Pace: manual
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Table of Contents
IntroductionSocial Enterprise Leader BETA is an immersive, web-based business game based on a simulation of real world economy. Strategic PositioningThe corporates Strategic Positioning Investment BudgetAt any time during a simulation your current available Investment Budget is shown. The Investment Budget can be used for starting new Business Unit as well as for Upsizing or Re-Launching existing Business Units. As long as profits are made; existing credits are paid back and the Investment Budget rises with every tick. The more profitable a corporation runs, the faster the Investment Budget rises.
FinanceBank credits are automatically taken as required and repaid as far as liquidity allows it at any time. The debt ratio shows the proportion of a company´s assets which are financed through bank credits. The lower the company´s debt ratio, the less risky the company is since excessive debt can lead to a very heavy interest and repayment burden. However, when relying largely on equity, a company also gives up the tax reduction effect of interest payments (Leverage Effect). When deciding on an optimal debt ratio, both risk and tax issues have to be considered. Credit Rating: For each company a Credit Rating is calculated and shown. The ratings are defined from 'AAA' (best) to 'D' (worst). The higher the debt ratio, the worse the credit rating and the higher the Interest Rate to be paid. Any A-Rating ('AAA','AA','A') strongly indicates to take further investments to ensure the continuous growth of the company. Any B-Rating ('BBB','BB','B') indicates that further investments might be taken soon to ensure the continuous growth of the company. Any C-Rating ('CCC','CC','C') indicates that further investments should not be taken to avoid very heavy interest and repayment burden. ProductionThe quantities for the monthly production cycle are planned automatically. Usually the production lines run at full utilization.
Overtime: When you see the overtime icon on a Business Unit, this indicates that your are producing at 120% output level. Due to wage premiums costs are higher but you will still make higher net profits in this situation. Overhead Cost: With each installed Business Unit the corporates total overhead cost rise over proportionally but remain the same when upsizing (economies of scale). If the corporations weighted (by Assets) average Maturity rises over > 100% then the overhead cost start rising exponentially. Marketing
To simplify the management of the PLC, the Maturity is displayed as the product age relative to the life cycle. A maturity of +100% means that the maximum point of the life cycle was reached and revenues/profits begin to decline unless the Business Unit is upsized or relaunched. Products with a short life cycle can quickly exceed 100% market demand as they will need to be upsized frequently. Market Share: Market Share is measured each tick within each Industry. Each competitor within an industry gets price mark-ups depending the degree of his Market Leadership and the competition level (# of competitors) in that industry. AccountingOn the My Corporation page the detailed Accounting data can be displayed by selecting the desired tick and clicking 'Show Accounting Data'.
EconomyThe Economy Size is shown at any time in the economy menu as well as in the Economy Size Graph. The growth of the Economy is determined by the investments of all players and is overlayed by a randomized cycle. The demand for each product and thereby the Supply Level and the Market Price are directly derived from the Economy Size. Economic ConceptsSupply and Demand
Demand - Demand refers to the amount of goods and services that buyers are willing to purchase. Typically, demand decreases with increases in price; this trend can be graphically represented with a demand curve. Demand can be affected by changes in income, changes in price, and changes in relative price. Supply - Supply refers to the amount of goods and services that sellers are willing to sell. Typically, supply increases with increases in price, this trend can be graphically represented with a supply curve. Equilibrium Price - The price of a good or service at which quantity supplied is equal to quantity demanded. Also called the market-clearing price. At the equilibrium price buyers want to buy exactly the same amount that sellers want to sell. If the price were higher, however, sellers would want to sell more than buyers would want to buy. Likewise, if the price were lower, quantity demanded would be greater than quantity supplied. In the Social Enterprise Leader BETA simulation the Equilibrium Price is determined by the aggregate demand to aggregate Supply functions for each industry. The aggregate Demand is driven by the Economy Size and the aggregate Supply depends solely on the participants investment decisions. Perfect CompetitionA market operates under perfect competition if it satisfies the following conditions: 1. Numerous firms 2. Freedom of entry and exit 3. Homogeneous output 4. Perfect information In a market economy, competition occurs between large numbers of buyers and sellers who vie for the opportunity to buy or sell goods and services. The competition among buyers means that prices will never fall very low, and the competition among sellers means that prices will never rise very high. This is only true if there are so many buyers and sellers that none of them has a significant impact on the market equilibrium. Pure monopoly - A firm that satisfies the following conditions: 1. It is the only supplier in the market. 2. There is no close substitute to the output good. 3. There is no threat of competition. Natural monopoly - A firm with such extreme economies of scale that once it begins creating a certain level of output, it can produce more at a lower cost than any smaller competitor. Generally characterized by a declining average cost curve. Duopoly - A market dominated by two firms. Both firms are large enough to influence the market price. Oligopoly - A market dominated by a small number of firms. At least several of these firms are large enough to influence the market price. A monopoly differs from competitive firms in that it is not a price taker. Because it is the only supplier in the market, it faces a downward sloping demand curve, the market demand curve. As a result, the monopoly is free to choose its price and quantity according to market demand. Monopolies are still profit maximizing firms and are thus going to satisfy the profit maximizing condition that marginal cost equal marginal revenue. The key to understanding monopolies and monopoly power is the marginal revenue calculation. In a perfectly competitive market, there exists a market price. Marginal revenue is simply equal to price in this market; every additional unit that is sold brings the market price. In a monopoly, however, every quantity is associated with a different price. In the Social Enterprise Leader BETA simulation the 3 main conditions (Freedom of entry and exit, Homogeneous output, Perfect information) of perfect competition are given. The number of competing firms depends on the participants investment decisions. All competition patterns, as Monopoly, Duopoly and Oligopoly may occur in Social Enterprise Leader BETA. In any case the Equilibrium Price is determined by the aggregate demand to aggregate Supply functions for each Industry. Economies of ScaleEconomies of scale, also called increasing returns to scale, refers to the situation in which the cost of producing an additional unit of output (i.e., the marginal cost) of a product decreases as the volume of output (i.e., the scale of production) increases. It is important to understand the concept of economies of scale because they can be an important factor in determining the optimal and equilibrium size of firms and thus the structure of industries and their prices and output levels. Oftentimes, large firms in industries with high fixed costs can take advantage of savings that smaller firms cannot. Economies of scale characterizes a production process in which an increase in the scale of the firm causes a decrease in the long run average cost of each unit. Economies of scale can be enjoyed by any size firm expanding its scale of operation. Marginal cost can decrease as the volume of output increases for several reasons. One is that larger production volumes allow fixed costs to be spread over more units of output. Fixed costs are costs that do not change regardless of the amount of use, or at least change relatively little as a function of use. That is, they are costs that must be incurred even if production were to drop to zero. Examples of fixed costs could include factories, warehouses, machinery, electrical transmission systems and railways. In the Social Enterprise Leader BETA simulation the Economies of scale is implemented by Overhead Costs and the effects of Upsizing a Business unit. A 1x business unit (i.e. Small Cars) incurs the same amount of Overhead cost as a 2x business unit. When upsizing the business unit from 1x to 2x the Overhead cost per unit fall and therefore generate Economies of scale. Economies of ScopeEconomies of scope refer to efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products. If a sales force is selling several products they can often do so more efficiently than if they are selling only one product. The cost of their travel time is distributed over a greater revenue base, so cost efficiency improves. There can also be synergies between products such that offering a complete range of products gives the consumer a more desirable product offering than a single product would. Economies of scope can also operate through distribution efficiencies. It can be more efficient to ship a range of products to any given location than to ship a single type of product to that location. A company which sells many product lines, will benefit from reduced risk levels as a result of its economies of scope. If one of its products falls out of fashion or one country has an economic slowdown, the company will, most likely, be able to continue trading. In the Social Enterprise Leader BETA simulation Economies of scope are implemented via the Synergy effects for maintaining multiple business units within the same industry sector. As a general rule one should start with 1-3 business units and add up to 1-3 more business units during the course of the simulation. Leverage EffectThe leverage effect explains a company´s return on equity in terms of its return on capital employed and cost of debt. The leverage effect is the difference between return on equity and return on capital employed. Leverage effect explains how it is possible for a company to deliver a return on equity exceeding the rate of return on all the capital invested in the business, i.e. its return on capital employed. When a company raises debt and invests the funds it has borrowed in its industrial and commercial activities, it generates operating profit that normally exceeds the interest expense due on its borrowings. The company generates a surplus consisting of the difference between the return on capital employed and the cost of debt related to the borrowing. This surplus is attributable to shareholders and is added to shareholders’ equity. The leverage effect of debt thus increases the return on equity. If the return on capital employed falls below the cost of debt, then the leverage effect of debt shifts into reverse and reduces the return on equity, which in turn falls below return on capital employed. In the Social Enterprise Leader BETA simulation the appropriate usage of the leverage effect is one of the main success factors for making top scores. As long as the sales margins remain high enough to repay the increased interest cost, it makes sense to invest as much capital as possible. But a highly leveraged company incurs a higher risk of being strongly hurt by a decrease in sales prices. As a general rule the average debt ratio should be kept between 20% and 40% to leverage the company while still not incurring too much risk. Glossary of Financial TermsAnnual ReportAn official quarterly or annual financial document published by a public company, showing Profit & Loss Statement, Balance Sheet and the Cash Flow Statement. Balance SheetQuantitative summary of the financial condition of a company at a specific point in time, including assets, liabilities and net worth. The first part of a balance sheet shows all the productive assets a company owns, and the second part shows all the financing methods (such as liabilities and shareholders equity). also called statement of condition. The term balance sheet is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term double entry - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance. Capital InvestedMoney (borrowed or owned) invested in a company's operations. Calculated by: Total Assets less Excess Cash minus non-interest-bearing liabilities. The sum of a corporations long-term debt, stock and retained earnings. also called invested capital. CashCurrency and coins on hand, bank balances, and negotiable money orders and checks. Cash FlowA measure of a companys financial health. Equals cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization. Cash Flow StatementOne of the three essential reporting and measurement systems for any company. The Cash Flow statement provides a third perspective alongside the Profit and Loss account and Balance Sheet. The Cash Flow statement shows the movement and availability of cash through and to the business over a given period, certainly for a trading year, and often also monthly and cumulatively. The availability of cash in a company that is necessary to meet payments to suppliers, staff and other creditors is essential for any business to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial. Corporate Social Responsibility (CSR)Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns into their business operations and in their interaction with their stakeholders (employees, customers, shareholders, investors, local communities, government), on a voluntary basis. Cost of Goods Sold (COGS)The directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = gross profit. Credit RatingA published ranking, based on detailed financial analysis by a credit bureau, of ones financial history, specifically as it relates to ones ability to meet debt obligations. The highest rating is usually AAA, and the lowest is D. Banks use this information to decide whether to approve a credit. Current AssetsA balance sheet item which equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year. A companys creditors will often be interested in how much that company has in current assets, since these assets can be easily liquidated in case the company goes bankrupt. In addition, current assets are important to most companies as a source of funds for day-to-day operations. DebtA liability or obligation in the form of bonds, loan notes, or mortgages, owed to another person or persons and required to be paid by a specified date (maturity). Debt RatioDebt capital divided by total assets. This will tell you how much the company relies on debt to finance assets. When calculating this ratio, it is conventional to consider both current and non-current debt and assets. In general, the lower the companys reliance on debt for asset formation, the less risky the company is since excessive debt can lead to a very heavy interest and principal repayment burden. However, when a company chooses to forgo debt and rely largely on equity, they are also giving up the tax reduction effect of interest payments. Thus, a company will have to consider both risk and tax issues when deciding on an optimal debt ratio. EBITA financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. EquityOwnership interest in a corporation in the form of common stock or preferred stock. It is the risk-bearing part of the companys capital and contrasts with debt capital which is usually secured and has priority over shareholders if the company becomes insolvent and its assets are distributed. Gross ProfitPre-tax net sales minus cost of sales. also called gross income. Gross Profit MarginGross profit divided by sales, expressed as a percentage. Interest CostThe fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate. Here, interest per year divided by principal amount, expressed as a percentage. also called interest rate. Interest RateA rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a bank charges a customer M$90 in a year on a credit of M$1000, then the interest rate would be 90/1000 *100% = 9%. Long-Term AssetsOn a balance sheet, the value of a companys property, equipment and other capital assets expected to be useable for more than one year, minus depreciation. Net IncomeSales minus taxes, interest, depreciation, and other expenses. Net Income is one of the most important measures of a companys performance, since the pursuit of income is the primary reason companies exist. Sometimes Net Income includes one-time and extraordinary items, and sometimes it does not. Also called net earnings or bottom line. Profit & Loss StatementAn official quarterly or annual financial document published by a public company, showing earnings, expenses, and net profit. also called income statement or earnings report. The P&L typically shows sales revenues, cost of sales/cost of goods sold, generally a gross profit margin (sometimes called contribution), fixed overheads and or operating expenses, and then a profit before tax figure (PBT). Basically the P&L shows how well the company has performed in its business activities. Profit Before TaxP&L position that shows the profit on ordinary activities before taxation. Return on Equity (ROE)Return on Equity. A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal years Net Income divided by Equity, expressed as a percentage. It is used as a general indication of the companys efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. investors usually look for companies with returns on equity that are high and growing. Return on Investment (ROI)A measure of a corporations profitability, equal to a fiscal years income divided by Long-Term Assets. ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better. Sales (Revenues)The final amount of sales, determined by subtracting the amount of sales returns and allowances and sales discount from the total amount of sales, for a fiscal period. Inventory (Balance Sheet)A companys merchandise, raw materials, and finished and unfinished products which have not yet been sold. These are considered liquid assets, since they can be converted into cash quite easily. There are various means of valuing these assets, but to be conservative the lowest value is usually used in financial statements. SynergyArrangements which are mutually beneficial to the parties involved. Corporate synergy occurs when corporations interact congruently. A cost synergy refers to the opportunity of a combined corporate entity to reduce or eliminate expenses associated with running a business. Cost synergies are realized by eliminating positions that are viewed as duplicate within the merged entity. Examples include the head quarters office of one of the predecessor companies, certain executives, the human resources department, or other employees of the predecessor companies. TaxesTaxes are compulsory, unrequited payments, in cash or in kind, made by institutional units to government units; they are described as unrequited because the government provides nothing in return to the individual unit making the payment, although governments may use the funds raised in taxes to provide goods or services to other units, either individually or collectively, or to the community as a whole. Total AssetsThe sum of current and long-term assets owned by a person, company, or other entity. Total Equity & DebtThe sum of Equity and Liabilities owned by a person, company, or other entity. 
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is defined by adjusting five parameters. Which combination of choices is more successful depends on various factors like saturation, maturity and debt ratio which fluctuate during the simulation. The strategic positioning may only be changed every 3 month (Tick: 0,3,6,9,12,15,18,..).
The Supply and Demand model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply.
