk....................................................................................................................................................... 159 Financial Assessment Methods............................................................................................................... 160 Payback:...................................................................................................................................... 160 Future Value; Present Value; Rate of Return................................................................................. 161 Examples:.................................................................................................................................... 161 The Present Value Concept Applied in the Simulation for Assessment Purposes....................................... 164 The Future Value Concept Applied in the Simulation for Assessment Purposes........................................ 165 Variables:..................................................................................................................................... 165 Key Words:............................................................................................................................. 167 APPENDIX C:.................................................................................................................................... 168 THE SECOND TRIAL DECISION........................................................................................................... 168 Practice Decision Forms......................................................................................................................... 170 APPENDIX D:.................................................................................................................................... 172 THE SCENT INDUSTRY...................................................................................................................... 172 Market Research on Men's Aftershave..................................................................................................... 172 Demand and Price Elasticity......................................................................................................... 172 Seasonal Demand:........................................................................................................................ 173 Example of seasonal demand pattern for Product 1 as a percentage of annual sales:................... 173 Backorder Rate:............................................................................................................................ 174 Market Research on Ladies' Perfume....................................................................................................... 174 Demand and Price Elasticity:........................................................................................................ 174 Seasonal Demand:........................................................................................................................ 175 Example of seasonal demand pattern for Product 2 as a percentage of annual sales:................... 175 Backorder Rate:............................................................................................................................ 175 Inventory Carrying Costs........................................................................................................................ 176 Shipping Costs....................................................................................................................................... 176 Returned Products.................................................................................................................................. 176 APPENDIX E:.................................................................................................................................... 177 FORECASTING DEMAND.................................................................................................................... 177 Market Potential..................................................................................................................................... 177 Seasonal Patterns.................................................................................................................................... 178 Forecasting Demand............................................................................................................................... 179 Forecasting Model.................................................................................................................................. 179 Determining Market Demand........................................................................................................ 179 Market Group Demand Variables....................................................................................................... 180 Seasonal Rate of Change......................................................................................................... 180 Conservative Calculation......................................................................................................... 180 Aggressive Calculation............................................................................................................ 181 Determining Real Market Share.............................................................................................................. 181 Conservative Calculation......................................................................................................... 181 Aggressive Calculation............................................................................................................ 181 Final Forecasting Figure......................................................................................................................... 182 Conservative Calculation......................................................................................................... 182 Aggressive Calculation............................................................................................................ 182 Product Loyalty...................................................................................................................................... 182 CHAPTER 8....................................................................................................................................... 185 MANAGEMENT INFORMATION SYSTEMS (MIS).................................................................................. 185 Management Information Systems................................................................................................ 186 Typical MIS Needs:...................................................................................................................... 186 Purchasing Office Supply Case:.................................................................................................... 187 Fully Integrated MIS Systems:...................................................................................................... 189 Implementing the MIS System:..................................................................................................... 189 Employment in the MIS Field:...................................................................................................... 189 Key Words:............................................................................................................................. 190 CHAPTER 9....................................................................................................................................... 191 THE PROCESS OF CHANGE................................................................................................................. 191 The Process of Change................................................................................................................ 192 The Revolution Continues:........................................................................................................... 192 Winners and Losers in Change:..................................................................................................... 194 Management:............................................................................................................................... 195 Key Words:............................................................................................................................. 195 APPENDIX F:.................................................................................................................................... 196 BANKRUPTCY................................................................................................................................... 196 What is Bankruptcy?:................................................................................................................... 196 Salvage Options:.......................................................................................................................... 196 When to Declare Bankruptcy:....................................................................................................... 197 The Process of Starting Over:....................................................................................................... 197 APPENDIX G:.................................................................................................................................... 198 QUICK GUIDE TO DECISION AND CONTRACT ENTRIES........................................................................ 198 To Login to the Simulation..................................................................................................................... 198 To Review Your Firm Profile or Change Your Password......................................................................... 198 To Enter Decisions................................................................................................................................. 199 Practice Decision Forms......................................................................................................................... 206 Quick Guide to Entering Contracts.......................................................................................................... 209 Confirmation Example............................................................................................................................ 210 Chapter 1 Overview This chapter provides an overview of the program of study. It is important that you understand how the simulation is integrated with the information in the text. The text, although it has a great deal of valuable information, was not designed as a stand-alone book. The text is the starting point and guide for an integrated learning experience. You are not finished when you have read a chapter, you have only just begun to learn about the concepts and how they are applied by real firms and applied by you in the simulation. 7 Chapter 1 -- Overview OVERVIEW There is little possibility that you would come to a true understanding of the new global business environment or the mind set of an entrepreneur simply by reading about it. Reading must be complemented by discussion, involvement, critical thinking, and most importantly, decision making. The experiences you gain in this program of study will lay a foundation for future learning in business and in life. If a student of business covers all of the essential areas of study but misses the "feel" or perhaps, the anguish of making critical decisions, then that student will only partly understand what business is all about. Given the importance of business in our society, it is essential that each team member have a hands-on business experience. Welcome to the Global View challenge! What to Expect From This Course The Global View program is based on innovative, yet proven methods of learning. This course will be taught differently than most of your other courses. You need to know what to expect. You will have: 1. Standard lectures 2. Standard text material 3. You will actively collaborate with and compete against fellow business students across cultures. 4. You will learn and gain skills through practice in planning, launching and managing an international business in a simulated environment, contract negotiations, and global communication. This program of study incorporates interactive and collaborative learning components in which you must take an active role. The educational value of this program is dependent on your being a partner in your own education. This program requires that you become part of a team and start your own business. Running a business in the Global View simulation is the main driver of this educational experience. Although the simulation is FUN learning, it should be undertaken with seriousness. The steps needed to launch your firm are outlined below. 1. Create a team 2. Develop a process for decision making 3. File for incorporation (create a firm) 8 Chapter 1 -- Overview 4. Decide whether you will sell Product 1 and/or Product 2 5. Determine if you will market in North America and/or Europe 6. Agree on how large a share of the market(s) your firm intends to control 7. Calculate how much capital (money) the firm must raise to be successful. 8. Manage your business over two simulated years (eight quarterly decisions are required). Steps 1-3 are things you need to do now. Steps 4-7 are things you will do as you begin entering your practice decisions. STEP 1: Create a team You may be assigned to a team as often happens in real business firms. You may not like the arrangement and you may in fact not even like your team partners. That does not matter. What does matter is that you become a valued and effective team member. Determine very quickly what the team expects of you and how you can add value to the firm your team is managing. In most situations the following is extremely vital to your team's success and to your success in the team.  Read the assigned text chapters in a timely manner.  Share contact information with team partners, such as phone number and/or e-mail addresses.  Arrange for at least one meeting time with team members per week outside of class time (for some teams it will be a virtual meeting that can be conducted over the Global View chat room system).  Expect all team members and yourself to spend two hours outside of class per week reviewing assigned text chapters, practicing global communication skills, communicating with students around the world, and studying the simulation data and results.  Be PROACTIVE. Do not sit back and wait for the team to teach you. Instead, contribute, communicate, volunteer opinions, be prepared for meetings and in that way, add value to your firm, your team, and your education. STEP 2: Develop a process for decision making Teams that act like committees often study things to death, get easily sidetracked with minor issues, and make decisions only because deadlines force them into it. Instead, it may be better for a team to act like executive decision-makers, having all members gather and share information, assigning responsibilities to individual members, holding members accountable, prioritizing issues, encouraging debate from all members and reaching decisions in a timely manner. Developing a process whereby all members have responsibilities, are held accountable, and contribute to the team effort is crucial to the success of firms in the global business community and to the success of your team in the simulation. Developing the process your team will follow in making decisions is more important than the decisions themselves. A good 9 Chapter 1 -- Overview process consistently applied with all members participating will produce consistently good decisions. Your team should spend time discussing and developing the decision making process as a specific task. Do not let one or two individual team members build the process around themselves or around a time frame that they personally like. You are a team. The members do need to compromise and accommodate constraints of individual members in developing the decision making process. In the end, the process should meet the needs of all members and achieve the needs of the firm. STEP 3: File for Incorporation (create a firm) Now that your team has been formed, your instructor will provide the firm number and password for your team. It is now up to your team to decide on the name of your simulated company and who will be in charge of communications for your firm (Communications Officer). Once your team has decided on a name and Communications Officer, send the information in an email to Kristi, your simulation administrator: [email protected] 1. Firm number (use this firm number in communications with your simulation administrator) 2. Firm Name 3. Email address for the Communications Officer of the team. This will be the person your simulation administrator will contact with any necessary notifications. Once you have supplied this information to the Office of Incorporation, you will receive a confirmation that your firm has been incorporated and established as a simulated corporation within the Global View Simulation. Once your firm is fully incorporated with Global View and all fees have been met, your firm will receive access to decision and contract menus as well as all reports within the simulation. STEP 5: Select Product 1 and/or Product 2 to sell Your firm will be operating in the Scent Industry. Within the Scent Industry there are two products that can be offered for sale to simulated retail store buyers: Product 1 is men's cologne, and Product 2 is ladies perfume. Your team must decide whether your firm will offer one or both of these products for sale. You will have the ability to test products in the simulated markets during your trial (practice) decisions. We highly recommend you test both products in both areas. This way you can collect good research data on both products and how well they do in both markets. Your team is not committed in the longer run to your decision on products. You can add or drop a product at any time. However, adding or dropping requires considerable effort in terms of creating marketing strategies and then spending money to implement those strategies. Thus, 10 Chapter 1 -- Overview adding or dropping a product line is an important strategic decision and should be considered very carefully. STEP 6: Determine if the firm will market in North American and/or Europe Your team will need to decide if it will sell in the simulated North American Free Trade Area (NAFTA) and/or in the European Union (EU). We highly recommend you sell both products in both areas in the trial decisions in order to gather information on which to make this decision. Your team can start in one area and then expand to the second area. Or, it may stay in one area for the entire simulation. Expanding to or dropping from areas should be considered a major strategic decision and involve thoughtful debate by all team members. Within each trading area (NAFTA or the EU), your small start-up firm will be servicing clients in a smaller regional area. You should view yourself as covering an area the size of Florida in NAFTA and the size of the Germany in the EU. Your competition for regional market share will be from up to 8 firms in your regional space. However, your competition for a measure of success in financial performance is from all firms in the introductory level simulation. Real World Example: Safeway Incorporated has competition in its NAFTA and EU stores from other retail food outlets. Safeway as a company must also compete against all large firms listed on the stock markets. The measure of success in stock price is to have its stock provide average or above average returns for its risk category to its stockholders. Your firm should never focus only on market share or only on stock performance. Top executives must be aware of both performance measures. You do not select your region within a trading area. Your region is assigned to your firm. From day one of the simulation, all regions are made exactly equal in market size and potential. A region becomes unique because of the firms operating in that region and the strategies they develop. Competition over time will cause each region to develop unique characteristics. STEP 7: Agree on how large a share of the market(s) your firm intends to control In a market region with five competitors the average percentage of units sold by each firm in each decision period is 20%. However, some firms may elect to have high priced, high quality products and settle for a share close to 12%. Perhaps a firm will take a position in the regional market that will resemble a low price, high volume firm and seek 35% of the market. In general, firms that have high volume and low prices seek higher market shares. The dream of every business, simulated or real, is to have a high volume, high priced product in the market with great market shares. Such an event is rare in simulated or real firms. 11 Chapter 1 -- Overview When it does happen, competitors eventually take your market share unless you can somehow keep them out. Businesses develop marketing strategies to compete for customers. Some firms also develop strategies to get rid of competitors or to keep them from even starting to compete in the market. What share of the market is your team interested in controlling? STEP 8: Calculate how much capital (money) the firm must raise to be successful To sell product you must first purchase product. Your firm will place orders with manufacturers in the Advanced Global View simulation, contracting for your product to be made. To do this, you will need to communicate and negotiate via the Global View communication system, through chat rooms, posting boards, e-mail correspondence and online advertising from manufacturers. Once you have a contract to have your products produced, you will need to market the products by making pricing, advertising and sales representative decisions. Your clients in this simulation will be simulated retail buyers. Thus, you need money to pay cash for the products that will be made for you. You will need cash to pay for promotion of your products. The more areas you sell in (NAFTA and the EU) and the more types of products you order produced (P1 and P2) and the larger your market share aspirations, the greater your need for capital (money). The chapter on financing your firm will provide financial guidelines for your trial decision. The basis for your financial decisions is in your firm's strategies regarding products, market areas and desired market share. Thus, your team will need to discuss and define what your firm will look like once it is operating before you can make reasonable financial decisions. STEP 9: Manage your business over two simulated years (eight quarterly decisions are required) At this step, you will have completed steps 1 through 8 and practiced decision-making in your two trial runs. Your decisions in the first real run regarding products, areas, market shares and financing are critical decisions with long run implications for your firm. To assure high quality decisions are made at this critical point in time, your team's decision-making process should be well established. Once your team is formed, review steps one through nine again. Make sure all team members realize the importance of having all team members participate in decision making, in sharing the workload and in being prepared. Each team member will need to read Chapter 3, on management. The information will help your team understand team strategy and team dynamics as the process of decision making in a team environment is created. The same chapter needs to be read a second time once you and your team partners have experienced intense decision- making in real time with real competition. Having experience and then rereading the team- building chapter will allow you to see the same subject matter from a new perspective. 12 Chapter 1 -- Overview The next set of topics will provide information about the environment in which your team and firm will be operating. In real firms and in simulated firms, many management teams become focused on day-to-day operations and decisions. Results of decision-making are often reviewed in terms of quarterly decisions creating results in that decision period. We caution you that such myopic and short-run styles of management are detrimental to your simulated firm and to real life firms in general. 1. Be aware of threats and opportunities in your global, national, regional operating environments as simulated economic and political events unfold. 2. Once you start up your firm you must keep it going. Each quarter follows the last. Poor decision-making will have cumulative effects as will good decision-making. You cannot expect to correct the effects of bad decision making in a final quarter effort. 3. Be aware when you receive your results that they do not reflect only your previous quarter's decisions. The results will show the impact of the previous quarter's decisions on the existing momentum of the firm and in relation to the changing competition caused by changes in competing firms. History is important. Do not think that one set of decisions can suddenly change everything. Dropping your price below that of a competitor will not immediately, in one single quarter, completely restore your declining market share. If your competitor is increasing quality as you are decreasing price, you may find nothing changes. Not only is history important, but also the interaction of your entire integrated set of decisions and those of your competitors. The Global View Simulation The World Of Global View: The Global View Simulation, like any sport or perhaps more like a good game of chess, consists of various components, rules, and opportunities that each player must be aware of if he or she is to achieve success on the playing field. To begin, you must imagine the Global View Simulation as a microcosm, a world in miniature. There is an economy at work, a stock market, and a banking system. There are governmental laws, taxes, and political movements. There are laborers, agencies, competitors and business partners. As you read through this text, consider what strategies your executive team might develop; decide on the structure and characteristics of your company. You are business entrepreneurs creating a company from scratch. Invent your firm. Don’t limit your vision to a narrow and self-absorbed point of view. Your firm does not exist in a vacuum, but in the Global View world. This means that you have competitors working to defeat you, as well as business partners hoping to establish beneficial relationships with your firm. Many 13 Chapter 1 -- Overview of your colleagues won’t be on your campus or even in your country. The simulation, in this respect, can provide you with a wonderful opportunity to experience international business first hand. Working with distant teams through e-mail or chatting with them in a chat-room can be rewarding to both the firm and the executive who undertakes the communication. Along with the other participants in the simulation, you should be aware of the Global View Administration. The Administration runs the details of the game, allowing professors and students to concentrate on the learning process. The Administration can assist firms with questions about this text, chat-room software, or anything relating to the simulation such as decision entry, passwords, financial statements, lawsuits approved by your professor, and communications with other companies. Product Of utmost importance is your product. Without product your firm would lie idle until its initial monies drained away. There are two products a firm can sell. For simplicity they are called Product 1 and Product 2. Product 1 is a low end (less expensive) product while product 2 is a high end product. What product 1 and product 2 are depends upon the industry your firm has been assigned. If, for example, your firm operates in the Scent Industry product 1 will be a premium aftershave and product 2 will be perfume. Know your product. What differentiates your product from that of another firm? Is it quality? Is it price? Is it the number of sales representatives you have promoting your product? Within the simulation, product 1 and product 2 are bought and sold in units. A unit is a case of product, not a single item. The number of items in a case is not disclosed. The purpose for keeping this factor hidden is to keep students from allowing their knowledge of retail store pricing to influence their simulation pricing decisions. Thus, by dealing only in cases and not individual bottles we hope to focus your attention on manufacture price to you and your needed price per case to the retail buyer in order to make a profit for your firm. Environment Environment in the Global View simulation can be broken down into five elements: land, political situation, economic situation, markets, and administration. The first element is the land, the actual space your firm will occupy. In this simulation you have a wide choice for company location. You can locate near any city in Area 1, the North American Free Trade Area (NAFTA) or Area 2, the European Union (EU) including the Czech Republic. Your choice of corporate headquarters is of minor importance in the simulation. Since you have no manufacturing plant, it is assumed that you will store unsold inventory (product). You do not pay 14 Chapter 1 -- Overview rent or a mortgage on this storage space; you pay only an inventory carrying cost on units that remain at the end of the quarter. In this way your focus remains on the product. The location of your manufacturer might be important. If they are in a politically sensitive area or one prone to strikes or labor disruptions your order for product may be delayed. Also, manufacturers have had delays in shipping due to hurricanes, earthquakes and other physical elements. Political Situation The second element, which makes up your environment, is the political situation in which you are operating. In the world of Global View, politics can affect your firm directly or indirectly. Stay informed about politics in your area. Read the news, which is published quarterly, to keep current. New trade laws, labor or environmental regulations as well as general industry news can have an immediate impact on your firm. Even though your firm won't have production facilities, the manufacturers you buy from do. Any increase to your supplier's cost of production due to a political event will inevitably mean the price you pay for product will be higher. Take preventive action when possible. Read your e-mail and check for administrative messages in the “Industry” section of the “Dollars and Scents Quarterly” so that you can take advantage of possible solutions being offered to dangerous political situations. These could be anything from an opportunity to vote or communicate with a labor union leader, to an offer for relocation or fire insurance. If you want to take a course of action, but don’t have the option to do so in your central decision set, or through special offers from the Global View Administration, ask for help. Don’t feel boxed in by the decision set. Explore your options. Economic Situation The third element of your Global View environment is the economic situation in which you are operating. The macro-economic movements within the game are the same for all firms. Everyone, regardless of location, is affected alike by the Global View economy. You can follow economic trends, trying to predict what lies ahead by reading the economic section of the news as well as by tracking certain figures on your industry reports such as the Bear/Bull market index and the economic indexes for the coming quarter and for the coming year. The EURO will be the currency used in the EU (Area 2) for pricing. All other figures are in U.S. dollars. The strength or weakness of the Euro Dollar or the U.S. dollar and the reason for 15 Chapter 1 -- Overview its relative fluctuations will be explored in the news. You can track the EURO in the industry reports for your region. Details of the EURO will be discussed in a later chapter. The economy will be affected by political and environmental factors that develop, just as politics and international policies will, at times, follow economic movements, as it does in real life. The Markets The markets in which your firm will sell product make up the fourth element of your firm’s environment. There are several markets in the Global View simulation. The consumer market is supplied by retail stores. The retail store market is supplied by distributors. (Your firm is a distributor - retail stores are your market). Distributors are supplied by manufactures in the wholesale market (you will order product from manufacturing firms operated by advanced student teams). The consumer market is made up of two regions, the NAFTA market and the EU market. Simulated retail store buyers in the NAFTA and EU market areas purchase finished goods from your firm and other Global View firms, for end consumers. The wholesale market as in real life, refers to the trading taking place between manufacturers and distributors. However, trading between distributors and retailers is also often referred to as the wholesale market. Thus, when someone discusses "wholesale prices or wholesale volume" you will need to seek clarification about which part of the wholesale market they are referring to. Because your firm does not have production facilities (a factory) you must contract with a manufacture to produce your products. By entering into contracts with manufacturing firms, you can buy products, which you will resell to the retail store market. The demand for your product from retailers depends on the simulated consumer market. Your firm will not have contact with end consumers, only with the retail store buyers who in turn sell to the end consumer. Administrative Entities The fifth and final element of your environment is the administrative entities working within the simulation. There are two, in particular, which you should be concerned with. The first is the Global World Bank. The Global World Bank sets monetary policy, which directly affects the cost and availability of money. The bank also conducts periodic audits and works with firms that are headed for bankruptcy. As firms get too far into debt, the bank grows uneasy. In this simulation, the bank will run frequent audits and demand that you bring your debt down to a reasonable amount. What can the bank do? The bank can call your loans and cancel lines of credit if it becomes frightened by the way you are managing your firm’s finances (similar to closing or 16 Chapter 1 -- Overview restricting your personal credit card account). The bank may opt to move your term loan to a special loan, which has an annual interest rate of 36%, YIKES! When you are bankrupt, the Global World Bank will seize your assets on behalf of all creditors and force your firm to operate under a particular set of rules or force your firm into bankruptcy. On the other hand, the bank can be a great friend and assist firms, which have encountered a terrible financial problem, or have become bogged down with the weight of interest from a special loan generated through a careless mistake. If you are having financial difficulties, appeal to the bank and see what they can do to help. The other main administrative entity in the Global View World is Peacock Industries. Peacock Industries runs a Firm identified by firm number 18. Peacock's primary function is to act like a manufacturer and sell finished goods to companies in the simulation. Peacock Industries does not act as a retail store buyer. Peacock is a government funded firm and thus politically sensitive. It can only operate in the manufacturer-to-distributor or wholesale market when there is a critical shortage of manufactured products for sale. Prices are high and fixed (that is, prices cannot be negotiated as they are with private manufacturing firms. You will purchase product from Peacock in your trial decisions. This will allow you to experience entering contracts. Even when you are entering trial decisions, you should have team members communicating with manufacturers for the day you make your first set of real decisions. Do not hesitate to talk with manufactures far in advance of actually ordering product for the coming quarter. Peacock can usually supply your full order for finished goods, but the prices of their products will go up and almost certainly continue to climb higher throughout the simulation. The current price for Peacock products can always be found in the quarterly news. Political pressure almost always forces Peacock to stop supplying product or to charge very high prices. Do not become dependent on Peacock simply it is an easy way to get product. You run very significant risks if you become dependent on Peacock as the supplier of your products. To buy finished goods through Peacock Industries, you simply enter a contract using Peacock's firm number as the supplier for product. It is easy, expensive and high risk regarding long term availability of product. Information Sources 17 Chapter 1 -- Overview Where do I look for the information I need?  The Simulation: To enter decisions To enter contracts To view the list of current contracts involving your firm To review and print market group reports To review and print firm reports To view stock performance  The Message Board/Chat Room System:  To post messages to stockholders  To post requests for product  To negotiate contracts  To view messages from other firms  To view messages from GV Admin  To participate in online tutorials  To chat with senior mentors  Global View Web page: To access the simulation -- decision/contract entry and firm reports To access The Message Board/Chat Room System To view the Frequently Asked Questions list To view the Introduction to Business program page updated weekly by your simulation administrator To view the chapter links To view the simulation news To view unique reports when available The Global View Matrix The Global View Simulation is a matrix (or related set) of participating firms. This is how it works. There are a series of market groups each with its own region. Market group 1 may have up to eight firms and is in region 1, which has regional markets in both NAFTA and the EU. There are many regions perhaps as many as 30 or 40 depending on the number of firms 18 Chapter 1 -- Overview participating. Your firm will be assigned one of eight firm numbers possible in each market group. Thus, your firm can never have more than seven direct competitors. Following is a table, which shows market groups 1-4, and the maximum group of 8 firms that can operate in each market region. The number of the market group plus the number of the firm in that market group is the firm number assigned to your firm. For example, if you're in market group 1 and you are firm 1, you would be Firm 11. Use this number to identify yourself to other firms in the simulation and to the Global View administrators. If you want to contact another firm, say in Market Group 12, and that firm's number is 6, then you would contact firm 126. Within your market group your firm can sell into your regional market in NAFTA and/or into your regional market in the EU. The Global View Matrix Market Market Market Market Group 1 Group 2 Group 3 Group 4 Firm 1 Firm 11 Firm 21 Firm 31 Firm 41 Firm 2 Firm 12 Firm 22 Firm 32 Firm 42 Firm 3 Firm 13 Firm 23 Firm 33 Firm 43 Firm 4 Firm 14 Firm 24 Firm 34 Firm 44 Firm 5 Firm 15 Firm 25 Firm 35 Firm 45 Firm 6 Firm 16 Firm 26 Firm 36 Firm 46 Firm 7 Firm 17 Firm 27 Firm 37 Firm 47 Firm 8 Firm 18 Firm 28 Firm 38 Firm 48 * Firm 11 - 18 is selling product within the same market region but not to the same market region as firms 21-28, 31-38, 41-48, etc.. Each market group has its own market region that firms from other market groups can't sell to. Each market group operates within a defined type of industry such as the Scent Industry. The industry selected will be the same for all firms in the simulation. 19 Chapter 1 -- Overview Time Time in the Global View simulation is broken down into quarters. There are, of course, 4 quarters per year. Quarter 1 begins in January and includes February and March. Quarter 2, would pick up with April, May, and June. Everything will follow the quarterly tick. All teams must submit a set of decisions each quarter. The actual starting year (2000, 2001, etc...) will be stated at the beginning of each simulation. The simulation will generally run for 3 to 4 years (your firm will only make competitive decisions for two years). Each quarter builds on the previous quarter, creating an accumulated history for your firm....And Seasonality There is another important consideration when looking at time in the Global View Simulation, the concept of seasonal demand. In the simulation a firm can resell 2 different items, product 1 and product 2. Each of these products has a quarterly seasonal pattern in which demand and thus, potential sales changes.. There may be a tremendous demand for product 1 in quarter 2 (the months of April, May, and June). Likewise, product 2 may have terrible sales in quarter 3, but excellent sales in quarter 4. The quarterly seasonal patterns are well established and can be viewed on the Global View web site. Your firm must be aware of seasonal demand from the consumer market prior to placing an order to purchase product from a manufacturer. A Quick Note on The Message Board/Chat Room System or E-mail: It is important that you immediately start to use the electronic communication system for discussions, meetings, chats and negotiations. All online communications including chat-rooms, you must follow certain codes of conduct. When you send messages to other firms, remember that you are representing your firm. The tone and content of your messages should be professional. If using private e-mail instead of The Message Board/Chat Room System, make sure you have identified your firm by both name and number at the start of the message. This will allow the receiver to identify the firm. Simply the “sender” header in the message cannot identify the firm if private e-mail is used. Global View Administration, will not forward messages for your firm. Send messages directly to the firm in question. This will quicken the response time and establish better lines of communication between your firm and the firm(s) you are working with. 20 Chapter 2 The Global Business Environment Chapter 2 will challenge you to define the definition of business. Ultimately, it is your perceptions that will create the definition. Farther into the chapter you will again be challenged to think for yourselves as you examine your country's political environment and decide where it is currently positioned on the CC Scale. 21 Chapter 2 – The Global Business Environment THE GLOBAL BUSINESS ENVIRONMENT What is business? Authors of competing introduction to business texts will not agree with our definition of business. They will argue that business should be defined as an activity, which provides society (or others) needed goods and services at a profit. How would you define business? Before you accept the standard definition, pose these questions to yourself and others: 1. The definition above states that a business engages in selling “needed” goods to society. Is this always true? Is there a difference between something needed and something wanted? Do people need and want things based on their own value system or do businesses create needs and wants through advertising? Are cigarettes a need, a want, or a business created desire? 2. What about illegal goods? Society in general doesn't want marijuana to exist yet we have people that sell it at a profit to a segment or target group in our society who desire it. Is something not a business because it sells illegal goods? 3. Is business always conducted to turn a profit? Some entities sell but not with the objective of earning a monetary profit. The Democratic and Republican parties in the United States sell candidates to the American public. The objective is not an immediate monetary profit but a gain of power and influence. Do you agree that the selling of a candidate and a political party's ideals are a type of product or service? 4. What about non-profit organizations? Some organizations are designed to provide goods and services to members of society but not for a profit. When a local restaurant opens and makes a profit, it pays taxes and retains part or all of the after- tax profits in the business. The increase in the firm's assets (such as cash or restaurant equipment) is listed on the books of the company as having come from retained earnings. The firm will often reward those who made the business successful with higher salaries or bonuses in addition to retaining some of the profits to expand the firm. If a local non-profit hospital makes excess money, it doesn't pay taxes on the profit, it simply retains the entire amount as a surplus. Similar to the successful restaurant, the hospital will also reward the people that made it a success with higher salaries or bonuses, and/or use its surplus retained money to expand its services. Do you agree that in many situations, the only difference between achieving a profit in a business and achieving surplus earnings in a non-profit business is that one pays income tax and the other does not? 22 Chapter 2 – The Global Business Environment There is another important difference between profit seeking firms and non-profit organizations such as political parties or community-sponsored hospitals. Profit seeking firms have owners. Non-profit firms have a governing body so no one "owns" the firm. Ownership is of key importance in many aspects of a for-profit business. Of course, for- profit and non-profit businesses have much in common. Both profit and non-profit businesses must seek start-up capital (money to buy inventory, machinery, ambulances, fixtures, etc.). Both types of organizations are held accountable to the individuals or groups that provided the start-up money. Both must seek continual revenues to stay in business. All profit firms must find a service or product that the market will purchase. Non-profit businesses must do the same and/or appeal to donors in order to stay in business. Non-profit businesses are sometimes faced with the interesting, dual marketing problem of how to provide services or products to meet a need while simultaneously convincing a second market (donors) that they should provide funds. Consequently, non- profit businesses must carefully monitor two very different markets (the benefactors of the service or product and the donors). Consider the additional information regarding for-profit owners and not-for-profit governing boards. In defining "What is a Business" should a distinction be made between for-profit and not-for-profit businesses? Risk and Return: The knowledge you will gain about business in this course can be applied to almost all organizations and institutions in the world. By our definition, they all have one thing in common. A business is an enterprise where the owners, boards or managers take risks in order to make a profit, gain excess earnings, secure power, influence the lives of others, gain prestige, or insure self-preservation. This is what business is about: Taking a risk in order to gain a return (risk and return). If you take a risk expecting on average to lose it's called gambling. If, on the other hand, you take a risk expecting on average to gain it's called an investment. In order to join in a discussion on the definition of business, reflect on what a business is. Determine for yourself if it is an activity, which provides society (or others) needed goods and services at a profit. Or is business better defined as taking risk in anticipation of a gain? Your instructor may require a written definition of "what is a business?" to be posted on the The Message Board/Chat Room System bulletin board. Incorporation A governmental authority administers incorporation. In the United States, incorporation is a state process, not a national or federal process. States have varied incorporation requirements with some states being pro-business. Other states seem more interested in protecting investors and keeping a close watch over firms rather than making it easy for businesses to incorporate. Incorporation is not a complicated process even when states are not pro-business nor is it expensive. Why do businesses incorporate? Once incorporated the firm assumes the legal status of an individual. This provides the owners or executives personal protection. If, for example, a firm makes a serious mistake or an accident occurs a lawsuit may result. The 23 Chapter 2 – The Global Business Environment lawsuit will be directed at the corporation rather than the owners and managers. In some cases, where there was intent to do harm or prudent decision making was not used, certain officials in the corporation might be included in the lawsuit. With legal protection provided, stock investors, are more likely to write a check to the firm and become part owner of the business. When the investors want to get out of the business the legal protection through incorporation makes it easier for the original investor to find a new investor that will write a check for the stock. It is important that you note the firm only receives money from the original sale of stock and is not involved in the future resale or exchange of the stock between investors. Investors also like the idea that if one investor has personal, health, legal, or financial problems, it does not directly affect the firm. Each investor can exit when they want to simply by finding some new investor that will buy the stock from them. The new investor assumes the same rights of the investor that sold the stock. Therefore the remaining shareholders do not care who holds the shares of stock. Other forms of business ownership are often used. A person or a husband and wife might start a business by taking out a business license from their city, county or provincial government agency in charge. Sole proprietorships are very easy to start and are often done for small sized businesses. However, proprietorships do not provide for additional owners to join and supply management talent and/or additional funds. If the business needs more than one owner in order to get the needed funds or human resource assets (programmer, mechanic, ER medical doctor, etc.) then a partnership form of organization can be set up. Partners can join by adding capital and/or talent. While excitement of working with a partner overcomes many team management problems, eventually most partnerships refer back to their legal partnership agreement to settle disputes. Legal advice should be sought to make sure the partnership agreement would cover many situations that are often overlooked as a partnership is formed. Another benefit of corporations over sole proprietorships and partnerships as a legal business entity is that individual investors can sell their interest in the firm (shares of stock) without disrupting the firm itself. Thus, if investors become irritated with the firm's performance or they need money quickly they can sell their stock to another individual. The corporation does not repurchase the stock. Thus, ownership continues to change but the corporation maintains the funds from the original sale of stock and the management team stays intact. Think of it as General Motors selling you a new car. GM has your money and you have the car. When you sell your car, GM does not repurchase it. Instead, the sale will be made to a car dealer or a private party. When investors decide to sell their stock, they can advertise the stock in the classified advertisement section of a newspaper. It is rare, but sometimes that is the only method to find a stock buyer if the company is a little, regional firm. Selling the stock of small, regional firms is a difficult process since buyers cannot be easily located. If, by luck, a buyer is found, determining the value of a share in a business is not easy, even when both buyer and seller bargain in good faith for a fair value. It is difficult to come to an agreement over the price of an automobile, which is tangible and is parked right in 24 Chapter 2 – The Global Business Environment front of the buyer and seller. How much is a piece of paper worth that has rights to partial ownership in a business? A system has been developed to facilitate the buying and selling of "used" stocks. There are famous names in the business of bringing stock buyers and sellers together such as the New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) and the National Association of Securities Dealers Automated Quotations (NASDAQ). Before one of these large stock exchanges will handle the resale of stock in a firm, that firm must have achieved some positive investment reputation. The firm must have enough shares and numerous stockholders, such that every day one could expect buy and sell orders for shares of stock. The process of examining a firm to see if it meets the requirements for active trading in the large stock exchanges is called listing. If an exchange determines that the volume of trading will generate sufficient revenue for the exchange and, that the firm agrees to make certain financial data public, the stock is listed. Having a stock "listed" or traded allows the investors to quickly and easily find a buyer for their stock. The ability to change an asset, such as a stock, quickly into cash without having to lower the price is called liquidity. Cash is the ultimate in liquidity. Stock on a listed exchange is quite liquid (you might take a loss on what you paid for it, but you will get the cash for what it is worth that day). A non-listed stock like a used car is less liquid. A home is generally a great asset but is not very liquid. Depending on the market, homes might turnover (sell) in three months but in some years it might take 12 months or more. The more liquid the asset, the easier to take care of adjustments in your personal life and the easier to move from one investment to a better one. Liquidity provides options. Entrepreneurs And Their Environments Entrepreneurs are the future. Citizens need to influence their governments to create a “user friendly” environment so ideas of creative individuals can evolve into new products and services. The legal system must provide some protection for start-up business ventures that succeed and also provide some safety net for the many entrepreneurs that certainly will fail. What type of economic environment will keep an economy moving into the future? Individuals throughout the world start businesses. As you are reading this someone, somewhere is preparing for opening day. They may be accepting delivery of their first box of lettuce for a new restaurant or perhaps posting the last graphic to their new online store. Perhaps you are considering starting a business or expanding one yourself. Within this course you will have the opportunity to begin a business in a simulated business environment. What questions do you need to ask about starting a real business and a simulated business in this course? Where and who can you turn to for help? The degree of ease in starting a business is determined in part by the area in which you will operate. Towns, cities, counties, states and nations all differ in the degree to which they will assist entrepreneurs (those who start businesses). Each governmental 25 Chapter 2 – The Global Business Environment body over time has developed an "attitude" toward business in general and have policies directed toward specific types of business operations. In the United States, small businesses are extremely important. Most jobs and many innovations are provided by small businesses. New job employment, are most often created by small businesses. Entrepreneurs attempt to commercialize new ideas or concepts and thus bring new products and services to the consumer. They keep the economic environment vigorous. Many societies depend on entrepreneurs to sustain growth since they often assume risks that larger and more established firms are not willing to consider. It would appear that as firms become successful and rich in terms of assets (cash, equipment, etc.), they are less willing to assume large risks. Their tolerance for assuming risk in the pursuit of gain diminishes as wealth is accumulated. It is understandable that a firm with large resources would not want to take on a large-scale project, which required the assumption of considerable risk. But why wouldn't a large firm attempt a little project, which would have minimal impact in the case of failure? Consider whom they would put in charge of a small project? Not many executives have the breadth of knowledge or skills needed to handle all the aspects of running a firm. When executives and managers within a larger firm face complex problems that go beyond their area of expertise. They turn to a specialized support staff. Small-scale business ventures cannot afford to staff specialists in all fields. In the arena of starting small businesses, entrepreneurs are unique individuals that have an edge over executives and managers from larger corporations. That edge is the ability to tolerate more risk, take on more encompassing problems, make decisions with less knowledge and harness the drive and commitment that comes from being an owner. Because of the value added to society by small business, governments at different levels have established small business programs. The Simulation Environment In this course, you and your team will create and operate a simulated business. The simulation has a business environment with competing firms, a political, and an economic environment. Business Environment: The business environment in the simulation will have your firm operating as a distributor of your own product. You will have the product made for your firm by a manufacturer. Your firm will then sell the product to retail stores. Your firm will be contracting for your private labeled products with manufacturing firms located in specific political and economic environments. Seniors and graduate students at the Advanced level of the simulation operate the manufacturing plants. (They supply finished goods to your firm, but do not compete in your markets.) Private labeling means you have a legal right to the product's brand name, but you contract with a manufacturing firm to produce it for you. In the simulation you will need to create names that will be used for the product(s) your firm will be selling. Then you must locate a manufacturing firm and negotiate a contract with them to manufacture the products and paste your firm's label on it. The manufacturer will deliver finished 26 Chapter 2 – The Global Business Environment goods to your firm. Your team will then market the product in your competitive market region. Association Global View staff will provide you with information about available manufacturers and how to contract with them. You

Introduction to Business Textbook PDF

Document Details

Tags

Related

Summary

Full Transcript

Upgrade to continue