MAN S337 - International Corporate Management - Duvic - 72385

Global Business Leadership Institute International Corporate Management Summer 2013

Instructor: Dr. Robert C. Duvic Distinguished Senior Lecturer Department of Finance The Red McCombs School of Business Office: GSB 5.176D Telephone: 471-6026 E-mail: [email protected] Course Overview

Course focus: The firm is an economic entity that strives to create wealth. The firm's success in creating wealth depends on the skills of its managers in making decisions within a market framework. Using computer simulation, this course will place you in a realistic environment in which you will create and run an international business for 2 years in compressed time (eight rounds of decision making).

Course Objectives: In this simulation you will: Learn how to integrate the several functional aspects of a business in the accomplishment of its wealth-creating goal. Be exposed to unexpected changes in your political and economic environment and be required to respond to these changes. Develop your ability to work with others in accomplishing a common goal under stressful conditions. Learn about yourself—both your skills and weaknesses—and develop your career focus. In addition to the simulation you will also: Contrast accounting and market-based decision making. Understand the global economic environment, including: The relationship between trade and exchange rates The international markets and how they assist companies in managing risks.

In addition to the simulation the class will involve active lectures in which many issues involved in corporate decision making are examined via discussion and class exercises. Some of the topics will be directly related to the simulation and others will delve deeper into strategic economic issues. Syllabus appendices A: The Simulation B: Course Evaluations C: Activities per quarter D: Class Schedule

1 Appendix A: The Simulation

Accomplishing the course objectives via simulation exercises This course is not a normal lecture-based course. In The Marketplace, you start up and run your own multi- national company, struggling with business fundamentals, the interplay between marketing, human resources, operations, finance, and accounting, and international factors such as exchange rates and tariffs. You are given control of a simulated business and must manage its operations through eight decision cycles. Repeatedly, you must analyze the situation, plan a business strategy to improve it and then execute that strategy out into the future. You face great uncertainty from the outside environment and from your own decisions. Incrementally, you learn to skillfully adjust your strategy as you discover the nature of your real-life decisions, including the available options, linkages to other parts of the business, conflicts, tradeoffs and potential outcomes.

Team Effort You will team up with four or five other students to form an entrepreneurial firm that will compete in a business simulation. During a four-week period, you will take your fledgling business through the natural stages of business growth, including emergence, development, and maturity. Along the way, you will learn to develop and refine your strategies and tactics.

Web-Based The Marketplace exercise will be delivered over the Internet. In logistical terms, we will create a common data set for the team’s decisions and store it on an Internet accessible file server. Thus, your team will be able to work from any location where there is a PC with an Internet connection. Any member of the team will be able to log onto the server, review the current situation on the web, make decisions, and then save them for the next student to work on. As each team member completes his or her area of responsibility, he or she will report the analysis and decisions to the rest of the team for their consideration. You and your team will still need to confer on your analysis, strategy and tactics. The advantage of this internet system is that each team member will be able to work on the most up-to-date decision file so that everyone is looking at the same data set. The file server setup will also facilitate the coaching role of the instructor. Just like you, the instructors will be able to log on at any time to review the current situation with any team or the exercise as a whole. Thus, the instructors can monitor activity and results and adjust the content of any discussion groups or individual coaching efforts.

Required Texts and Software Professor Help, contained within the Marketplace website. Additional readings as assigned.

Software Demos and Signup Procedures Three flash demos have been prepared to introduce you to the Marketplace software. Please go to the following web page, http://marketplace-simulation.com/sample-screens/flash-demo.php, review the Student’s Overview, Student’s Signup, International Corporate Management.

Team Formation The students will form themselves into teams on Tuesday, July 9 following the procedures to be distributed in class.

Role of the Executive Team Management of your entrepreneurial firm will be a challenging task. Successful firms divide up the responsibility and share the workload. You will need to take on one or more of the following roles: 1) VP Marketing 2) VP Sales Management 3) VP Human Resources,

2 4) VP Marketing Research 5) VP Manufacturing, and 6) VP Finance and Accounting.

There should also be one person to lead the team, the president of the company. This person can also take on the human resource management position or possibly one of the other positions listed above if desired (many teams find that Marketing Research is a good combination with HR in terms of level of activity). However, keep in mind that the President position is demanding and thus the president should be careful of assuming significant other functional/tactical responsibility. Teams may change the President position or other roles as the game progresses – with instructor approval. This is sometimes desirable to share the responsibility and to give individuals a broader range of experience.

You Can Be Fired It is permissible to fire a team member who is not making a substantive contribution to the success of the team. Missed meetings, poor preparation, failure to complete assignments, etc. are all indicative of underperformance. Before a person can be fired, the team must give the student an opportunity to correct his or her deficiencies. The following process must be followed.  The team must provide the student with a written statement of the problems associated with his or her work. A peer evaluation may be used in conjunction with this statement.  The student must respond in writing as to how he or she will correct the problems cited. If the problems continue, the team may fire the underperforming team member with a letter of dismissal. A copy of all correspondence must be submitted to Dr. Duvic.  A person who is fired must apply to another firm for employment. If no team is willing to take on the student, then instructor will assign the student additional academic work to complete the course.  Being fired would substantially affect the student’s final grade. Dr. Duvic would use performance in the simulation and work on additional work to set a grade for the course. This grade would also include a substantial academic penalty.

Workload Once the simulation begins, the work will vary according to the activities within the exercise. During the first and second quarters the work is fairly light, so you should try to get ahead on your functional area in Professor Help. The workload will increase for each quarter up through the presentation of the first Board of Directors meeting. Students report spending 3 to 4 hours per decision during quarters three and four and 8 to 10 hours during the presentation of the business plan to the board.

Following acceptance of the business plan, the majority of students report spending 3 to 6 hours per decision. This reduction of time is due to familiarity with the software, game procedures, and market, and having a plan of action that requires modification rather than creation.

Time Management Time management will be vital to your success in participating in the Business Simulation. There is more work than any one person can do. Also, it is not wise for everyone to participate in all aspects of the business. Too much time would be wasted. Therefore, it is necessary to divide up the work. There are suggestions on how to divide up the responsibility in the help files within the software. Feel free to depart from these guidelines if individual preferences or experiences would allow a more equitable allocation of tasks. Also, do not hesitate to reallocate responsibility if conflicts arise or the workload is unevenly distributed. The game will progress very rapidly, so failure to address problems early can be VERY problematic for the team. One of our goals is to develop the leadership skills of all the students. For this reason, teams may decide to change the leadership and functional area positions to change systematically during the course of the game. Teams interested in changing positions should discuss their thoughts with Dr. Duvic. The president should preside over each team meeting, making sure that the discussion does not wander from the business at hand. Each team meeting should begin with an agenda and a timetable. Meetings should not last more than two hours. Long drawn out meetings are not productive and raise

3 frustration levels about not getting things done. The meeting should conclude with a set of action items for each executive. The outcome of these actions should be reviewed at the start of the next meeting. To facilitate executive meetings, each team member should prepare his/her work in advance. The executive should know the ins and outs, problems, and tradeoffs of his/her area of responsibility. When the executive committee meets as a whole, each executive should have a plan of action to recommend to the team. The executive should be prepared to thoroughly discuss the options open to the company and be flexible on the final decision of the executive team.

4 Appendix B: Course evaluation

Grading Team Simulation Performance (Balanced Scorecard)...... 60% Individual (Areas of responsibility in Scorecard, peer evaluations, and Executive Briefings) 40% Total …………………...... 100%

Annual Reports to Board Each team will deliver two presentations to the Board of Directors: one report is after the first year of operations, the second after the second year of operations. Each annual report is a part of the International Corporate Management and the Studies in Intercultural Management Courses. Each team will be expected to make a professional presentation using PowerPoint. The details of the market analyses and strategy must be carefully laid out in appropriate handouts or back up slides. While there is no requirement for a written Business Plan, the groups should be guided by the logic of a business plan in developing their operations and reporting on those operations to the board. Each team must also be prepared to discuss its performance as a team and the contributions of the individual team members. Additional guidance on these annual reports will be provided once the courses begin.

Computation of Simulation Performance A Balanced Scorecard will be used to measure your firm’s performance. The team’s total business performance will be based upon its financial performance, market effectiveness, marketing performance, human resource management, investments in the firm’s future, manufacturing productivity, asset management, and creation of wealth. A total score will be computed for each firm competing in the Marketplace. At the end of the exercise, each team will be ranked in the order of performance for the total score. A letter grade will be assigned depending upon your team’s ranking and how close it is to the team(s) above or below it.

Individual Effort The individual effort grade will be based on the student’s participation in the briefings to the board of directors, on the student’s relative performance in his/her area of responsibility, peer assessments and faculty observation. Briefings for Board of Directors: Each student must participate in all briefings. The individual effort grade will be based upon the board’s evaluation of the student’s contribution during these briefings. Functional area: During the first quarter of play, each team member will assume an executive position. These designated areas of responsibility have relevant performance criteria assigned to them. The simulation provides a report that highlights how well the company is doing within that student’s area of responsibility. This report is available to both the instructor and the student, and the company’s relative performance in that area will be a part of the student’s Individual Effort grade. Performance Appraisal: A performance appraisal on each student will be developed by the other members of the student’s team at the end of the 4th and 8th quarters. Significant deviation in performance above or below the norm will be used to adjust individual student grades for the activity being evaluated. Moreover, at the end of the game each team President will complete an HR report on each group member, assessing their contribution to the team. For UT Students: The individual grade will include a component based on individual work after the conclusion of the simulation. Instructor Evaluation: Dr. Duvic and Dr. Mendez will combine these elements and, based on their direct observations during the simulation, assign an Individual Effort grade.

Sanctions Full participation in the program is essential. You are not only responsible for your own efforts, but must uphold your obligations to the team members. Dr. Duvic reserves the right to reduce grades for non- performance and withhold credit for the course.

5 Appendix C: Activities per Quarter

Year 1: Establish your company Quarter 1: Organize your company Major Action: Select your team members and organize the team by functional area. Comment: While only a few seemingly simple decisions must be made, they are crucial decisions that determine whether the company management has members who can agree on the way they make decisions and contribute in the different functional areas involved in running the company.

Quarter 2: Develop an initial corporate plan of action. Major Actions: Analyze the market and decide what products your company will produce. Determine how and where you will produce your product. Identify the markets in which you will test your product Comment: Entrepreneurs often don’t truly at first know their market. They must gather information, make some assumptions, and test their insights to gather more information before fully committing the company. You make some initial decisions in Quarter 2, implement the plan in Quarter 3, and get your initial results in Quarter 4.

Quarter 3: Test your plan Major Action: Take actions to implement the plan that was developed in Quarter 2. Comment: There are many detailed steps involved in designing, manufacturing, and selling a product. Decisions that seem fairly simple and small-scale may have a major and unexpected impact in a future quarter. You should always be sensitive to the fact that you have limited resources and must ensure that those resources are invested to best advantage.

Quarter 4: Evaluate your plan’s performance Major Actions: Evaluate your company’s performance thus far and make chances in your strategy and tactics. Develop a formal business plan for presentation to the Board of Directors. Comment: You have expended a lot of your own money to buy information. You should use the feedback from Quarter 3 to revise your plan. Be sure to look not only at your performance, but the performance of your competitors.

Year 2: Fully compete in your markets Quarter 5: Raise external capital Major Actions: Evaluate and change your plan Decide on how to use financial leverage Obtain the funds necessary to develop your company. Comment: You need to modify your operations and make additional investments in productive assets. You will receive a substantial infusion of additional capital from outside investors.

Quarter 6: Respond to changing economic conditions and maximize company performance. Major Actions: Develop insights on how the market is changing and what you must do to change with it. Modify your business plan to reflect possible expansion plans Comment: As time unfolds you see how interrelated decisions affect your company.

Quarter 7: Improve on your sales efforts Major Action: Identify new elements in the market and modify your company’s operations. Seek out ways to spur greater efforts from your sales staff. Comments: Your competitors are evaluating the market and your actions. Be sure that you are not giving them a competitive advantage through short-sighted decisions on your part.

Quarter 8: Monitor, improve and execute Major Action: Identify new elements in the market and modify your company’s operations. Comments: Your competitors are evaluating the market and your actions. Be sure that you are not giving them a competitive advantage through short-sighted decisions on your part.

6 Appendix D: Class Schedule

Course schedule Session Date Agenda Week 2 Tuesday, July 9 Introduction to GBLI In-class company (group) formation and goal setting

1. Wednesday, July 10 Tasks for Second Quarter Topic 1: The Income Statement

2. Thursday, July 11 Topic 2: The Balance Sheet

Week 3 3. Monday, July 15 Tasks for Third Quarter Topic 3: Markets and Economic Value

4. Tuesday, July 16 Team work on 3rd Quarter

5. Wednesday, July 17 Team work on 4th Quarter

Week 4 6. Tuesday, July 23 1st Annual briefing to Board of Directors

7. Wednesday, July 24 Topic 4: Risk

8. Wednesday, July 24 Team work on 6th Quarter

9. Thursday, July 26 Team work on Eight Quarter

Week 5

10. Monday, July 29 Preparation for Annual Report to Board of Directors

11. Tuesday, July 30 2nd Annual report to Board of Directors

Decision/report deadlines Quarter Date/time Decision for quarter 1 Tuesday, July 9th/10:00pm Organize your company 2 Thursday, July 11th/10:00 pm Develop an initial corporate plan of action 3 Tuesday, July 16th 10:00 pm Test your plan 4 Thursday, July 18th/10:00 pm Evaluate your plan’s performance First annual report to Board of Directors Tuesday, July 23rd 5 Tuesday, July 23th 10:00pm Raise external capital 6 Wednesday, July 24th 10:00 pm Respond to changing economic conditions 7 Thursday, July 25th/10:00 pm Improve on your sales efforts 8 Friday, July 26th 10:00 pm Monitor, improve and execute Second annual report to Board of Directors Tuesday, July 30st