What is the purpose of a business simulation course?
Definition • Course goal
A business simulation lets you practice making integrated
decisions (marketing, operations, finance, strategy) in a
risk-free environment, then learn from the results. The goal is
to connect decisions to performance metrics over multiple
rounds.
What is market share in the simulation context?
Metric • Performance
Market share is the percentage of total industry sales captured
by your company. It reflects how attractive your offering is
compared to competitors given your price, quality, and
marketing decisions.
What does Return on Sales (ROS) tell you?
Metric • Profitability
ROS measures how much profit you earn per dollar of sales.
A higher ROS means you are managing price and costs well;
a falling ROS suggests prices are too low or costs are too high
relative to revenue.
What does Return on Assets (ROA) tell you?
Metric • Efficiency
ROA shows how effectively the company uses its assets to
generate profit. High ROA means you’re getting strong returns
from your plants, equipment, and investments; low ROA suggests
underused capacity or weak profitability.
What does high inventory plus falling profit suggest?
Diagnostic • Operations
You may be overproducing relative to demand, tying up cash in
unsold units. You may need to reduce production, cut price,
adjust features, or redirect marketing toward segments with
higher demand.
What do frequent stockouts/backlogs suggest?
Diagnostic • Capacity
Demand is stronger than your available supply at your chosen
price. You might need to increase production, add capacity,
slightly raise price, or improve forecasting to avoid leaving
sales on the table.
What is a “cost leadership” strategy in a simulation?
Strategy • Position
Cost leadership focuses on being the low-cost producer: efficient
operations, high capacity utilization, competitive pricing, and
often targeting broader markets. You protect margins through
cost control rather than premium pricing.
What is a “differentiation” strategy?
Strategy • Position
Differentiation emphasizes unique features, quality, or service.
You often charge higher prices, invest more in R&D and
marketing, and target customers willing to pay for added value.
How do pricing and marketing work together in the simulation?
Decision • Demand
Price sets the basic value signal, and marketing builds
awareness and preference. A low price with no marketing can go
unnoticed; strong marketing with a misaligned price can waste
money. You need both aligned with your chosen strategy.
Why is capacity planning critical?
Decision • Operations
Capacity decisions shape how many units you can produce in
future rounds. Too little capacity creates stockouts and lost
sales; too much creates unused assets, low ROA, and cash strain.
How do short-term profit and long-term investment conflict?
Decision • Trade-off
Cutting R&D, marketing, or capacity may boost short-term
profit but weaken product appeal and growth in later rounds.
Sustainable performance usually requires balancing immediate
earnings with future demand and capability.
What does rising sales but falling profit margin suggest?
Diagnostic • Mixed signal
You may be “buying” growth with discounts or high spend.
Your pricing or cost structure isn’t supporting healthy margins.
You should review price, input costs, and spending (marketing,
overhead) relative to revenue.
Scenario: Demand surged last round; you had stockouts and strong margins. What’s a smart next move?
Scenario • Growth
Consider modestly increasing capacity or production, maintaining
or slightly raising price, and supporting demand with targeted
marketing. The key is capturing more sales without overbuilding
capacity or destroying margins.
Scenario: Sales fell, inventory is high, and competitors cut price. Where do you start?
Scenario • Competitive pressure
Re-examine segment needs and competitor positioning. Adjust
price and features to better fit your target segment, reduce
production to clear inventory, and consider focused marketing
rather than across-the-board spending.
Scenario: You’re heavily leveraged (lots of debt) but want to expand capacity. What’s the risk?
Scenario • Finance & risk
Additional borrowing increases financial risk and can hurt your
score if performance dips. You may need to improve profitability,
manage cash, or grow more gradually before taking on more debt.
Scenario: Your chosen strategy is Differentiation. Which decision pattern matches that?
Scenario • Strategy alignment
Higher product quality/features, strong marketing and R&D,
pricing above basic competitors, and capacity sized to meet
demand in chosen segments—not just chasing every low-price
sale.
Scenario: The OA asks you to explain a poor round performance. What should your answer include?
Scenario • Reflection
A clear link from decisions → results: what you chose (price,
production, marketing, capacity), what happened (KPIs and
trends), why it happened, and what specific changes you would
make next round.
Scenario: Performance is strong overall, but capacity utilization is only 55%. What’s the concern?
Scenario • Efficiency
Underused capacity means you invested in assets you aren’t
using, which lowers ROA and ties up capital. You may need to
grow volume, repurpose or reduce capacity, or avoid further
expansion.
Deep practice idea: in Test mode, pick a scenario card and write
one or two bullet points using specific KPIs (e.g., ROS, ROA,
market share) before revealing the answer.