Introduction to case management

What is case management?

Case management is the powerful one-of-a-kind business simulation exercise case
customization tool that is integrated to Cesim Instructor platform and available with all
Cesim business simulation games.

What is a case?
Case in Cesim dictionary refers to a set of parameters that guide the development and
fluctuations of the business and economic environment in our business simulation games.
In addition to the parameters that change on roundly basis, case usually includes a
separate case description or business case document giving a background story for the
simulation exercise.

How to use case management?

Create new custom cases

To create a new custom case, go to case management in Cesim Instructor and choose
“Create new case” from the sidebar.

Insert a name for the case in the respective field and choose the desired Cesim business
simulation. Here we are creating a Global Challenge custom case. To create the custom
case, click “Create”. The new custom case you just created can now be found under “Your
cases”.

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Your cases

You will find all your custom cases listed in chronological order under “Your cases”. There
are also four options to choose from next to each case: Setting, Edit parameters, Delete
and Copy.

 Settings option opens up a settings panel that includes the following options:
custom case name, case description, sharing option, available languages and
custom description file upload.
 Edit parameters link launches the parameter editor, which is covered extensively in
further chapters.
 Delete function allows you to delete the custom case.
 Copy function allows you to create an exact copy of a desired custom case if you
want to use your old custom case as a template for further changes.

Shared cases

You can share the custom cases that you have created with all Cesim instructors that have
registered into our platform, and you can take a copy for yourself from any of the custom
cases that other instructors have shared with everyone.

You can share a case by clicking “Settings” under “Your cases” in case management. This
opens up a pop-up window that includes a checkbox for sharing your case. Select
“Shared” and save your settings to share your new case with everyone.

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All shared cases appear in a list under “Shared cases” The list includes the name of the
case, short description, creator name and the copy control, which you can use to copy the
shared case for yourself to be used as is or further refined by you. Changes to the original
copy of the shared case do not have any effect on your account after you have copied the
case to yourself.

Cesim cases

In addition to shared cases, there are also highlighted Cesim cases. Depending on the
particular business simulation game, Cesim offers several pre-defined Cesim created and
supported business cases to choose from. These are available for all instructors through
the course creation or later through case management. They are clearly highlighted in the
list of available cases for each course.

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Assign custom cases to courses and universes

Once you have created a custom case, you can assign it to your course or universe within
a course by clicking “Assign” from the sidebar. This opens up the following view:

The “Assign” page includes a familiar course list in the sidebar and course details appear
on the top right. Below the course details, you will find details about the currently assigned
case. All simulation courses have a case assigned to them; by default, it is the default
Cesim case.

The case information box includes details about the case name and description, simulation
type, inclusion of a custom case description and available languages. If the case includes
a case description file, you can download it from here. The assigned case can be changed
by clicking “Change” at the bottom left corner of the information box. This opens up the
following pop-up window:

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The case change window includes the same case details as in the previous phase, and in
addition to the details, a select box at the top left corner for changing the case. The select
box includes a selection of available Cesim cases and your own custom cases, including
the ones you may have copied from shared cases.

It is also possible to assign different cases to separate universes. This option is available
at the bottom of the “Assign” page.

You can assign custom cases to universes by clicking the green button or return to using
the custom case assigned to the course by clicking the red button. The case assigned to
the universe is highlighted under “Case”. In case there is no custom case highlighted, the
particular universe is using the custom case assigned to the entire course.

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Editing a custom case

If you wish to edit your custom case, click “Edit parameters” next to the set you want to
modify under “Your cases”. This will in most cases take you to Outlooks page where you
can pick any of the languages available in the simulation to modify market outlooks. Next
to the Outlooks tab you will find several business function categorized tabs under which
you’ll find relevant parameters that form the business case of your simulation exercise.

When editing a custom case, note that most of the parameter inputs are validated against
minimum and maximum limits. All of your changes are saved as you make them and there
is no ability to go back to the previous value, so be careful when making changes.

Some of the parameter changes are immediately reflected everywhere in the game, but
this does not apply to all parameters, so if you wish to make changes to your case during
the course, it is recommended to do so with at least one round advance. Remember also
that you should reinitialize your course if you wish to affect the initial situation in any way.
Be also aware of the fact that although some parameter changes are technically possible
to make, it does not mean that they make up a good business case or are reflective of an
actual real world market place.

It is important to note that changes to parameters are currently not automatically reflected
in market outlooks. Market outlooks are supposed to give a rough description of how the
case evolves and as such should be in sync with the parameters.

Please note that changes to custom names and currencies will be immediately reflected
on all of the pages. For example, in Global Challenge, Finance and logistics page might
show tariffs per unit in Australian dollars for all transports from Australia to Japan instead
of showing the same in US dollars for all transports from US to Asia. Moreover, some
parameter inputs might be grayed out based on what modules are currently activated.

All parameter edit pages allow you to change the number of rounds that are displayed.
This decision is common across all pages and affects both parameter input cell visibility
and graphical presentation. The purpose of this is to lessen the amount of clutter on the
page in case all the rounds are not relevant for your purpose.

Although all of our simulations follow a similar structure when it comes to case
management, there are notable differences. In the next chapter, we will introduce you to
the process of creating a custom case specifically for the international business and
strategy simulation Cesim Global Challenge.

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Excel download / upload functionality
This feature is currently not available to Cesim instructors directly.

The Cesim Instructor platform allows for seamless downloading and uploading of all
parameters and market outlook texts between Microsoft Excel workbooks and the Cesim
Instructor platform case management tool. We have created purpose built Excel templates
for all our business simulations for editing the entire custom case in Excel and uploading
all the changes back onto our servers with the click of a button. The Excel template and
the case management tool can be used as complementary ways of editing your custom
case. You can create a case in case management, download it to Excel for heavy editing,
upload back onto our servers and continue making final changes before assigning it for
your course. We hope to bring this functionality to all Cesim instructors in the future.

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Global Challenge custom case creation
Best practices with Cesim Global Challenge
A good case is transparent to participants. In other words, teams who engage themselves
in analyzing the market outlooks and previous rounds’ results and make well justified
decisions based on their analysis, also succeed in the game. A good case is built to
support and target desired learning outcomes.

On the other hand, you should not create a case where parameters incentivize
contradictory decision-making; you should not for example decrease demand while
increasing advertising elasticity in a given market. The case is supposed to force teams to
carefully analyze the situation and give them some gratification upon recognizing leading
trends.

Custom case creation can be approached from a top-down or bottom-up perspective. In

the former, you will start developing an overall storyline for the simulation exercise in broad
strokes. You might write down the key changes you would like to see in each round, make
changes to market outlooks and then seek to have these changes be reflected in all the
relevant parameters.

A rough sketch for a new storyline including 7 rounds and weak economic conditions might
be something like this:

 Rounds 1&2: Normal economic conditions, moderate growth (2%-5%), upbeat

outlooks
 Round 3: Growth halts, uncertain outlook

 Round 4: Sharp contraction in demand (-10% to -15%), negative outlook

 Round 5: Economic contraction slows down, but growth negative, negative outlook
 Round 6: Recession bottoms out, cautiously positive outlook
 Round 7: Recovery begins, slight growth and recovery, positive outlook

When the basic storyline is described in the outlooks, you can start adding twists in
between to highlight different areas of your choice. It is also possible to add surprising and
remarkable events to the outlooks. With different events you can force teams to adjust
their strategy in their decision-making. Finally, you can start to build accurate parameter
changes for every round. Familiarize yourself with the parameters available in the case
management tool and start working on numerical changes for every round.

You might also take a more bottom-up approach to custom case creation. A good way to
start experimenting with Cesim case management is to identify few key parameters that
would alter the basic dynamic of the simulation exercise a bit after using the simulation for
few times. This is of course not necessary, and we are happy to give advice on how to
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immerse yourself into the practice of creating great custom cases that achieve your course
learning targets.

Some of the most common parameters, whose implications are straightforward

include:

 Demand growth rates for each market area

 Price elasticity in each market
 Network coverage for each technology

 Corporate tax rates in each market area

 Foreign exchange rates for both currency pairs

 HR and inventory modules

 Custom currency and market names

These parameters that are found under Demand and marketing, Finance and logistics and
Modules are a good starting point alongside necessary adjustments to market outlooks.
However, the next sections will introduce everything that is available in Global Challenge
case management tool including adjustable parameters, default values and some
guidance.

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Outlooks
Available languages:

 English  Chinese
 Lithuanian  Romanian
 French  Russian
 Spanish  Hungarian
 Brazilian  Portuguese
 Italian

Editing outlooks

Global Challenge outlooks are edited by first choosing the desired language. Secondly,
the instructor must select custom outlooks into use from the top right corner of the page.
Once that is done, the market outlook texts that appear in the editable boxes will be the
ones used by the simulation.

The market outlook edit view includes Global Challenge outlooks divided into three
sections: demand, costs and finance. The original market outlook text will always be
available for reference on the page along with the editable text boxes at the bottom of the
page. There are 12 market outlooks, one for each round and these are changed from the
top left corner of the page from the round number selector.

Remember that if you wish to use multiple languages all respective languages must be
modified to use your desired custom market outlooks. By default, other languages will
continue to use their respective default market outlooks.

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Demand and marketing
Demand and marketing page contains parameters affecting demand formation,
competitive elements and marketing efforts.

Basic demand

For round 0 (the starting situation for your students), you can decide the amount of basic
demand per team in thousands of units. From round 1 onwards, you can set the
percentage growth (+) or decline (-) of the basic demand on sequential or round-on-round
basis.

Basic demand per team is further influenced by pricing, advertising, number of features
and several other factors before the team specific final demand is determined.

 Market area 1 (2000 K units, growth rates between -3% and 20%)
 Market area 2 (2006 K units, growth rates between -7% and 41%)
 Market area 3 (1739 K units, growth rates between -15% and 15%)

Total demand in the market also varies depending on teams’ decisions. If teams have
invested significantly into advertising and average prices have been heading lower, the
total market size expands and vice versa.

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A good case might include different starting levels and growth rates for each market with
noticeable differences to force teams to team prioritize the market areas and possible
adjust their strategies in the middle of the game.
The graph in the case management tool shows the big picture for basic demand in each
market.

Network coverage

Network coverage is an index telling you how widespread each technology is on a given
round. If network coverage is set as zero, there are no sales for it. You might consider
evolutionary trends for different network technologies or you might choose to set them to
be more direct competitors. Note that the simulation does not structurally consider the
different technologies to depend on each other, so you may freely change the coverage
parameters. You can also change the names of the technologies under Custom texts.
Please, also consider changes to development and licensing costs, available features,
production costs and other parameters in case you consider significant changes.

Students can observe these parameter values on the demand page in network coverage
forecasts charts.

Market area 1 Market area 2 Market area 3

 Tech 1  Tech 1  Tech 1
 Tech 2  Tech 2  Tech 2
 Tech 3  Tech 3  Tech 3
 Tech 4  Tech 4  Tech 4

Price elasticity

Elasticity is a measure of a relative impact of a factor to a relative outcome. It is measured

as a percentage difference in the explainable variable (often “quantity demanded”) divided
by the percentage difference in the explaining variable (such as price, advertising etc.).

The higher the absolute value of elasticity is, the higher the effect of price difference on
demand is. Note that the price elasticity has to be negative. The absolute value should be
higher than 1 and smaller than 6. With values smaller than 1, teams would always benefit
more from increasing price than what is the effect of price increase on demand.

If the price elasticity is set at -3, 10 per cent difference in price will lead to a 30 per cent
difference in demand provided that all other demand factors are excluded. The behavior of
price elasticity can be misinterpreted if one does not take into account the general change
in price level. If a team reduces pricing by 5 per cent but the overall prices decline by 10
per cent, the specific team will indeed lose demand.

The price sensitivity is set separately for each market area. It is recommended that there is
a difference in price sensitivity between the market areas.

 Market area 1 (-3.20)

 Market area 2 (-3.90)
 Market area 3 (-2.40)

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Advertising elasticity

Advertising elasticity should always be positive, because higher advertising always leads
to higher demand no matter how small the effect might be. A higher promotion elasticity
will increase the effect product promotion has on consumers, and differences in demand
due to promotion will grow. Elasticity of 0.1 means a 10% difference in promotion effort
would cause a 1% difference in the demand. Advertising elasticity is set separately for
each market area and it should be in the range of 0.05 to 0.3.

 Market area 1 (0.13)

 Market area 2 (0.07)
 Market area 3 (0.10)

Number of features elasticity

These parameters determine how much customers appreciate additional features in

products. If you set the elasticity to be higher, it’ll increase the effect of having more
features than competitors. This figure needs to be positive, so that offering more features
always increases demand. The number of features elasticity is set separately for each
market area.

 Market area 1 (0.20)

 Market area 2 (0.20)
 Market area 3 (0.45)

Technology attractiveness

Technology attractiveness measures the relative appeal of products. What matters, is the
relative rates of Tech 1, 2, 3 and 4 within a single market. For example, if Tech 2
attractiveness multiplier is two times higher than Tech 1 attractiveness multiplier in the US,
then Tech 2 is two times more popular than Tech 1 in the US given otherwise similar
properties. You can use the attractiveness parameter to create interesting twists in the
game. Remember to write about changes in attractiveness to market outlooks.
Attractiveness parameters are set separately for each technology in each market area.

Market area 1 Market area 2 Market area 3

 Tech 1  Tech 1  Tech 1
 Tech 2  Tech 2  Tech 2
 Tech 3  Tech 3  Tech 3
 Tech 4  Tech 4  Tech 4

Cumulative part of advertising

The share of advertising investment that remains effective on the next round. For example,
a value of 50 per cent means that out of an investment of 1000 units of advertising
expenditure on round 1, 500 units continue to affect the demand on the second round, and

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only 500 additional units of expenditure are required to achieve the same effect as on
round 1. The advertising residual parameter is set separately for total company advertising
and technology specific advertising.

 Company advertising (50.0 %)

 Technology advertising (50.0 %)

Last round’s market share elasticity

Last round's market share elasticity dictates the extent to which differences in last round’s
market share affect differences in team specific demand on the current round. Note, that
this creates an effect where it is increasingly harder for weak teams to contest those who
succeed at first. Last round’s market share elasticity parameters are set separately for
each market area. A value close to 0.2 is appropriate.

 Market area 1 (0.20)

 Market area 2 (0.20)
 Market area 3 (0.20)

Technology market share elasticity

Technology market share elasticity dictates the extent to which differences in technology
market share affects differences in team specific demand. These parameters are set
separately for each market area. A value close to 0.1 is appropriate. Note also that since
there are two different market share related demand factors there combined effect might
become too high.

 Market area 1 (0.10)

 Market area 2 (0.10)
 Market area 3 (0.10)

Cross elasticity multiplier

Cross elasticity multiplier affects situations where a team is offering two different products
in the same market. Lower figure creates larger impact. For example, a value of 1 means
that cross elasticity has no impact. High cross elasticity leads to lower combined demand
for teams that have products with significantly differing market demand before considering
the cross elasticity impact. These parameters are set separately for each market area.

 Market area 1 (0.75)

 Market area 2 (0.75)
 Market area 3 (0.75)

Technology advertising elasticity

Tech advertising elasticity dictates the extent to which differences in total technology
specific advertising (advertising for products of the same technology) affects differences in
team specific demand. These parameters are set separately for each market area.

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  Market area 1 (0.17)
 Market area 2 (0.08)
 Market area 3 (0.12)
Global multipliers

These parameters affect the formation of total demand for each technology. For example,
average pricing determines how strongly total demand is affected by deviations from
customers' standard price perceptions.

 Attractiveness (1.00)
 Network coverage (1.00)
 Average pricing elasticity (-1.60)
 Average advertising (0.30)
 Last round’s market share (0.00)
 Number of teams (0.50)

Total technology market price elasticity

These parameters dictate the impact of average pricing on the total market demand for a
certain technology among the technologies that are available in the marketplace. The price
elasticity parameters should be negative, and they are set separately for each market
area.

 Market area 1 (-0.40)

 Market area 2 (-0.45)
 Market area 3 (-0.35)

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Production
Production page covers parameters related to production, production cost determinants,
inventories and supply.

Basic in-house production unit cost

Basic production unit cost acts as a base for the actual unit cost. It is then multiplied by
economies of scale, planning penalty and learning curve multipliers when the actual
production unit cost is calculated. These parameters should reflect other issues that might
affect production unit costs in the real world. Note that the learning curve multiplier effect in
the default case is quite large and can decrease the cost around 20% already in the
beginning. Therefore, set the production basic cost higher than what you would like the
actual production cost to be. Production unit costs are set separately for all technologies in
the first two market areas (third market area does not have production).

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 Market area 1 Market area 2
 Tech 1 (171.0 USD)  Tech 1 (210.0 USD)
 Tech 2 (242.0 USD)  Tech 2 (332.0 USD)
 Tech 3 (156.6 USD)  Tech 3 (224.6 USD)
 Tech 4 (330.0 USD)  Tech 4 (344.0 USD)

Economies of scale

You can set the economies of scale level to 1-10, where 1 indicates a low effect and 10 a
high effect. Economies of scale parameter in Global Challenge is the effect that capacity
utilization rate has on the production unit cost. It is the same multiplier for both market
areas that have production. There is a graph in the case management tool that shows the
multiplier with different capacity utilization ratios. For example, if the graph shows that the
unit cost multiplier is 0.98 at 80% capacity utilization, then the unit cost is multiplied by
0.98.

 Economies of scale effect (1-10, 10 being the highest)

Planning penalty

Planning penalty refers to how much the allocated production decision differs from actual
production. Planning error is interpreted so that every time the actual demand for a team
has been smaller than their production decision, the team's production unit cost is
multiplied by a multiplier that is higher than 1. Please note that production is never scaled
upwards, and that planning penalty does not apply to courses that use finished goods
inventories. There is a graph in the case management that shows the unit cost multiplier at
different planning error levels.

 Planning penalty effect (1-10, 10 being the highest)

Learning curve

Producing a technology will decrease its production cost over time. Here you can decide
the level of the learning curve effect between pre-determined levels 1 and 10. The graph in
the case management tool shows the multiplier by which the unit cost is multiplied at
different cumulative production amounts. Note that the learning curve effect is technology
specific. High learning curve effect incentivizes low pricing strategies and can lead to fierce
initial price competition.

 Learning curve effect (1-10, 10 being the highest)

Scrap rate

Scrap rate is the share of production that goes to waste and cannot be sold to customers.
Teams pay the production costs for the scrapped products. Scrap rate is set separate for
both market areas that can have production.

 Market area 1 (5.00)

 Market area 2 (10.00)
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Maximum outsourcing limits

These parameters dictate the maximum amount of contract manufacturing per team in
thousand units. You can set both minimum and maximum limits for maximum outsourcing.
The amount of products available for allocation to contract manufacturing depends on the
cumulative allocated amount. Thus, the more teams decide to outsource in previous
rounds, the more contract manufacturing capacity they have available later on. The
parameters are set for both market areas that can have production.

Maximum cannot be more than Maximum cannot be below

 Market area 1 (2000 K units)  Market area 1 (1000 K units)
 Market area 2 (2000 K units)  Market area 2 (1000 K units)

Basic outsourcing costs

This is the basic unit cost of contract manufacturing in base currency. A volume discount
multiplier is used to arrive at the final unit cost of outsourcing. Outsourcing costs are set
separately for each technology in both market areas that can have production. Note that
outsourcing is available from the second market area even if it does not have production
facilities.

Market area 1 Market area 2

 Tech 1 (118.5 USD)  Tech 1 (145.5 USD)
 Tech 2 (137.2 USD)  Tech 2 (188.2 USD)
 Tech 3 (102.5 USD)  Tech 3 (138.6 USD)
 Tech 4 (187.1 USD)  Tech 4 (195.0 USD)

Volume discounts

Volume discounts affect the extent to which effective outsourcing costs are affected by
cumulative outsourcing orders. With outsourcing, the more you order, the lower prices you
get.

 Volume discount (1-10, 10 being the highest)

Initial number of own production facilities

Here you can determine the amount of production facilities available in the beginning of
the simulation. Please consider this together with production plant capacity parameters,
outsourcing capacity and total demand growth. Also, remember that overcapacity cannot
be divested in Global Challenge. Moreover, any changes should probably be reflected in
balance sheet values that are available for adjustment under the Finance and logistics
page.

 Market area 1 (10 plants)

 Market area 2 (0 plants)

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Production plant capacity per round

These parameters dictate the total production capacity of each production plant per round
in thousands of units.

 Market area 1 (550 K units)

 Market area 2 (550 K units)

Feature cost

Feature costs are added directly to product unit costs based on the number of features
that are offered. For example, if a product has 6 features and the feature cost is 10 US
dollars, out of the total unit cost of the product 60 US dollars are directly dependent on
feature costs. These parameters are set separately for each market area as features are
added to the product in each market area separately and not in production.

 Market area 1 (6.0 USD)

 Market area 2 (6.0 USD)
 Market area 3 (6.0 USD)

Inventory cost

Inventory costs can be set to be dependent on both stored units and a fixed cost, and
separately for both production areas. Remember that you must activate the inventory
module under Modules page in order to have finished goods inventories included in your
course. Variable costs are set as base currency per unit whereas as fixed costs are set as
thousands of units of base currency for both market areas separately. Fixed costs are
incurred on every round irrespective of whether a team has any units in inventory. Variable
costs are based on average storage balances.

Variable cost, USD per unit Fixed cost, K USD

 Market area 1 (10)  Market area 1 (0)
 Market area 2 (7)  Market area 2 (0)

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Finance and logistics
Finance page contains all the relevant parameters detailing finance, financial
management, logistics costs and market valuation.

Tariffs per unit

Tariffs parameters are set in base currency per unit. Each product that is transported
across market areas is subject to tariffs according to these parameters.

 Market area 1 -> Market area 2 (7.0 USD)

 Market area 1 -> Market area 3 (3.0 USD)
 Market area 2 -> Market area 1 (7.0 USD)
 Market area 2 -> Market area 3 (3.0 USD)

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Transportation costs per unit

Transportation cost parameters are set in base currency per unit. Each product that is
transported across market areas is subject to transportation costs according to these
parameters. Note that there are no transportation charges in sales within the production
area.

 Market area 1 -> Market area 2 (15.0 USD)

 Market area 1 -> Market area 3 (9.0 USD)
 Market area 2 -> Market area 1 (15.0 USD)
 Market area 2 -> Market area 3 (5.0 USD)

Investment cost of a plant

This is the cost of building a plant in market area 1 or market area 2 in thousands units of
base currency. The investment is paid one round after the investment decision. For
example, if the cost for a plant in round 3 is 200 M USD, the decision to build a plant was
already made in round 2. The construction delay can be set as 1 or 2 rounds on Modules
page. However, the construction delay does not alter the cash flow schedule.

 Market area 1 (140 000 K USD)

 Market area 2 (160 000 K USD)

Foreign exchange rates (method 2)

Initial round parameter is used to set the absolute level of each currency in relation to the
base currency. All subsequent parameters are annual percentage changes in the
exchange rates for both currency pairs. This method enables you to preserve the
exchange rate dynamics of the game if there is a need to adjust the approximate starting
point of the exchange rate so that it better reflects a real world situation. EUR / USD = 1.4
means that one euro buys 1.4 US dollars.

 Currency 2 / Currency 1
 Currency 3 / Currency 1

Short-term interest rate premium

This parameter only applies to market area 1. It is added up to the long-term loan interest
rate for market area 1. For instance, if long term interest in market area 1 is 5% and short
term premium is 2%, then the interest rate for short term loan is 5% + 2% = 7%. Short-
term interest rate premium needs to be positive and preferably at least 1 per cent, because
short-term debt is intended to be an emergency financing source in the simulation, which
is tapped, when planned level of long-term debt is not enough to cover financing needs.

 Market area 1 (1.00 %)

Long-term loan interest rates

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This is a standard level for long-term loan interest rates in market area 1 and loan interest
rates in general for market areas 2 and 3. It is further affected by company specific
creditworthiness and short-term interest rate premium for market area 1. Interest expenses
are calculated on the basis of average outstanding debt balance between opening (last
round) and closing balance sheets (current round).

 Market area 1 (4.50 %)

 Market area 2 (6.50 %)
 Market area 3 (5.00 %)

Company specific risk rate elasticity

This determines the sensitivity of company specific interest rate to creditworthiness. The
higher the elasticity, the faster the interest rate rises for every incremental decrease in
creditworthiness, which is measured with consolidated company debt to equity ratio. The
elasticity should be rather large, as financial markets tend to be very sensitive.

 Elasticity (7.00)

Interest rate for cash

This is the interest rate paid to the company’s cash and cash equivalents. In Global
Challenge, this is simply calculated by multiplying the amount of cash on average between
starting and closing balance sheets by the interest rate in each region. To illustrate, if a
company holds cash reserves worth of 4 million USD on average in a region and the local
interest for cash is 2%, then the company gains 80,000 USD for holding the cash in their
back accounts. These interest rates are set separately for each market area.

 Market area 1 (2.50 %)

 Market area 2 (4.50 %)
 Market area 3 (0.50 %)

Minimum cash reserves

These parameters set the minimum amount of cash to preserve on each balance sheet (in
thousands of units of base currency for each region). In case the cash reserves fall below
this amount in any of the market areas, the game automatically fills in the gap with short-
term loans in market area 1 or local long-term loans in market areas 2 and 3. Minimum
cash reserves reflect the amount of money that is needed for operational activity. It is also
relevant to market valuation as the amount of excess cash (cash – minimum cash reserve)
every team holds is added to the enterprise value.

 Market area 1 (2000 K USD)

 Market area 2 (2000 K USD)
 Market area 3 (2000 K USD)

Administration costs

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Administration costs can be determined in three complementary ways: fixed cost, revenue
dependent cost and production plant count based cost that can be adjusted with an
elasticity parameter. Fixed costs are set in thousands of units of base currency. Variable
costs are set as a fraction of total region specific revenue. These variable costs are not in
use in the default case. Denotation 0.01 equals 1 per cent. Variable costs based on
production plant count are set separately for both market areas that can have production
and the cost can be further influenced with an elasticity parameter.

Fixed costs
 Market area 1 (35000 K USD)
 Market area 2 (10000 K USD)
 Market area 3 (10000 K USD)

Variable cost, share of revenue

 Market area 1 (0.00)
 Market area 2 (0.00)
 Market area 3 (0.00)

Cost per plant

 Market area 1 (6000 K USD)
 Elasticity (0.80)
 Market area 2 (6000 K USD)
 Elasticity (0.80)

Corporate tax rates

Note that effective tax rates can deviate significantly from these official corporate tax rates
due to loss carry forwards. Transfer pricing decisions can also affect the global average
effective tax rate. For this reason, it is recommended that there are differences in tax rates.

 Market area 1 (35.0 %)

 Market area 2 (15.0 %)
 Market area 3 (30.0 %)

Starting balance sheet, K USD

The two sides of the balance sheet do not have to balance here; the initial round will take
care of that through profits, cash, receivables, payables and short-term debt. Share
capital, restricted equity, retained earnings, First market area's (US by default) long-term
loans and internal loans will be shown on the last round balance sheet on the initial round
as determined here. Fixed assets will be shown less depreciation, and the rest of the
balance sheet items will be determined by the system.

Changes to initial balance sheets are relevant for example when changing the amount of
production plants in the beginning or when it is desired to create a case with significantly
weaker or stronger balance sheet for the start of the simulation exercise.

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  Fixed assets
 Cash
 Share capital
 Restricted equity
 Retained earnings
 Long-term loans
 Short-term loans
 Internal loans

Required rate of return

The required rate of return should be set higher than the average company growth rate
detailed below, preferably significantly higher. This is because when determining values
for cash flows, the cash flows are divided with a figure equal to required rate of return less
expected growth rate (CF / (r - g)). Appropriate range for the required rate of return is from
8 per cent to 15 per cent. These parameters are used to determine the value of the
company’s cash flows.

 Market area 1 (10.0 %)

 Market area 2 (9.5 %)
 Market area 3 (10.1 %)

Average company growth rate

The average company growth rate should be set lower than the required rate of return
detailed above. These parameters are used to determine the terminal value of the
company’s future cash flows in market valuation calculation.

 Market area 1 (2.0 %)

 Market area 2 (4.0 %)
 Market area 3 (3.0 %)

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Sliding average weights of inputs

These parameters dictate the weighting of marketing and R&D related investments in
business valuation. When we determine the equity value of the simulation companies, we
start with providing a value for each market area business. First we calculate a measure
for free cash flow. For this purpose we must deduct marketing and R&D related costs from
current round revenue. Since marketing and R&D expenditures can vary significantly from
round to another, we provide a way to smooth that effect over multiple rounds. We
calculate weighted expenditures over three rounds. For example, if a team has spent 100,
200 and 300 units of marketing over the last three rounds, we will deduct 100 * 0.05 + 200
* 0.23 + 300 * 0.72 = 267 units from revenue on current round to determine free cash flow
instead of the full 300. The same method is used for research and development
expenditures.

 This year (72%)

 Last year (23%)
 Two years ago (5%, determined as the residual value)

Weight of operating cash flows in share price calculation

This parameter determines the relative importance of current round and previous round’s
operating cash flows in calculating the market valuation of the company. If this round
parameter is set at 100 per cent, market value will be fully based on current round cash
flows.

 This year (65%)

 Last year (35%, determined as the residual value)

Face value of share

Face value of share affects the division of cash flows into and out of share capital and
restricted equity accounts when dealing with share issues and share repurchases. When
issuing new shares, the amount equal to new shares multiplied by the face value of the
share is always put on share capital account, and all excess funds are put on restricted
equity account. Equivalently, the share capital account is reduced by the amount equal to
the repurchased shares multiplied by the face value of the share when buying back
shares.

 Face value (10 USD)

Depreciation

Depreciation of fixed assets is based on declining balance method. Depreciation rates are
set separately for both market areas that can have production facilities. Setting the
depreciation for example at 15 per cent means that 1000 units in fixed assets will cause
150 unit depreciation charge on the income statement on next round.

 Market area 1 (15.0 %)

 Market area 2 (15.0 %)

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Payables and receivables

Payables are counted as percentage of production, outsourcing, feature and transportation

costs, and receivables are counted as a percentage of sales. Accounts payables
constitute interest free borrowing and they reduce net working capital, which then does not
have to be financed externally. Accounts receivables constitute interest free lending to
customers and they increase net working capital.

 Payables (3.85%)
 Receivables (3.85%)

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Research & Development and Human resources
R&D and HR page contains all parameters that are directly related to research and
development function and human resources management.

In-house R&D investments required for features

For in-house research and development costs, you can set the cost for the first feature for
each technology separately in thousands of units of base currency.

The cost of additional features depends on R&D elasticity parameters, parameters

detailing required tech level increase and parameters that dictate the relative increase in
the tech index after 100-level. The cost of an additional feature depends on previously
incurred expenditures. The next feature for tech 1 for example has been approximately
half developed when starting the game and when using default parameters (Tech index
level 130). There are input cells for the tech index to allow for experimenting with different
starting points. Inserting a value of 100 for the tech index reveals the cost of an additional
feature given a new license and a value of 110 reveals the cost of the next feature if it is
developed on the next round.

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R&D licensing cost for features

Licensing costs for new and additional features are determined as thousands of units of
base currency.

First feature, K USD Additional features, K USD

 Tech 1  Tech 1
 Tech 2  Tech 2
 Tech 3  Tech 3
 Tech 4  Tech 4

Tech index increase per man-day

These parameters detail the effect of development efforts on tech index increase, but they
are not directly comparable to the required increases in tech index parameters.

 Tech 1 (250)
 Tech 2 (202)
 Tech 3 (160)
 Tech 4 (120)

Man days available per employee per round

One round equals one year so an appropriate value for this parameter is in the range of
250. This parameter could for example be used to simulate a strike by reducing it during
one round to 100 man-days.

 Man days (250)

Normal HR turnover rate

Normal turnover rate determines the share of research and development personnel that
leaves the company without any associated layoff costs provided that all turnover-related
factors are at a comparison level.

 Normal turnover rate (0.10, denotation 0.01 equals 1 per cent)

Wage effect on turnover

These two parameters detail wage's effect on personnel turnover. The higher the
comparison level, the higher the turnover for any given level of actual wages. The higher
the absolute value of the elasticity, the larger is the effect that results from actual wage
differing from the comparison level. The elasticity is negative because higher wage leads
to lower personnel turnover.

 Comparison level (3500 / month)

 Elasticity (-4.00)

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Training effect on turnover

These three parameters detail cumulative training's effect on personnel turnover. The
higher the comparison level, the higher the turnover for any given level of actual
cumulative training expenditure. The higher the absolute value of the elasticity, the larger
is the effect that results from actual training differing from the comparison level. The
elasticity is negative because higher cumulative training leads to lower personnel turnover.
The residual parameter determines how much of last year's expenditure continues to
affect on current round. For example, value of 0.4 means that 100 unit investment on
round 1 is equal in its effect on turnover to a 40 unit investment on round 2.

 Comparison level (1500 / month, cumulative)

 Elasticity (-3.00)
 Residual of training expenditure (0.40)

Utilization level effect on turnover

The research and development personnel partially determine the attractiveness of their
employment by the projects they get to work on. If teams hire personnel but do not utilize
them in R&D efforts, they become dissatisfied. The elasticity formula determines the extent
of this effect.

 Elasticity (0.20)

Company success effect on turnover

Company success, for the purposes of turnover effect, is measured as turnover growth
against average turnover growth. Companies that are gaining market share on turnover
basis look more attractive in the labor market than companies who are losing market
share.

 Elasticity (0.10)

Engineer layoff costs and comparison levels

These parameters detail the boundaries for different layoff costs and the associated layoff
costs per person. Companies can layoff off people up to level 1 limit without cost. Level 1
cost is associated with the interval between level 1 and 2, level 2 cost is associated with
the interval between level 2 and 3 and level 3 cost is associated with layoffs larger than
comparison level 3.

Layoff cost Layoff comparison level

 Level 1 (12.0 K USD)  Level 1 (0.05)
 Level 2 (15.0 K USD)  Level 2 (0.20)
 Level 3 (20.0 K USD)  Level 3 (0.50)

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Other HR cost parameters

Wage’s share of total costs determines the additional employment costs associated with
hiring an employee. For example, paying a gross wage of 4000 US dollars incurs
employment costs totaling 5714 US dollars. In addition costs are incurred from
recruitment, and the R&D function includes a host of other operating costs that are
determined per person.

 Wage’s share of total costs (0.70)

 Recruitment costs (4.0 K USD)
 Other R&D costs per employee (7000 USD)

Elasticity parameters for HR and non-HR based development effort

The higher these parameters are, the more difficult it is to develop technologies and
features. The first set of parameters is used with the HR module whereas the next set of
parameters is used when HR has not been activated. Both sets of parameters are
determined separately for each technology.

 Tech 1
 Tech 2
 Tech 3
 Tech 4

Increase in index after 100

The R&D function works through an underlying technology index. Having the technology
requires a level of 100 whereas all subsequent features require an increase in the index as
detailed in the next set of parameters. These parameters allow you to change the slope for
any incremental increase in the tech index after the technology and the first feature have
been developed. For example, a value of 0.5 means that only half of the rise in tech index
is counted against features after the tech index reaches the 100 level.

 Tech 1 (0.50)
 Tech 2 (0.50)
 Tech 3 (0.50)
 Tech 4 (0.50)

Increase in level required for a new feature

These parameters dictate the required increase in tech index level for any given new
feature. Available technologies are at a level of 100 or higher and include the first feature.
All subsequent features require an increase in the index as detailed here.

 Tech 1 (20.0)
 Tech 2 (20.0)
 Tech 3 (20.0)
 Tech 4 (20.0)

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HR hiring limit parameters and example calculation

The amount of personnel that can be hired during the current round is limited by wages,
training expenditure and company success. This maximum limit can be determined using
the parameters below. The elasticity of company success effect is the same as for
turnover. You can use the example calculation in the case management tool to experiment
with different variables to see where the hiring limit is being set.

 Standard level (500)

 Comparison wage (4000)
 Comparison training (300)
 Wage elasticity (1.50)
 Training elasticity (0.40)

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Decisions
Decisions page includes the ability to change initial decisions (those taken by teams for
the 0 round in order to form the starting point of the simulation exercise) and assign
custom validation limits to all decisions.

List of contents

 Initial decisions values

 Original initial decision values for reference
 Student decision-making area default values for reference
 Custom validation checkboxes
 Minimum and maximum validation limits for decisions

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Custom texts
Texts page includes a list of text strings that can be customized for any Global Challenge
course. Note that, the customized texts only appear in their respective languages and only
four languages can be customized as of this moment: English, Lithuanian, Russian and
French. The custom texts can be used to customize the concepts of “technology”,
“features” or “promotion” to be something else.

List of texts that can be customized:

 Total features available
 Network coverage forecasts  Feature costs
 New tech +1 feature  Money needed for new features
 New tech +2 features  Maximum number of features
 New tech +3 features available is
 New tech +4 features  Tech 1
 New tech +5 features  Tech 2
 1 additional feature  Tech 3
 2 additional features  Tech 4
 3 additional features  Promotion
 4 additional features  Advertising
 5 additional features  Promotion must be between
 Features  Number of offered features
 Feature cost, feature/product  Company advertising
 Number of features  Tech advertising
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Modules
Modules page includes parameters that affect the simulation market and company
structure, and custom naming parameters.

Customizable decision making areas and simulation market structure

 Human resources module

 Finished goods inventories

You have the options to include additional module in your course such as human
resources decisions and finished goods inventories. HR module will introduce a range of
personnel decisions and it will alter the in-house research and development to be based
on man-days instead of just cash payments. Finished goods inventories module will add
inventories to market area 1 and market area 2 and excess production will no longer be
scaled down but flow into inventories. Products are stored without features and the
simulation company uses the FIFO (first in first out) method. More HR and inventory
parameters can be found under Production page and R&D and HR page.

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Other modules

 Construction delay for production plants

You have the option to reduce the time it takes to start production in new production plants
from 2 rounds to just 1. In this case the cash payments will still occur with the same
schedule; only production can start one round earlier.

Custom market area names and currencies

 Custom currencies (27 predetermined alternatives and option to name a custom

currency)
 Custom market names
 Initial foreign exchange rates

You can activate custom market area names by checking the box next to the desired
market area and inputting your custom area name of choice under "Market area". Please,
note that the custom name you choose will appear in the game under every language.
Currencies can be altered using the respective select boxes. You can also choose to set
your own currency symbol by picking other from the list. All changes are automatically
reflected everywhere in the game, except for market outlooks. The exchange rate input
uses the alternative method from finance page (it must be separately selected) and is
included on this page for convenience as it is highly likely that the absolute value of
exchange rate must be adjusted given any currency change.

Remember that the custom currency and market name changes are not automatically
reflected in market outlooks.

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