Management Game 1994: Shifting fortunes as field narrows

RADICAL but different approaches to the problems confronting participants in the Independent Management Game are being tried by the two teams we are following through the semi-final round.

The Student Industrial Society team taking part in the game sponsored by National Westminster Bank sought to deal with a lack of production capacity caused by price cutting by putting the machine shop on three two shifts.

This dealt with only part of the problem, since the assembly area was still short staffed and the company had burdened itself with higher costs as a result of paying overtime.

The team also increased its marketing effort overseas, which again undermined profit margins. The result was a significant trading loss, a weaker balance sheet and a drop in the share price - and all of this at a time when the tax burden from a successful earlier part of the year became due and pundits were predicting a collapse in world trade.

The other team under the spotlight - from United Distillers - decided to go in the opposite direction and live with the production shortage by pushing up export prices. The result was a drop in demand but a rise in margins and near profitability. By combining this with a drive to cut raw-material stocks, it was able to strengthen the balance sheet, make only a small loss and see the share price rise nearly 20 points.

Consequently, it is in touch with the leaders, with a share price after the first quarter of Ecu 1.41. Ahead of it are Oki on Ecu 1.43, BPP Courses on Ecu 1.49, Boots Pharmaceuticals on Ecu 1.46 and Lucas Aftermarket Operations on Ecu 1.50.

All 30 teams, including two from NatWest, are trying to run a medium-sized manufacturing company selling to the European Union and the United States. In trying to forecast likely sales and make the best of financial, human and plant resources, they are pitting themselves against a computer and each other. The simulation, designed by Edit 515 which organises the competition, takes in all of these functions, plus marketing.

Six winners of the semi-final go through to a national final to be held in London next month; the winners of that receive pounds 10,000 and the chance to represent Britain in a European final in Lisbon in January.

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