Making Your first Decision With Sample of Biz-Café Decisions for The First W eek

1. Making Your first DecisionWith Sample of Biz-Café Decisions for The First Week Ted Mitchell

2. In this lecture You will • 1) learn about the types of decisions • 2) learn how you earn points in both the single-shot games and the practice games • 3) be given a reasonable but NOT optimal decision set for starting the game • 4) Learn to buy the professional market research

3. Hard to make smart decisions • when you have no idea what the situation is • Read the Biz-Café Case

4. Historical Information about likely Sales Revenue and Prices Ted Mitchell

5. Historical Demand and Revenue Demand and Price From Pat’s Old Coffee Shop Mature market with 100% customer awareness

6. Starting Biz-Cafe • You are the owner of a Biz-Café • You are the team leader (leader of a Team of ONE, you) • You get a loan of $25,000 to start the Biz-Café • The goal is to maximize cumulative profits (Retained Earnings on the Balance Sheet) • Not just the net income for the final week • But the maximize the net income for every week • Making a bigger profit from week to week is NOT sufficient! • Your goal is to make the biggest profit that can be made!

7. There are Two Types of Simulations • 1) a Practice Game with lots of opportunities to replay decisions (Groundhog Day effect) • To get the points for playing a practice game you must finish the simulation normally 8 or 16 decision periods • The goal of the practice game is for students to experiment with different choices and prepare a strategy for the Single-Shot game. • 2) a Single-Shot Game with NO opportunities for any replays. (You’ll need to have a plan prepared in advance.)

8. Earn Points in a Practice Game • 1) Finish the simulation and end the game with the results of the final week’s decisions • If the simulation involves making decisions for 16 simulated weeks then finish the practice with a balance sheet for month 4! • You will be participating in several different games (scenarios). Finish each one by completing the total weeks involved.

9. Earn Points in a Single Shot Game • Make as much net income each week as you possibly can and increase your retained earning to the maximum amount you can • The bigger your retained earnings at the end of the game the more points you will earn • If you have average retained earnings you will get the average grade for the class • If you fail to make a positive cumulative profit (a positive retained earnings) then you get zero points • You will be given target goals for the different games you will be playing • Example: To earn a grade of A- you must Reach an awareness level of at least 80% and have a retained earnings of at least $30,000

10. ThreeTypes of Decisions • 1) Start up Decisions • Renting the Floor Space • Buying Furniture (choose the style) • Buying an Espresso Machine (choose the size) • 2) Weekly Business Decisions • Management • Marketing • Operating Decisions • 3) Special Incident Decisions • Buying insurance, market research, renovations

11. 1) Start Up Decisions You only make these decisions once!

12. 2) Making a Weekly Decision • You make your decisions for next week at the end of the current week • When making Decisions for Week Number One, #1You will be in Period #0 • You must advance the game to week #1 in order to see the Results and Outputs of Your Decisions for week #1When you are finished reviewing the results of your decision for week #1, then you will be making decisions for week #2. • You are at the end of week #1 when you make decisions for the operation of the café in week #2 • You must advance the game to week #2

13. Your Business Grows and • You will change you decisions over the span of the game • The goal is to find an optimal set of decisions that will maximize Retained Earnings for each week the business is open • The decision set that is optimal in week #1 will not be the optimal decision in week #15 • The game is a moving target

14. Weekly Decisions Always Include

15. ‘Reasonable’ Decisions For Week 1

16. If you do not change the decisions • Then they will remain the same each week.

17. Type 3) Special Incident Decisions • Depending on The Learning Objective for the game • There will be different types of one-off decisions • Buy insurance or not • Buy a professional market survey or not • Buy a pastry oven or not • Advertise Fair trade • Buy a Coffee Roaster • Choose type of entertainment • Renovate Furnishings • Deal with Sexual Harassment • Deal with angry customer

18. Any Special Incident • Only occurs once during a game • Buying insurance or not only occurs once per game • Choosing to sell pastry or not only occurs once per game • There is no second chance to see the incident again. • The consequences of the incident decision last for the duration of the game • In a Practice game you can repeat the decision in order to learn the consequences of your decision about the incident (the groundhog day effect) • In a Single Shot game there is no second chance and you live with the consequences for that entire game.

19. Any Questions • on The nature of The Decision Making in Biz-Café? • Remember it is a moving target. The market is growing, competitors are reacting, special incidents will occur!