What-if Games: This manual is applicable to all the games on this site. Please read the content completely to play effectively and enjoy the games and attain the intended learning outcomes.
Introduction
What-if games are business management games. A business context is created which challenges you to make decisions in a competitive business environment. In each game You are given a virtual company to run and you must manage it profitably. There would be many competitors (companies like yours) in these games. All companies manufacture and sell products / services in a simulated market. The companies compete with one another, over several accounting periods which can be 3 months, 6 months or one year. Each accounting period is referred to as a "Period".
What-if games are designed as ‘team games’. 3-4 members in a team (Maximum 4 members in each team) is ideal for inter-company management simulation. An individual can also play representing a company, if desired. Inter-company competition creates a competitive environment and hence an encouragement to learn. Ideally 4-6 companies are desirable to simulate good market competition. What-if games can handle up to 8 teams. When the number of teams is less than 4, What-if games will pitch dummy competitors (Bots), to create competition.
What-if games are games of decision making. The decisions include raw material purchase, production (or outsourcing), marketing, communication, financing etc. All teams (Companies) start on an equal footing, at the starting or the opening period with equal chance to succeed. That is, they will have same production capacity, number of production lines, market share, input price (for raw materials), product price etc., The decisions should be based on market analysis and the results of the previous periods. Click on "Your Decision" tab to fill in the decisions.
Features of What-if Games
What-if games features are classified as
- You will use machines and manpower available in the plants for manufacturing products and/or for providing services.
- New additional machines can be purchased to augment capacity. There would be a lead time for installation of new machines that is normally one period i.e., the new machines purchased in the current period would be available for production in the subsequent periods and not in the current period.
- You can delete a few machines to reduce capacity if so desired
- The deleted machinery will be sold, and Profit or loss from such sales will be reflected in the Income Statement (Profit and Loss) statement
- The production machines can be used for a specified number of periods - their fixed lifespan. At the end of their lifespan, the machines would be decommissioned, and sold as scrap. The capacity would reduce to the extent of decommissioned machines. These details will be reflected in the charts shown when you click “Dashboard” tab in the games page.
- You can avail long term loans for purchasing production machines.
- The service stations, (where after-sales-service is applicable and desired) can be added and these would start functioning immediately after the decision (in the same period in which the decision is made). When a service station is decommissioned, it is written off and the salvage value would be zero.
- Manpower will be required for production and/or service. Please note that a unit of manpower would mean a measure in relation to production of a product and does not mean a person. It is a fraction of man hours of a group of workers and managers put together.
- The manpower cost would normally escalate over time
- Raw materials (RM) are to be procured by the companies, in some of the games.
- The cost of RM may escalate / deescalate over time.
- The RM vendors would supply, subject to their maximum production capacity. Such limits would be specified in the games where applicable. If RM is to be procured beyond this limit, it would attract a higher price.
- The quantity of input materials required, the manpower required, and capacity units required to make one unit of each product is given in the “Game Specific” tab and also in details of “Reports” –> “Information for Next Decision” tab. You can manufacture to the extent of available material and capacity (both can be planned and procured). Required manpower would be available always and need not be planned by you but will have to be paid for. If material procurement is not a part of the game, you can produce up to available capacity and the material procurement would be automatic (to the extent of planned production – which also means that if you decide on a production quantity more than production capacity, material procurement will be higher to that extent and the excess procurement would lie idle till the next period).
- In some games, it would be possible to add additional / special features to the products and develop them. The costs of such features would be shown in the “Your Decisions” tab.
- All processes in your company can be defined and formalized by standards certification – including procurement, manufacturing, and sales
- Such process certification would significantly improve product quality and reduce rejections
- You can obtain certification of your defined processes that attracts a one-time cost and a recurring cost as would be shown in “your decisions” tab
- The products can be sold through many channels such as, retail, direct sales, online sales, etc., as the game permits.
- Spending on sales and distribution activities are required to achieve availability of products on the shelves and consequent sales. Without this investment, products would not get distributed.
- Products needing after-sales-service (ex: a smart phone) require service stations, in games where it is applicable. The teams must add service capacity in such games, to the extent of estimated need for service.
- Marketing Communication (Advertisements etc.)
- Addition of product features / Product Development
- Sales and Distribution: Spending on employing salespersons, distribution of products and making it accessible.
- Product Packaging - Multiple levels of packaging the products are possible in some games. Higher levels of packaging will add to brand, but at a cost
- Service rendered: Complete fulfilment of service where needed.
- Process certification and training to improve quality, which will also reduce rejections.
- Demand fulfillment
- Research and Development / marketing Schemes.
- Sales Promotions, for e.g., the companies may offer freebies / samples.
- Macro-economic factors such as growth, interest rates, and inflation.
- Pricing of the products by all teams
- Investments in sales and distribution and marketing communication by all teams
- Investments in technology, product research & development, and adding product features.
- For e.g., if all companies spend more on communication, the demand for that product would rise.
- Trade margins or commissionswill have to be passed on to the channel partners, who sell products through their channels.
- The variable Trade Margins are to be decided by you.
- Average margins (commissions) offered in similar industries is shown for your reference in “your Decisions” tab.
- While low margins may not enthuse the trade partners to sell the products, higher margins may attract them to push your products. If margins are not offered to the trade, or if incredibly low margins are offered, the products may not get sold at all.
- Fixed Trade Margins (pre-agreed margins that cannot be varied by you) are offered to the providers in case of online sales.
- Similarly, a fixed commission is payable to the franchisees who invest in Service Stations and run them – this is paid on a “per service” basis as indicated in the “Game Specific” and “Reports” tabs
- Products placed for selling are to be priced by you.
- The prices cannot be below the cost of the products, though there is no upper limit for pricing. (The lower limit is indicated to you)
- The consumer sees a value in products placed in the market and that is the price she would be willing to pay. The value perceived by the consumer is again influenced by technology, product features, standards certification / quality, communication, packaging, sales and distribution efforts, etc.
- A team that does not want to sell a product can price it at zero.
- During a game, if a product(s) becomes outdated, you can sell such finished goods at a discount and clear the stocks, if the game permits. In such cases, the minimum price limit will not be applicable.
- Investments in research and development would be necessary to develop new products and launch them. So also, for adopting new technology / improve the existing technology, R&D is required.
- Normally, it would take time to develop a product or technology i.e., an investment in the current period will allow the teams to launch a new product in the next period. Till then, this investment would be shown as an intangible asset WIP(work-in-progress) on the Balance Sheet of the company.
- The cost of R&D towards new products, new technology and one-time cost of process certification can be considered as intangible assets and can be amortized. You can also decide not to amortize the cost towards such intangible assets and expense it in the period in which it is incurred.
- In some periods, there could be bulk orders or export contracts from institutions. You can quote / bid, compete, and win such bulk orders.
- Price alone will not be the criterion for winning bulk orders, but also other factors like the past (previous period) marketing efforts, the history of demand fulfillment / service fulfilment and such factors that form the brand image.
- How much to invest / spend on marketing related activities (communication, Sales/ Distribution, Sales Promotions, Trade Margins etc.) is to be decided by you in line with the strategy of your company.
- These investments will influence the demand / market share.
- But the effect of such investment does not increase uniformly, and the incremental benefits will reduce as the investments increase, as shown in graph below.
- Investments in branding will sustain over several Periods i.e., a brand built over time will not immediately lose brand value if the investments are reduced in any one period. Note that Consistent investments will boost the brands.
- Market information would be available at a cost that includes some basic market research. The research would include competitor information, competitive position, consumer perception surveys, consumer behavior, focus groups, conjoint analysis etc. where needed / applicable.
- At the end of every period, an Income Statement (Profit and Loss Account), Statement of Financial Position (Balance Sheet) and a Cash Flow Statement are generated and shown as ‘Financial Statements’ in the “Reports” tab.
- The currency in this simulation is denoted as CU (Currency Units)
- Sales Revenue, and
- Service Revenue in.
- Raw materials used, Production Manpower, additional product features, Fixed Production Cost, depreciation of production machines, packaging cost, warehousing Raw Materials, and finished goods purchased by outsourcing, form Cost of Production.
- Production fixed cost per unit production capacity would depend on the total capacity. The capacities are reckoned in 3 slabs and are indicated in “Game Specific”. At higher capacities, the cost would reduce.
- There would be a fixed cost incurred towards warehousing, as shown in the “Game Specific” tab. A part (normally half) of this cost is allocated to raw material and is included in the cost of goods sold.
- Sales and Distribution,
- Trade Margins,
- Franchisee Service Commissions,
- Communication, Promotions, and outbound logistics.
- All these costs will be expensed in the account (P&L or Income Statement) of every Accounting Period.
- The transportation cost of finished goods (out bound) will be borne by the company as a selling expense.
- Service Fixed Costs of Company owned Service Stations and Franchisee owned Service Stations,
- Service Manpower employed by the company,
- Process Certification Costs,
- Interest, Depreciation of administrative buildings, Amortization and “Other Expenses”.
- R&D Investments (that are not amortized), Write Offs (write down / write back),
- Market research costs,
- Warehousing and Administrative Overheads.
- raw materials loss and finished goods loss, (for eg., due to natural calamities) that are not covered by insurance.(In What-if games, 90% of the value of such losses are expected to be honored by the insurance companies, and therefore 10% of the value of such losses is written off. while 90% of the value (insurance claim) is shown as a Current Asset on the Balance Sheet.)
- bad debts and obsolete goods if any
- profit / loss from selling decommissioned plants
- scrapped raw material and interest from deposits if any. You can avail the following loans.
- Long term loans against purchase of machinery and setting up of service stations would be available. These are to be repaid in equated periodic instalments (EPI). EPI=
where P is the loan amount or principal, R is the interest rate per period [if the interest rate per annum is 8%, then the rate of interest per quarter will be 8/(4 x 100)], and N is the number of periodic instalments. The interest during the lead time for installation of machines, will be capitalized. - Short term working capital loan would be available up to 75% (normally) of inventory lying as of end of last accounting period plus receivables.
- Unsecured loans are given (automatically by the system) to fill the gap between the cash available and the cash needed during the period. This is also to maintain a minimum cash at the end of an accounting period. These loans come at a high rate of interest.
- You may allocate spending from available cash (budget). Some of the expenses will be allocated by the What-if games accounting team consequent to the decisions made by you. Depending on the cash availability, any shortfall would be taken as “Unsecured” loan automatically. Interest on loans will be automatically paid and shown in the Income Statement.
- The tax on profits at the indicated rates will be payable.
- At the beginning of the game, in the Opening Period, a Balance Sheet is shown that contains a certain share capital. The face value is normally CU.10 per share. Debenture (Bonds) Redemption Reserves (DRR) are included under this head.
- The Retained Earnings are shown under Share Holders’ Funds as Reserves and Surplus.
- During the games, if a team accumulates losses exceeding the share capital, such a team would be declared bankrupt and would exit.
- In some of the games Companies (teams) can raise funds by issuing Debentures (Bonds) to public if the system permits.
- These debentures are issued by offering an interest that is acceptable by the public. If the offered interest rates are acceptable, the public would subscribe to it. In addition, historical profits made by the company and the debt-equity ratio of the company would also be considered by public for acceptance.
- Note: The convertible debentures are those where a part of the debenture amount gets converted to equity after a specified time in addition to attracting an interest whereas, non-convertible debentures are to be paid only an interest.
- After a specified time, the debentures are redeemed, and the monies are paid back to the subscribers.
- Every year, a specified fraction of the debenture (Bond) value is to be set aside as Debenture Redemption Reserve (DRR) and invested securely. This DRR is shown as a part of the Share Holders Funds while the Debenture itself is shown as a non-current liability.
- This includes Long Term borrowings and Debentures (Bonds).
- The short-term borrowings: Working Capital loans and Unsecured loans.
- Trade payables: The payables to Raw Material (RM) vendors and Finished Goods (FG) vendors (in cases where the FG is outsourced), are included under this head. Normally 20% of the value of RM and FG becomes payable in the next period, while 80% would have to be paid while buying these, in the current period.
- WC loans would be available for purchase of RM and outsourcing of Finished Goods.
- A refundable Security Deposit is payable by franchisees if you decide to appoint them for carrying out service of the products sold in earlier periods (in games where service feature is included). These security deposits are shown as part of current liabilities and these are refundable if the service contract is terminated by either party.
- The net book value of the capital assets and long-term deposits are included under this head. This also includes capital works in progress – both tangible and intangibles.
- This would include cash in bank, Short Term deposits, trade receivables, inventory, and insurance claims if any.
- The inventories are normally valued at cost and are considered at weighted average cost. After manufacture (or outsource) in each period, the cost of manufactured quantity is added to the brought forward FG stocks and a new average is arrived at. The FG inventory is valued at cost or Net Realizable Value, whichever is lower.
- Long term deposits: These deposits are to be made for a minimum of 2 periods. To withdraw this deposit the companies must notify one period in advance i.e., a decision in the current period will convert it to cash in the next period.
- Short term deposits: These deposits will yield a lower interest rate compared to long term deposits and can be withdrawn immediately i.e. it would be available as cash in the period in which the decision is made.
- Cashflow from operating activities: Includes the sales / service revenues, expenses towards purchase of raw material, selling costs, employment expenses, overheads, etc.
- Cashflow from investing activities: Includes cashflow due to investing in Property Plant and Equipment, sale of old plants or other fixed assets, short term and long-term deposits, income from such investments are accounted under this.
- Cashflow from financing activities: This accounts for the loans availed during the period (long term, short term, and unsecured loans), repayments, dividend payments, and issue of debentures.
- All companies are listed in the What-if stock exchange.
- The stocks of all teams are traded in a simulated stock market.
- The prices of stocks (price in CU Per share) as quoted in the stock market are shown on the Dashboard. An index of the market exists named “Stock Market Index”, is representative of the quoted prices of many companies.
- The quoted price per share multiplied by the number of shares outstanding is the Market Capitalization or Market Cap.
- In the games where the Market Cap is the winning criterion (set by trainers or coordinators), the stock prices become important.
- The Book Value of share: This is the share capital plus the accumulated profits (Reserves and surplus) divided by the number of shares issued as of that period.
- Earnings per share (EPS): The profits after tax per equity share is the EPS of that company at the end of a given period.
- Economic factors: The GDP growth for the period in the economy and the global cues (randomly simulated) that represent the global markets also influence.
- Consistent dividend pay-outs: A company that pays dividends consistently will command a better P/E ratio (Price/Earnings per Share ratio).
- Debt/Equity Ratio: Shares of companies with lower debt equity ratios will be better valued.
1. Production
a. Plant and machinery and manpower
b. Raw Materials (RM)
c. Production planning
2. Quality Management
3. Marketing features
a. Sales and service features
b. after-sales-service
c. Branding
Factors influencing branding in this game are,
d. Demand
The following factors influence demand.
e. Trade Margins or commissions
f. Product Pricing
g. New Product launch and Research & Development (R&D)
h. Bulk orders
i. Investment in marketing and branding
4. Finance
a. Financial Statements
I. Income Statement (Profit and Loss Account)
The following line items are included in the Profit & Loss Statement
Revenue
Costs
Cost of Production
Selling Expenses
Others
The Write Offs include
Other Income includes
Loans and Interest
Taxes
Please see sample formats of Financial Statements
II. Statement of Financial Position (Balance Sheet)
Share Holders' Funds
Debentures (Bonds)
Non-Current Liabilities
Current Liabilities
Non-Current Assets
Current Assets
Deposits
You can invest in deposits if you have excess cash and earn interest on the deposits.
III. Finance management and cash flows
The teams should manage their finances by optimally balancing allocations. At the beginning of the game a small amount of cash would be available on the balance sheet – shown against Bank. The cash flow is accounted under the following 3 heads
5. What-if Stock Exchange
a. General
b. Factors influencing the stock prices