NOTES for the MARKETPLACE SIMULATION

QUARTER 2
You have a new million dollars to spend in Q2
Buy as much market research as you can buy
You will design two products for two separate markets - remember to think of this
market as during the beginnings of the 1980’s - computers were new and it
was not clear that anyone needed them
You will determine where to locate your factory and determine the factory capacity
You will determine what your customers need, and design products to meet those
needs
You will be careful to balance the needs of your customer with the limited financial
resources available
As you are designing your two different products, if possible try to have some of the
components be similar to each product in order to reduce your
costs
Try to keep your different products reasonably close to each other to reduce change-
over time in manufacturing
Carefully balance how you use your money to reduce the need of getting a bank
loan or being visited by the loan shark

QUARTER 3
Remember that you won’t be profitably until most likely Q4
You have a new million dollars to spend in Q3
Buy as much market research as you can buy
You will develop two different ads for your two different products and determine
where to place those ads - keep the ads simple with no more than seven items.
Keep the most important items of your ad near the top of the list
You will hire your sales force - remember that you will not sell anything without
sales offices and a sales force
You will remember that the market needs to be developed - this is a brand new
product offering
You will schedule production
- Forecast demand
- Set minimums and maximums for warehouse
- Schedule operating capacity
- Run factory simulation, check numbers
Determine the price point that will get sales, make you profitable, and compete
effectively against the other companies
You will be careful with inventory - too much and you might have the wrong
products that might be scrapped - too little and you will miss sales and
upset your customers

Suggested Rules of Thumb for the Simulation:

1 Anticipate that the sales staff will sell between 30 to 100 units. Pick 50
units/quarter as a good starting point per sales person
2 Anticipate that you will lose 30% of available plant capacity as you change
production from one product to the next product
3 Therefore if you have:
10 sales people

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 Each can sell 50 units
Probable demand for quarter is 500 units
Add 150 units for long changeovers
Set operational capacity at 650 units for the quarter in order to serve
the potential demand of 500 units
4 Anticipate that you will need to replenish stock during each quarter and this
will require your manufacturing organization to change over to make
product which is in high demand and low in inventory
Therefore, a safe beginning inventory level is approximately 100 units,
and a safe replenish level (during the beginning of the simulation) might be
20 to 50 units
5 You will run a Pro Forma before wrapping up your plans for the quarter. A
desirable ending cash position would be $500,000. Rerun your Pro
Forma for a worst case scenario (reduce demand by 50%), and a
desirable ending cash position would be $300,000

QUARTER 4
Remember that you won’t be profitably until most likely this quarter, but it might be
Q5
You have a new million dollars to spend in Q4
Buy as much market research as you can buy
You will review your strategies to see how they have worked out. You will modify
the various strategies as necessary.
If you are doing worse than the competition in any element, find out what they are
doing and possibly copy it.
Watch the Balanced Scorecard to see where you are strong, and where you need to
focus attention
Invest in R&D and Quality

QUARTER 5
Continue to grow your company
You will now have an additional $5 million to work with

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