BSIM May 2011

Manchester Business SchoolGlobal MBA

Business Simulation Group ProjectStudy Guide

Original Thinking Applied

Manchester Business School Global MBA This Study Guide and Workbook has been prepared forManchester Business School Worldwide by:

Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD

We regret that the authors are unable to enter directly into any correspondence relating to, or arising from this Study Guide. Any comments on this work would be welcomed and should be addressed to:

The AcAdemic direcTor

Manchester Business School Worldwide

The University of Manchester

Booth street West

Manchester

M15 6PB

© MBS Worldwide

Business Simulation Group Project (Global MBA)

Business Simulation Group ProjectManchester Business School Global MBA

The materials in this course were prepared byKevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD

Contents

Section A : Introduction to the module 2

Section B : Instructions for Business Simulation 10

Section C : Managing in project groups 10

References for Unit One 76

Business Simulation Group Project (Global MBA)

Global MBA Business Simulation Group Project

This Study Guide is divided into three sections:

Section A: Introduction to the module

This section covers the aims and objectives, learning outcomes, logistics, guidance on

assessment requirements and submission deadlines.

Section B: Instructions for the Business Simulation

This section gives all the detailed information that you need to understand and

participate the business simulation itself.

Section C: Managing in project groups

This section addresses the issues of group dynamics and the requirements for effective

group functioning. The ideas in this section can be used to inform the learning you

gain from the group dynamics that occur while carrying out the business simulation

module and other group activities that have happened or are yet to occur as part of

the overall MBA programme.

Business Simulation Group ProjectSection A – Introduction to The Module

introduction to The moduleThe materials in this course were prepared by: Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD

Study GuideWe regret that the authors are unable to enter directly into any correspondence relating to, or arising from this study guide. Any comments on this work would be welcomed and should be addressed to:

The Academic directorMBSBooth Street WestManchester M15 6PBUnited Kingdom

making the most of your studiesEach study guide and workbook has been designed with the learning template in mind.

It will help your revision to check you have attempted to understand the study element in terms of its content.

Did you work through the guided questions, including any directed to personal development? Were you able to go more deeply into recom-mended reading materials such as cases, articles and the textbook? Were you able to connect this with your personal experiences?

Support Printed study guides have been provided to support the electronic version within Blackboard.

Blackboard is a core part of the learning process which also con-tains other course material, such as:

Welcome letters, study plans & •course outlinesAssignment questions•Workshop preparatory docu-•ments

Discussion forums are available to discuss material content.

2Business Simulation Group Project (Global MBA)

Section A:Introduction to the module

This section covers the aims and objectives, learning outcomes, logistics, guidance on

assessment requirements and submission deadlines.


Introduction to the module

Welcome to the Business Simulation course. In some respects this course is different

from most of the others on the GMBA programme. It requires you to work for a

sustained period as part of a group, rather than as an individual. It also requires the

group to interact with the module tutors when they act as the simulation controllers

and bankers.

You and the other members of your team are invited to take over and manage one of

a number of identical companies that are competing in a growth market for semi-

durable consumer goods. Details of the simulation are given in section B.

The following sections set out in more detail the module aims and associated

learning outcomes, the module content and chronology, and the required outputs and

assessments.

Course aims and learning objectives

There are two primary aims and learning objectives of this course.

The first is to consolidate current and prior learning on the GMBA programme. This is

done by mobilising and integrating ideas from the topics addressed in earlier modules

(e.g. finance and accounting, operations management, corporate finance, marketing,

etc) and applying them in order to manage a simulated business effectively.

The second addresses the issue of effective group working. Specifically, you should

focus on the dynamics that occur within your group during all phases of the project

and in particular the thoughts, feelings, emotions and insights that you experience

and the learning you derive about yourself and how the group functions during all

stages of the simulation.


At the end of the course you should:

Understand better the key issues associated with setting and implementing of a •

company strategy and particularly the interplay of factors and decision-making

issues that influence effective organisational performance

Be able to mobilise prior and current learning from other parts of the MBA •

programme to address the group task

Appreciate the need for organisation, planning, communication, coordination •

and negotiation in executing a group task

Obtain greater insight into your own and other group members’ ways of working •

as part of a task group

Be able to function more effectively as a member of a group•

The Module focus

As has been previously mentioned in the module aims and learning objectives, there

are two key aspects in this module: (i) the development of professional management

skills in relation to running a business and (ii) effective group organisation and

functioning.

(i) The development of professional management skills

The Business Simulation module has been designed to provide an effective learning

experience for managers who wish to develop their professional skills. It does this

by focusing on decision-making skills and a satisfactory performance depends on

developing an effective team operation. In participating in the activity, the financial

consequences of operating decisions are made very explicit and awareness is

heightened of the interdependence of specialist functions in the organisation.


(ii) Effective group functioning

In organisations many of their aims and objectives can only be attained by people

working with others as part of a group. Increasing one’s experience and understanding

of the key dimensions of effective group working can be crucial to achieving effective

organisational performance. It is a key management skill. Therefore, as part of this

module, emphasis is placed on how you and your project group function while

undertaking the task of trying to run a simulated business effectively. The insights

and learning that you derive from the direct experience of working with others as part

of a task group should be of use to you on other parts of the MBA programme.

Course content and logistics

(i) Pre-workshop study and planning

Prior to the beginning of the residential workshop you should read this Study Guide.

You should make contact with the other members of your team. As a team you need

to create a short policy statement of just a few lines (which is not assessed) outlining

your initial plan for your company.

(ii) Group formation

Before the residential workshop the GMBA administration will assign individuals to

groups which will normally consist of between five and six members. The administration

will notify you of the names and contact detail of your fellow team members.

(iii) Tutorial support

The role of the tutor normally is not to act as a group leader or resolver of conflicts,

but rather to be available to offer clarification and specialist advice whenever needed.

Groups should keep in touch with their tutor at regular intervals and keep the tutor

fully informed about their progress.


Should any group member be unwilling to devote sufficient time to the simulation

exercise (instead absenting him or herself or spending time in other ways), and if

the matter cannot be resolved satisfactorily within the group it should be reported

promptly to the project tutor. It should not be left by default.

(vi) Module phases

1) Before the module’s introductory session you should you should:

- read this Study Guide and especially Section B: a guide to the Business

Simulation

- make contact with the other members of your team

- as a team create a short policy statement (just a few lines) outlining your plan

for your company. This can be submitted to the tutors at any time prior to the

beginning of the introduction of the simulation at the residential workshop

(see separate timetable for due dates).

2) At the residential workshop the following is scheduled to take place:

- An introduction to the business simulation exercise

- Decision 1 of the simulation will be taken

- Decision 2 of the simulation will be taken

- A review of these first two decisions

At the residential workshop there will be opportunity to revisit the twin themes

of effective management of your company and the dynamics of effective group

functioning. There will also be time available to analyse the market environment and

to develop further your plans for running your company.

It is very important that all members of a group should try to attend the workshop

because face-to-face meetings early on in the life of a project have a significant impact

on the effectiveness of the subsequent group functioning and the quality of the task

output (see Hertel, Geister and Konradt (2005) for a review of empirical research on

managing virtual teams).


3) After the workshop the following is scheduled to take place:

- Decisions 3-7 of the simulation will be taken

- Submission of the assessed group report

- Decisions 8-10 of the simulation will be taken

- A review/debrief of the simulation. The review will focus on the general

underlying principles involved in effective planning and management and

will be illustrated by examples of actions taken by the participating teams. A

detailed timetable giving decision times will be issued separately.

(vii) Assessment

There are two components to the assessment:

- a group report which focuses on the analysis of your company’s strengths and

weaknesses and on the threats and opportunities presented by the operating

environment and the formulation of an appropriate strategy with the objective

of optimising financial performance (for 70% of the final grade).

- the performance of your company as reflected by your final share price. This

in turn is influenced by the quality of earnings, the value of your net assets,

the earnings per share, the dividend yield, the stability of your company’s

performance and its future prospects (for 30% of the final grade).

There is no formal assessment at this stage of your reflections and learning from

the group dynamics that occur during all phases of the simulation. However, it is

recommended that you keep an informal contemporaneous written record in the

form of a log or diary that captures details of the experiences, thoughts, feelings,

emotions, reflections and learning occur while you are working as part of a team on

the simulation task.


Group report focus and structure

The report should be structured in a way that most clearly and logically represents your

analysis and assessment of your company and the operating environment. Therefore

you are free to organise your material in the way you find most effective.

You should explain how you would plan to maximise the share price of your team by

the end of period 12, if you were to repeat the simulation over a three year period.

You need to analyse the information in the simulation guidelines (section B) together

with the results of the decisions you have made so far, and show how your plan

reflects the results of your analysis. Support your answer with tables or graphs where

appropriate.

In your analysis you may wish to consider the following questions:

What has been the history of the market for this product in the first five years (refer

to the Industrial Bulletin) and how do you see this developing over the next 2.5 years

(i.e. 10 decision periods) and also in the longer term (i.e. for three years or 12 decision

periods)?

What does the production schedule tell you about how production costs will be

influenced by different levels of production and your investment in machine tools?

What is the impact of the labour unrest function?

What does the financial analysis of your company tell you about its strengths and

weaknesses?

The body of the main report should no greater than 3,000 words. You can use

appendices (which do not form part of the word count) to show supporting material.

You should show the actual word count on the first page of the report.


In the assessment what is being looked for is an analysis of key themes such as industry

trends, finance, marketing, production, etc and how this leads to a coherent strategy.

Explain how you could analyse the situation and formulate an appropriate strategy

(using the learning that you derived during the first seven decisions).

Give selective examples of insights you have gained, calculations you have performed,

etc. Provide evidence for your statements and assertions. Highlight the important

conclusions that you make.

Include a reference section that shows the source of any theories or techniques that

you have used (i.e. details of the textbook, article or other source and the author).

You can include a small number of short appendices to support any points that you

make in the main body of the report.

It is not necessary to give a descriptive account (i.e. a running commentary) of your

decisions period by period.

Leave time in your planning schedule to edit the individual written contributions of

group members so that the report reads as a coherent piece of work.

Submission deadlines

The latest submission dates for the group report and for each operational decision are

given in a module timetable which is issued separately.

Recommended reading

When constructing your report you should draw on and make explicit reference to any

relevant ideas, models and frameworks found in the recommended reading for other

MBA modules that you have already completed or are currently undertaking.


The notes included as Section C titled: Managing in Groups ‘1. Task and Process’, and ‘2.

Process and Task’ and the texts mentioned in that section and cited in the bibliography,

can be used to help your group function effectively and for you to learn from the

experience of doing this group-based module.

Business Simulation Group ProjectSection B – Instructions for the Business Simulation Exercise

instructions for the Business Simulation exerciseThe materials in this course were prepared by: Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD











Section B: Instructions for the Business Simulation ExerciseINTRODUCTION

The Business Simulation Exercise programme* and guidelines have been designed

to provide an effective learning experience for managers who wish to develop their

professional skills.

It does this by focusing on decision-making skills and a satisfactory performance

depends on developing an effective team operation. In participating in the activity, the

financial consequences of operating decisions are made very explicit and awareness is

heightened of the interdependence of specialist functions in the organisation.

At the start of the exercise participants join a management team to take over and run

one of a number of identical Companies. The success of a team’s members depends

directly on their ability to organise themselves as a working group, their skills in

making deductions from information provided and their ability to develop methods

to monitor their own performance and to relate their own functional activities to a

coherent general strategy.

Each team consists typically of between four and eight participants. The Business

Simulation is distinctively different from other such exercises in that the number

of teams is not restricted. It has been run for as few as twelve people and as many

as one hundred and fifty people at a time. A further difference is that participating

Companies do not form the totality of the market. Each active Company has only a 5%

market share at the start of the exercise and the rest of the market is in the hands of

background Companies. These background Companies do compete but are managed

to react belatedly to initiatives made by the active Companies. As a result, teams can

develop long-term strategies without being exposed to major disruption from the

competing active teams.


In setting your strategy you should remember that the Business Simulation has been

designed to ensure that companies can operate effectively in a variety of different ways.

By analysing the information in this booklet you can make the choice between present

and future profitability, between growth and return to shareholders, or between

security of your existing operations and venturesome expansion. An appropriate

strategy can be devised to implement all of these choices.

* © D Wood

RUNNING THE BUSINESS SIMULATION

The Booklet

The information contained in this booklet is set out as clearly and openly as we are

able. There is neither intention to mislead, nor are there any hidden pitfalls. The

Controllers will be glad to interpret and clarify the operating rules at any time in order

to resolve any difficulties. At no time do the Controllers make arbitrary changes in the

rules or operating conditions in the industry or economy.

Time Deadlines

It is helpful if time deadlines are kept, since a consequence of lateness is that other

groups are kept waiting for a team which is both delaying the schedule and gaining

an advantage of extra time. You will be given notice of the time for your next decision

on the Industrial Bulletin each period and after due warning persistent lateness will

attract financial penalties.

Team roles

This is a learning experience and you may well decide that you would learn more by

getting into a tangle in an unfamiliar area and having to rectify a difficult situation

than you would by using your existing knowledge to maintain a stable operation.

Consequently, the team should decide, at the start, whether it wants to maximise

on immediate performance or on learning. Focusing on immediate performance

would suggest that team members split the tasks up so that each member selects


the role closest to their existing area of expertise, while to maximise learning each

team member takes on a task which is not part of their day-to-day management

experience.

The team should also spend some time discussing operating style and the way in which

decisions will be taken. Issues of group leadership and effective decision making need

to be formally discussed.

YOUR COMPANY

Your Company is initially identical with those operated by other participating

Companies. It is engaged in making and marketing a semi-durable consumer good for

use in the home. It is in the same price range as a mobile telephone or an MP3 player.

The total potential user market is reliably estimated to be 30 million units.

Your Company helped to pioneer this new product and now markets a proven item

which is identical in specification to those of all your competitors. This process of

development has been an expensive uphill struggle and after three years of losses your

Company earned net profits of just €350,000 in year 4 of operations and €425,000

in the recently concluded year 5. However, the undoubted growth potential of this

market has always attracted an adequate investment capital.

You are taking over the Company as its new management at the beginning of the first

of the four operating periods of year 6. As you embark on this role your first task will

be to set an outline strategy covering the highlights of your approach to your new

responsibilities. This policy statement (which is not assessed) should only be a few

lines but serves as a guide for the Controllers and should be submitted as indicated

on the module timetable. Then for the following operating periods, each equivalent

to three months trading, you need to fill in the decision form provided (see appendix

2), making the decisions for your Company which your team believes will achieve your

targets of growth and profitability.

Each period’s operating decisions will be processed for you on the contollers’ computer

and the results, as shown in the operating statement, profit and loss and cash flow


analysis, will be fed back to you prior to starting work on the operating decisions for

your Company in the next period. The results from the last operating quarter (i.e. the

last quarter of year 5) are shown within the study guide.

At the end of each year, i.e. after each four decisions, you may be required to produce

a profit and loss statement for the year’s operations and a balance sheet covering

your year-end position. A statement reviewing last year’s operations and outlining

your policies for next year may also be required. These statements will be circulated,

together with the operating statements for each of the companies, on the last quarter

of the year.

You will not be able to raise capital in the first operating period, but you may open

negotiations with the controller’s capital market at any time after this, although there

is no guarantee that your proposals will be fundable. You may also declare dividends

on your shares on any decision.

Your team’s rating by the capital market will depend on your ability to achieve

policy objectives, the stability of your Company under changing market conditions

and the effectiveness with which you deliver and control the Company’s financial

performance.

The price of your shares will be the measure of your operating success and will reflect

the quality of earnings, as discussed above, the value of your net assets, the earnings

per share, the dividend yield, the stability of your Company’s performance and its

future prospects.


PRODUCTION

I Direct Production Costs

Initially you have a single factory, located in area 1, area 2, or area 3. The factories in

area 4 are operated by background companies. Details of your factory location, which

depends on your team number, are given within the study material. The direct basic

production costs for your initial and for any additional factories vary both with the

level of output and the intensity of machine tool utilisation. The basic cost schedule is

on the next page. Most of the popular production positions are shown on this schedule

though there is no reason why you should not operate outside it if you so wish. An

extended schedule can be provided on request.

II Depreciation

The cost of depreciation of machines tools is additional to the figures shown in the

basic cost schedule. Depreciation of the physical productivity of your capital equipment

is reflected by making a physical reduction of 2.5% of the number of machine tools

you own at the end of each period. The remainder, after this deduction, are assumed

to enjoy their original productivity.

For accounting purposes the cost of depreciation is calculated by multiplying the

number of depreciated machines by the current machine tool price.

III Investment

Your Company may invest in machine tools at any time either to replace depreciated

tools or to support further expansion.

You pay for them at the end of the period in which they are ordered. They are delivered

to you in time to be used for production during the period following your order. The

price of machine tools for the next four periods is provided in the Industrial Bulletin

and updated during the game for further periods.


You may operate one factory in each of the four market areas. There is no upper

limit to the size and output of a factory though a lower size limit prevents you from

producing less than 50,000 units or using less than 400 machine tools in a factory.

6

Direct Production Cost Schedule, €’s per unit of output

Production in ‘000 of units

50 60 70 80 90 100 120 140 160 180 200

Tools Used

400 47.78 48.61 49.32 49.94 50.49 51.01 51.88 52.64 53.31 53.89 54.44

450 45.89 46.69 47.37 47.97 48.51 48.99 49.83 50.56 51.21 51.77 52.28

500 44.27 45.03 45.69 46.27 46.78 47.25 48.07 48.77 49.38 49.93 50.43

550 42.85 43.59 44.22 44.78 45.28 45.73 46.52 47.21 47.79 48.33 48.81

600 41.59 42.31 42.92 43.47 43.95 44.39 45.16 45.82 46.39 46.91 47.38

650 40.46 41.16 41.76 42.29 42.76 43.19 43.94 44.58 45.14 45.64 46.11

700 39.45 40.13 40.72 41.23 41.69 42.11 42.83 43.46 44.01 44.50 44.94

750 38.53 39.19 39.77 40.27 40.72 41.12 41.83 42.44 42.98 43.46 43.89

800 37.69 38.34 38.89 39.39 39.83 40.22 40.92 41.52 42.04 42.51 42.93

850 36.91 37.55 38.09 38.58 39.01 39.40 40.08 40.66 41.18 41.64 42.05

900 36.21 36.82 37.36 37.83 38.25 38.63 39.31 39.88 40.38 40.83 41.24

950 35.53 36.15 36.67 37.14 37.55 37.92 38.58 39.14 39.64 40.08 40.48

1000 34.91 35.52 36.04 36.49 36.89 37.26 37.91 38.46 38.95 39.38 39.77

1050 34.33 34.93 35.44 35.89 36.29 36.65 37.28 37.82 38.29 38.73 39.11

1100 33.79 34.38 34.88 35.32 35.71 36.07 36.69 37.23 37.69 38.12 38.51

1150 33.28 33.86 34.35 34.79 35.17 35.52 36.14 36.66 37.13 37.54 37.91

1200 32.79 33.37 33.85 34.28 34.66 35.01 35.61 36.13 36.59 37.01 37.37

1250 32.34 32.89 33.38 33.81 34.18 34.52 35.12 35.63 36.08 36.48 36.85

1300 31.91 32.46 32.94 33.35 33.73 34.06 34.65 35.16 35.61 36.01 36.36

1350 31.49 32.05 32.52 32.93 33.29 33.62 34.21 34.71 35.14 35.54 35.89

1400 31.11 31.65 32.11 32.52 32.88 33.21 33.78 34.28 34.71 35.11 35.44

1450 30.74 31.27 31.73 32.13 32.49 32.81 33.38 33.87 34.29 34.68 35.02

1500 30.39 30.91 31.36 31.76 32.11 32.43 32.99 33.48 33.89 34.28 34.62

1550 30.05 30.57 31.01 31.39 31.75 32.07 32.63 33.09 33.52 33.89 34.23

1600 29.72 30.24 30.68 31.07 31.41 31.72 32.27 32.74 33.16 33.53 33.86

1650 29.41 29.92 30.36 30.74 31.08 31.39 31.93 32.40 32.81 33.17 33.51

1700 29.11 29.61 30.05 30.43 30.77 31.07 31.61 32.07 32.48 32.84 33.16

1750 28.82 29.32 29.75 30.13 30.46 30.76 31.31 31.75 32.15 32.51 32.84

1800 28.55 29.04 29.46 29.84 30.17 30.47 31.01 31.45 31.85 32.19 32.52

1850 28.28 28.77 29.19 29.56 29.89 30.18 30.71 31.16 31.55 31.89 32.22

1900 28.02 28.51 28.92 29.29 29.62 29.91 30.43 30.87 31.26 31.61 31.92

1950 27.77 28.26 28.67 29.03 29.35 29.65 30.16 30.60 30.99 31.33 31.64

2000 27.54 28.01 28.42 28.78 29.09 29.39 29.89 30.33 30.72 31.06 31.37

NOTE: These costs are per unit per factory. They include all materials, services and labour costs but do

not include:

1) Depreciation costs on machinery

2) Interest and other financial costs

3) The costs of labour unrest following an output change.


In order to build a new factory you simply order the desired number of new machine

tools in any of the areas where you currently have no production capacity. A factory

building is then automatically ordered on your behalf, and you may go into production

in the period following your order. The €2,000,000 cost of the new factory has to be

met at the end of the period in which it is first brought into operation. A new factory

does not have to be used immediately though the machine tools will depreciate

whether used or not. Machinery, once committed to a factory area can only be moved

or sold if the continued existence of your Company is under threat.

IV Labour Unrest

Altering production levels in an existing factory alters work patterns and generates

labour unrest during the period in which the change is made. The cost of this unrest

rises progressively as output changes. For a 10% production change (up or down) the

cost schedules would for example increase by 2.5% whilst for a 25% change unrest

would add 15% to basic production costs.

Labour unrest does not occur during the first period of operation of a new factory.

V Hiring

Machine tools may be hired at any time provided that you do not hire more than

20% of the number of machine tools which you own in the hiring factory. The cost is

€2,000 per period per machine tool. Hiring is accomplished by specifying a usage of

machine tools greater than the number you have available in that area. The difference

will be automatically hired to you up to the 20% limit. Unless you renew the hire, it

automatically ceases after one period. Hired tools have the advantage that they are

available immediately, whereas new tools purchased in one period can only be used

in the following period. Also, the option of using hired tools is always available, even

when your financial situation might not allow the purchase of new tools.


SALES

I Sales Areas

Each of the four market areas is identical in size, population and market potential

(though Area 4 is at a slightly less developed stage and currently is serviced solely

by the background firms). The markets in areas 1, 2 and 3 are at an identical state of

development when you take over your Company. As time passes competitive activity

may create differences in the rate of market development as well as differences in

response to pricing and marketing policies in the four areas.

Your Company can sell in any or all of the market areas. Quoting a price in an area

signifies a willingness to sell. Ceasing to quote a price or spending nothing on

marketing signifies withdrawal from that area.

II Sales Outlets

Your Company’s product is sold exclusively through dealers on whom you depend for

pre-delivery checks and warranty work. Each dealer has a maximum capacity of 2,500

units per period and you cannot sell in excess of the dealer capacity you provide in a

market area. Each dealer costs €30,000 per period.

Extra dealers will not sell extra units merely by their presence. Your price and marketing

mix must attract extra custom to the dealers - unless you have been selling to dealer

limits, in which case there may be some previously suppressed demand.

Dealers can carry unlimited stocks of your products and there is no warehousing

cost.

Dealers can be taken on at any time but can only be discharged at the end of each

operating year, i.e. after periods 4, 8 and 12. Dealers cannot be transferred from area

to area.


III Marketing Expenditure

You should assume that each sum allocated for marketing expenditure is spent

as effectively as possible during the period on the relevant advertising media. The

marketing expenditures which you enter on the decision sheet do not include either the

cost of dealers or of transport. These costs are charged automatically and separately.

Whilst your Company has no intrinsic product advantages over your competitors,

you are marketing an attractive product in a new and relatively unexploited set of

markets.

Marketing expenditure helps to create goodwill and visibility for your product. Although

goodwill develops as trading progresses, you cannot expect this effect to sustain sales

when current marketing expenditure is negligible or the price unreasonably high.

As the market develops you can expect increased marketing to show a diminishing

return.

IV Price

Your Company is marketing a competitive, semi-durable consumer good. Price

competition is fairly important especially as the market matures.

V Replacement Market

The replacement rate is 75% per annum and is a significant source of potential sales

for your Company. There is a heavy replacement demand for the product. Units have a

short service life and around 75% of the units in service in the preceding year need to

be replaced. Brand loyalty is important in the replacement market.


VI Sales Volume

It is as well to remember that, in any period, you cannot sell more units in any area

than your initial area stock level, plus your current shipments into that area. Selling

out, or selling to dealer limits, attracts no particular penalty but is a signal that price

is too low or marketing expenditure too high for that level of stocks or dealers.

VII Transport

There is no transport charge on units produced and delivered to dealers in the same

area. Delivery involving shipping into another area costs €8 per unit. If goods are

moved into an area in shipments of 100,000 units or more, the transport cost falls to

only €4.

VIII Wholesaling

It is possible to trade goods between groups at agreed prices at the time of any

decision. The selling team must deliver the units into an area in which the buying

team has a factory. Transport charges may therefore be incurred by the seller moving

units into the appropriate area. Both parties will need to notify the controllers of the

terms of a wholesaling transaction at the time of a decision.


FINANCE

I Cash Transactions

At the beginning of each period your Company has an opening cash balance resulting

from its previous operations.

Certain current operating expenses are then incurred at the beginning of the new

period. These are: -

direct production costs (including labour unrest)

machine tool hire charges

Transport costs

marketing expenditures

dealer costs

Unless your Company’s opening cash balance is sufficient to cover these current

expenses, an overdraft position will be created which will last until the end of the

period.

All other financial transactions take place at the end of the period. Sales revenue is

received, overdraft interest is charged, new machine tools and factories are paid for

and dividends (if any) also paid. Capital raised during the period is also received at

the end of the period. In the case of tax and bond interest the amount charged in the

profit and loss account each quarter accumulates until it is paid at the end of each

operating year, i.e. at the end of periods 4, 8 and 12.

II Overdraft

Overdraft facilities are available to your Company up to a limit which may be increased

if you choose in line with sales revenue. Initially your facility is €6m, with advances

within this costing 4% per quarter. Funds used in excess of your facility cost 6% per

quarter. Interest at 3% per quarter is paid on unused balance.


Overdraft facilities are negotiated with the Controllers. A charge of 0.25% per quarter

on the current facility has just been introduced. Facilities may be altered with one

period’s notice if the Controllers become disturbed by excessive levels of overdraft.

III Bonds

Long-term, fixed interest debt, in the form of bonds, can be issued to your Company

as an alternative to overdraft financing. Your Company has just issued a nominal €5

million of bonds at 90% which has raised €4.5 million in cash. Bonds may not be issued

in your Company’s first period of operation under your new management.

Interest on bonds is paid at the end of each operating year at the rate of 2% per period.

Bonds may only be issued in multiples of €100,000 nominal value, with a minimum

of €500,000, by negotiation with the Controllers. Bonds may be redeemed by your

Company at any time but redemption will not be initiated by the capital market.

Bonds always carry a coupon of 2% of nominal value per quarter, but will be issued

at a discount that reflects the size of the issue and the closeness the issue brings the

company to its gearing limit. Bonds may only be issued by companies in net profit on

their last quarter trading. Furthermore, issues cannot result in Market Gearing rising

above 1, where Market Gearing is given by:

Market Gearing = Issued Bonds

Issued Equity Shares x Share Price

IV Equity Shares

Your Company has issued 10 million shares of €1.00 per value. Each share is valued

by the capital market at €1.05 at the time when you take over management of the

Company. Your share price will fluctuate from period to period depending upon your

operating results and financial strategy.


If you trade profitably, the share price will normally be calculated as a multiple of your

net profits. Dividends will help to raise your share price - provided that your Company

can afford to pay them. Should profits be inadequate, the share price will reflect (at a

discount) the value per share of the Company’s net assets.

Additional equities can be issued to existing shareholders at rates negotiated with the

Controllers. The larger the dilution involved the bigger the discount which has to be

made relative to the latest share price to persuade shareholders to take up the issue.

The capital market fluctuates and there is no guarantee that your company will be

able to raise extra funds at any particular time. However, the Controllers will normally

be able to indicate, on request, the funding potential and terms on which new capital

can be issued. Should your Company wish to accept such an offer it will remain open

only during the decision period when it is made.

Equity shares are changing hands at €1.05 currently and cannot be issued below

€1.00.

V Taxation

Depreciation at current replacement cost, overdraft interest and bond interest are

all allowed as deductions before calculating gross taxable profit. Furthermore, all

expenditure on machine tools (but not on factory premises) attracts a 25% initial

investment allowance as a deduction against taxable income.

Trading losses and unconsumed investment allowances are carried forward into

subsequent operating periods and will offset future taxable profits. Losses and

allowances cannot be carried back to offset earlier taxation.

Tax is charged at 50% on the taxable profit.


VI Stocks

Stocks of your Company’s product are always valued at €40 per unit.

VII Takeovers

Takeovers may be permitted by the controllers if this is announced in the briefing. If

they are then the relevant rules governing bids are given in Appendix 1.


13

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14

FINANCIAL STATEMENTS, ALL TEAMS, YEAR 5

Profit and Loss Account for Year 5 Balance Sheet at end of Year 5

Notes €'000's Notes €'000 €'000

Turnover 19,738 Fixed Assets 2 14,600Cost of Sales 18,769 Current Assets

Stock 3 856Trading Profit 969 Debtors 0

Cash and Bank 5,5716,427

Interest paid 517 Current LiabilitiesCreditors 4 0

Profit before taxation 452 Overdraft 0Taxation 0

Taxation 27 Dividend 00

Profit for Year 425 Net Current Assets 6,427Total Net Assets 21,027

Non Current LiabilitiesBonds 5,000

Movement in Reserves 5,000At beginning of year 2,102 16,027Retained Profit for year 425 Capital and ReservesAt end of Year 5 2,527 Called up Share Capital 10,000

Share Premium Account 3,500Earnings per Share 1 4.25 c Profit and Loss Account 2,527

16,027

Notes

1 Earnings per Share is calculated on the basis of €425,000 after tax profit divided by the 10,000,000 issued shares

2 Fixed Assets Buildings Machines Total€'000 €'000 €'000

Start of year 2,000 11,196 13,196Additions during year 2,464 2,464Depreciation for year 1,060 1,060At end of year 2,000 12,600 14,600

3 Stock €'000Start of year 451Additions during year 405End of year 856 (21,411 units at €40)

4 Current Liabilities - All creditors, taxation, interest and dividends are paid in full at the end of the financial year.


15

TRADING RESULTS, LAST QUARTER OF YEAR 5

Teams 1, 4, 7, etc

Production Sales Area1 Area2 Area3 Area4 Area1 Area2 Area3 Area4

Production '000s 60 0 0 0 Dealers 9 9 9 0% Production Change 0 0 0 0 Marketing €'000 100 110 100 0Machine Tools Used 560 0 0 0 Average.Mktg. €'000 * 100 100 100 80Shipments '000 -40 20 20 0 Own Price €/Unit 80 80 78 0Machine Tool Order 30 0 0 0 Average Price €/Unit 80 80 80 81New Tools Owned 576 0 0 0 Previous Sales, units 16,200 16,200 16,200 0Direct Costs €/Unit 43.3 0 0 0 Opening Stock Units 4,310 6,404 7,279 0Shipping Costs €'000 0 160 160 0 Closing Stock Units 7,137 7,137 7,137 0

Sales Units 17,173 19,267 20,142 0

---------------------------------------------------------------------------------------------------------------------------------

Teams 2, 5, 8, etc


Production '000s 0 60 0 0 Dealers 9 9 9 0% Production Change 0 0 0 0 Marketing €'000 100 110 100 0Machine Tools Used 0 560 0 0 Average.Mktg. €'000 * 100 100 100 80Shipments '000 20 -40 20 0 Own Price €/Unit 80 80 78 0Machine Tool Order 0 30 0 0 Average Price €/Unit 80 80 80 81New Tools Owned 0 576 0 0 Previous Sales, units 16,200 16,200 16,200 0Direct Costs €/Unit 0 43.3 0 0 Opening Stock Units 4,310 6,404 7,279 0Shipping Costs €'000 160 0 160 0 Closing Stock Units 7,137 7,137 7,137 0

Sales Units 17,173 19,267 20,142 0

---------------------------------------------------------------------------------------------------------------------------------

Teams 3, 6, 9, etc


Production '000s 0 0 60 0 Dealers 9 9 9 0% Production Change 0 0 0 0 Marketing €'000 100 110 100 0Machine Tools Used 0 0 560 0 Average.Mktg. €'000 * 100 100 100 80Shipments '000 20 20 -40 0 Own Price €/Unit 80 80 78 0Machine Tool Order 0 0 30 0 Average Price €/Unit 80 80 80 81New Tools Owned 0 0 576 0 Previous Sales, units 16,200 16,200 16,200 0Direct Costs €/Unit 0 0 43.3 0 Opening Stock Units 4,310 6,404 7,279 0Shipping Costs €'000 160 160 0 0 Closing Stock Units 7,137 7,137 7,137 0

Sales Units 17,173 19,267 20,142 0

*Average Mktg .€'000 is the marketing spend for a Company with a 5% market share selling at the average price.


16

TRADING RESULTS, LAST QUARTER OF YEAR 5 (continued)

All Teams

Profit and Loss Statement € Cash Flow Statement €

Production Costs 2,599,440 Opening Cash 1,430,740Shipping Cost 320,000 -Current Expenditure 4,039,440Marketing Cost 310,000 = Overdraft (€6M facility) -2,608,700Dealer Cost 810,000 -Overdraft Interest & Fees 104,348Tool Hire ( 0) 0Total Current Expenditure 4,039,440+Value of Stock Change 136,720 +Sales Revenue 4,486,276=Cost of Sales 3,902,720 -New Investment ( Number 30) 675,000Sales Revenue 4,486,276 -Dividend (0% on €10M nominal) 0Gross Trading Profit 583,556 -Bond Interest (€5M nominal) 0Depreciation (14 Tools) 315,000 -Tax Paid 27,495Net Trading Profit 268,556 +New Bonds (€5M @ 90%) 4,500,000Overdraft Interest 104,348 +New Equity (€0M @ €0.0) 0Bond Interest 0 =Net Cash Flow 4,139,993Profits Before Tax 164,208 New Cash Available 5,570,733Tax Allowances 168,750Tax 0 Tax Allowance Carried Forward 4,542Net Profit (Cumulative €0.0M) 164,208 Net Profit/Sales 3.7%

Cumulative Earnings per Share 0


Appendix 1: TAKEOVERS

With the authorisation of the Controllers it is possible for a team to bid for another

participating team, and if successful to gain control of its assets and responsibility

for its liabilities. The only reservation is that no involuntary redundancy must occur

as a result of such an arrangement. Takeover bids are permitted only from period 5

onwards.

A takeover involves shares in the victim group being bought out. The predator has to

notify both the Controllers and the victims of the proposed terms at least one week

before the next scheduled decision (this period is reduced to 45 minutes in the case

of the last three decisions at the debrief location). If an offer is made then the victims

have the opportunity to fend off the bid by getting their share price above the offer

level with their next decision.

If they do so the bid fails and cannot be renewed for another period. If the victim’s

share price is less than the offer the bid succeeds and the assets and liabilities of both

companies are pooled.

At this point the employees of the victim company may receive funding to set up again

in business on their own account on terms that are determined by the Controllers.

Where a bid is made it cannot be partial or conditional. Bids may be in cash or shares

in any combination but the effective value of a bid is limited to a maximum of twice

the cash element offered. To prevent reckless bidding the cash must also be available

in the closing cash balance of the predator when the bid takes effect. Typical bids

would be:

Cash Only Bid: Company X offers €1.20 in cash for each share of company Y.

If company Y has 10m shares and a share price at the end of the period of €1.15 this bid

would succeed if Company X had at least €12m in closing cash.


Cash and Shares Bid: Company X offers a half of one of its shares plus €0.60 in cash

for each share in Company Y.

If Company X’s share price was €1.60; this bid is worth (0.5 x €1.60) + €0.60 or €1.40

but would only be effective up to €1.20 (double the cash element) provided it had €6m

available in closing cash.


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Glossary of Terms

A number of key words and phrases used in the booklet are explained below in lay

terminology. The relevant page is shown in brackets.

Balance sheet: A summary of the assets and liabilities of your company at a given

date.

Brand loyalty: The propensity of customers to buy additional or replacement goods

from the same supplier.

Cash flow statement: A summary of the cash movements in and out of the company

for a given period.

Coupon: The interest rate charged on the bonds (set at 2% per quarter)

Bonds: A long-term fixed interest loan from the bank .

Depreciation: The reduction in the balance sheet value of machine tools (fixed assets).

For simplicity the simulation assumes that at the end of each period there is a 2.5%

reduction in the number of machine tools that your company owns.

Dividends: Cash paid to shareholders for each share owned expressed as a percentage

of the nominal value of each share (i.e. €1.00) .

Earnings per share (EPS): The amount of net profit divided by the number of shares.

Equity: Another name for shares.

Fixed assets: Usually such items such as plant (factory building) and machinery

(machine tools) used in the manufacture of other goods .

Gearing: The ratio of the value of long term money borrowed (i.e. bonds but not

overdraft) to the value of the Company’s shares (i.e. number of shares x current share

price).

Gross National Product (GNP): The total value of goods and services produced within

a period of time by an economy.


Machine tools: The equipment on which your company’s products are made.

Nominal value of shares: The price at which the shares were issued originally (i.e.

€1.00).

Profit & Loss statement: A summary of financial costs, revenues etc for a given

period.

Shares: Certificates issued by the company to shareholders in return for money that

they invest in the company. Currently your company has issued 10m shares (at a

nominal value of €1.00). They are currently valued by the capital market at €1.05.

Business Simulation Group ProjectSection C – Managing in Project Groups

managing in Project GroupsThe materials in this course were prepared by: Kevin Gaston BA (Law), MBA, PhD, MA & Peter Yallup BSc, BA, MSc, PhD











Section C: Managing in Project Groups

This section addresses the issues of the requirements for effective group organisation

and of group dynamics. The ideas in this section should be considered when you are

deciding how to organise yourselves and how to function as an effective working

group.

For the group dynamics dimension of this project, which forms part of the focus of the

individual reflective essay assignment on leadership and professional development

(which is submitted in semester seven), you should read and consider using the notes

included in this section.


1. Task and process

Some practical guidelines

introduction

Much managerial activity is undertaken in working groups. As a part of the MBA

programme, a project work assignment offers opportunities for working with others

as a group, and getting the best out of a group.

Though the life of each group is unique and its development in some respects can

be unpredictable, experience has demonstrated that groups’ work can be facilitated

appreciable where groups are able to follow the guidelines set out here.

These notes are set out in two sections. The first section reviews phases of a group’s

development. The second section sets out some advice and practical guidelines

towards task accomplishment.

I: Phases of group development

1. Three stages of project group activity

2. Two dimensions of activity: task and process

3. The process dimension and its phases

II: Guidelines towards task achievement

4. Integrating process and task

4.1 Inventory crucial resources: people, time and organisation

4.2 Agree an initial agenda

4.3 Establish an overall time frame

4.4 Establish goals: what the group is to do


4.5 Chairmanship: managing boundaries

4.6 Secretaryship: recording and progressing the group’s work

4.7 Establish a time-based activity plan

4.8 Allocate roles and responsibilities clearly

4.9 Progress review

4.10 Anticipate the report

4.11 Virtual team-working

5. Tutorial resources

I: Phases of group development

1. Three stages of project group activity

Work in groups can be richly rewarding, with members of successful groups identifying

strongly with one another. Work in groups also can be challenging and time-consuming:

the price of success often can be continuing attention, especially to detail.

The MBA project groups typically are required to complete a task usually of some

complexity within a prescribed time frame. Overall, a group’s work must progress

through three stages of activity:

1. Planning and preparation

2. Data generation and analysis

3. Resolution and writing up

Groups also must undertake a number of internal management activities which will

involve planning, decision-making and organising.


While it is necessary for a group’s activities to be managed and monitored by members

throughout, this is true especially of the initial phases of a group’s life, for decisions

taken (or avoided) then can have profound effects on a group’s subsequent work. They

also can be difficult to retrieve later.

2. Two dimensions of activity: task and process

Typically, groups operate simultaneously on two dimensions: task and process. Task

is often represented as the manifest requirements of the assigned task a group has

been set, and is grounded in legal rationality. Process encompasses the personal

relationships which group members engender in seeking to fulfil the group’s tasks.

Process is dynamic and volatile; sometimes it is referred to as ‘group dynamics’.

In practice, process and task tend to be bound up with one another. Here, however, I

have distinguished between them in order to clarify phases through which the work

of a project group normally must pass in order for it to develop successfully. Though I

begin with the process dimension, the thrust of this paper is concerned with guidelines

towards successful task accomplishment.

3. The process dimension and its phases

At the outset, a project group’s organisation is unformed. Its resources include an

assortment of individuals, each with different interests, skills, priorities, and degrees

of understanding and commitment to the group’s undertaking. The success of

the project will depend on the extent to which these individuals are able to forge

themselves into a team, co-operating effectively, flexibly and consistently towards the

achievement of thoughtfully defined and agreed goals throughout all phases of a

group’s work. Establishing and maintaining secure, reliable and continuing patterns

of organisation and authority are essential elements for a group’s success. To achieve

them, a group typically moves through four main processual phases of development .

These are described below.


3.1 characteristics of four key phases in the development of project group process

Phase Process dimension(interpersonal relations)

Task dimension(operational activities)

1. ‘Form’ Dependence(seeking guidance, leadership, seeking to remove uncertainty)

Seeking orientation

2. ‘Storm’ Contention(determining best ways forward)

Forging effective work group organisation

3. ‘Norm’ Cohesion(coming together as an effective working group)

Implementing agreed operational ground rules and roles

4. ‘Perform’ Co-operation(working effectively as a mutually supportive trusting team)

Operating interdependently in problem-solving and task accomplishment

Adapted from: Tuckman, B. & Jensen, M. (1977) ‘Stages of small group development revisited’, Group and Organization Studies, vol. 2, no. 4, pp. 419-27, and Huczynski, A. & Buchanan, D. (2007) (6th edn) Organisational Behaviour, pp. 297-300.

Characteristic behaviours during each of these four main phases are described in the

passages which follow.

Phase 1: Form

Initial group behaviour tends to be characterised by uncertainty. In particular,

uncertainty about how members feel about one another, how they expect one

another to behave, the sort of assumptions they will make about one another, the

commitment group members will have to one another, the kind of problems they may

have in joining forces with one another to progress the work of the group, and so on.

Uncertainty is uncomfortable, and often produces a swift hunt for ‘leadership’ in the

form of someone upon whom to depend to produce structure, establish ground rules,

and set the agendas for the group to follow.


Phase 2: Storm

As the group’s work begins to develop from its initial, formative stage, it is not unusual

for original agendas, swiftly set but ill-considered during phase 1 of the group’s life, to

begin to unravel. Similarly, awkward underlying issues (perhaps concerning authority

and how best to proceed), which have been suppressed in phase 1 (‘we haven’t time

to deal with that now’), re-emerge. Among these are likely to be personal agenda

issues: who is to lead, who is responsible for what, who is perceived as an ally, who

as a potential threat. Such issues will require discussion and working through to a

satisfactory resolution to enable the group to proceed to phase 3.

Phase 3: Norm

During the third phase of group development members can find themselves working

well together. There is a sense of having resolved earlier conflicts as a result of which

the group has created an effective operational agenda. Members begin to share ideas

and information, with emerging openness. This is often regenerative. Feeling that they

are achieving something worthwhile, members tend to reinforce positive behaviours

with further actions which generate commitment, friendship and trust.

Phase 4: Perform

Phase 4 is characterised by group members’ interdependent co-operation, as

individuals or as sub-group members. The group has moved from the insecurity in its

interpersonal relations which often characterises phases 1 & 2 to a state of relative

security. At its most effective, this extends to members soliciting and offering feedback,

with commitment to common activity, to problem solving and to one another. There

can be a strong sense of interpersonal achievement; morale is high, activity is high,

with a corresponding reluctance to consider the eventual ending of the group and its

activities.

More recent developments of this model have included a fifth phase – Adjourn –

which addresses the issue of managing the disbanding of a group once the task has

been completed. For a discussion of the phases of group formation, see Huczynski &

Buchanan (2007: 297-300).


II: Guidelines towards task achievement

4. Integrating process and task

While the phases set out in Part I typify the process development of the successful group,

progress towards stage 4 is neither automatic nor necessarily easy. Fundamentally,

achieving success requires effort and commitment by members throughout, and

especially in the group’s formative phases, 1 and 2. With such commitment, however,

the process of achievements of phase 4 potentially is within the grasp of all groups.

Indeed, some apparently unpromising initial groupings have gone on to perform

outstandingly well. In doing so, they have found some of the advice set out in the

following guidelines helpful.

The guidelines are not exhaustive but summarise some fundamental matters project

groups will need to take into account in developing their work. Essentially, they concern

issues of authority and organisation. In some respects, the guidelines inevitably place

an artificial rationality upon dynamic and unstable forces and it should be recognised

that groups at times may find themselves unable to follow such orderly procedures

(owing to influences indicated in the companion notes to these on Process and Task).

Nevertheless experience has shown that groups have found this advice not only a very

useful agenda to address but also a vital lifeline to return to in cases of difficulty.

4.1 Inventory crucial resources: people, time organisation

Usually, work undertaken in a group’s opening phases 1 and 2 is likely to be crucial to

its subsequent progress. Vital resources are people and time.

The initial thrust of a group’s activities necessarily must be inventorial: as a group’s

principal resources are its members, it needs to discover how best to go about

mobilising their skills ad talents.


All groups also have a further crucial resource (and one which is often overlooked);

namely time. Managing time (a concept which embraces all, and which is neutral and

depersonalised) can be an effective way of initially managing people and personalities

within a group.

A truism repeatedly demonstrated is that most successful groups are those which

organise their operations and time management most effectively.

4.2 Agree an initial agenda

It is useful to begin by agreeing

- An adequate time span for the group’s initial work (a pattern of one or two-hour

working slots can be helpful).

- That the group’s initial work is inventorial and exploratory

- That outcomes are to include some written plans and preparations

4.3 Establish an overall time frame

As soon as possible, establish an overall time frame for the project group’s work

ahead. Your time frame should span all of the project’s three operational stages

(preparation, data generation, resolution), working backwards from the group’s report

submission date. (Gantt charts or written time lines are useful for sequencing events

and activities. They can also be useful for sharing ideas and establishing consensus

about time boundaries, where these are located, and what the group will need to do

in order to meet them). In doing so, it also can be useful to scan your timetables for

events outside your project which potentially may have an impact upon it, your time,

and your working arrangements.


4.4 Establish goals: what the group is to do

One of the advantages of the time frame approach is that it encompasses all and

provides an externalised arena into which members can place their ideas about the

nature of the project and the work they are able to undertake. This must be explored

in order to generate common understanding of what they are organising to do.

Hence, group members need to discuss their initial perceptions of the tasks ahead

and the issues these are likely to involve. They need to establish and understand their

group’s goals and how to approach them. By focusing discussion initially on an overall

time frame, the group is likely to be able to progress towards consensual agreement

on tasks ahead: on what needs to be done. Subsequent important issues concern how

it is to be done and who is to do it.

4.5 Chairmanship: managing boundaries

While leadership can be exercised in different ways by different people in relation to

different activities at different times in the life of a group, normally there is a premium

upon good chairmanship throughout. The function of the chairman is to manage an

arena for group discussion, for planning, for sharing ideas, for reviewing progress. The

chairman’s task is to enable time to be managed effectively, to enable members to be

heard, and points to be recorded.

4.6 Secretaryship: recording and progressing the group’s work

Normally, it is helpful to record decisions, remits, time spans for task completion, and

so on. Moreover, a summary also should be agree for circulation to group members in

order that they know as clearly as possible

- what is expected of them

- who and by when and how they have agreed to deliver it.


If this appears time consuming, it is as nothing when compared to the time, progress

and effort which can be wasted in subsequent argument where such matters have

been misunderstood. Time management and recording are essential functions. The

palest ink can be better than the best memory.

4.7 Establish a time-based activity plan

You already should have established an overall time frame for the group’s work ahead.

Also you should create a time frame for planning and organising roles and resources.

If a group of six members has, for example, 40 hours timetabled for its work, this

should be represented within your overall time frame as 240 working hours available

to the group. Setting this out as a timetable and filling in the blanks can be a good

way of prioritising tasks, allocating roles and addressing essential questions of how

tasks are to be approached and who is to undertake them. Fundamentally, the group

must agree and establish its effort-reward ground rules, along with privileges and

obligations of membership.

Should any member be unwilling to devote time as scheduled to project group activity

(instead absenting him or herself or spending time in other ways), if the matter

cannot be resolved satisfactorily within the group it should be reported promptly to

the project tutor. It should not be left by default.

4.8 Allocate roles and responsibilities.

If a board of directors fails to assign specific responsibilities (say, for marketing, finance,

manufacturing, HR and so on) instead explaining that “we just leave everything to

everybody” justifiably it would inspire little confidence. Similarly, it is essential for

group members to have clearly defined roles and responsibilities for specific activities

and outputs within the agreed overall time span, especially as the group moves

towards phases 3 and 4 of its process activities.


4.9 Progress review

In phases 3 and 4, it is likely to be necessary for the group to operate in subgroups, in

order to make best use of time and resources available. The operating procedures and

ground rules a established during phases 1 and 2 should be maintained, in particular

for progress review purposes, in order that all members understand where the group

is up to, what remains to be done, and sight is not lost of the group’s overall strategy

and purpose.

4.10 Anticipate the report

In the course of the sometimes heady scrambles of fieldwork, it can be easy to lose

sight of the project’s resolution phase – how the group’s work is to be written up and

by whom. Yet it is upon such issues that much of the success of a group’s work will

be judged. It is prudent to begin to draw together initial drafts for the report well in

advance of a project’s resolution phase. This can be useful for highlighting potential

shortcomings while time remains to take steps towards remedial action.

A premise underlying project group activity at MBS has been that each member of a

group brings to its work broadly similar levels of skill, accomplishment and competence.

Hence, for example, all members should be able to contribute comparably (albeit

perhaps in different ways) to the production of a group’s final report. Nevertheless, it

can be desirable for one or two editorially-skilled members to create a final coherent

style for the report.

4.11 Virtual team-working

Advances in communications technology and the increase in globalisation are two of

the many drivers that have led to the increased use of virtual teams. During the life

of an MBA group project the members will encounter periods when they are working

‘virtually’. Shin (2005) suggests that virtual teams may be characterised by members

being in different locations (spatial dispersion); being in different time zones and

working at different times (temporal dispersion); coming from different national

cultures which influence values and norms of behavior in the work setting (cultural


dispersion); and coming from different organisations which influences the way team

members think that work tasks should be approached (organisational dispersion).

This last dimension is often referred to as reflecting organisational culture or ‘the

way we do things around here’. It is important that all team members hold in mind

these potential differences because, if they are unacknowledged, it can lead to mutual

misunderstanding and impaired group functioning.

There has been much written on issues associated with working and managing in

an international context where differing national cultures have an influence (see for

example Hofstede, 1991, 2001; Adler, 2002; Hickson & Pugh, 2001; Schneider & Barsoux,

1997). The organisational behaviour text book by Huczynski & Buchanan (2007) gives

a good overview of these key issues. Such influences may well be present in your team

and will need to be acknowledged and actively managed.

In a comprehensive review of empirical research studies Hertel et al (2005) identify

the key dimensions that influence virtual team working. They argue persuasively

that virtual teams are not fundamentally different to conventional teams but rather

that the former are variants of the latter. They make the point, as do Griffith & Neale,

2001 (cited in Huczynski & Buchanan, 2007) that all teams fall somewhere along a

continuum of very low to very high degrees of ‘virtualness’.

5. Tutorial resources

While project group members themselves represent the group’s crucial resources,

groups normally have further resources on which to draw, including a briefing, usually

detailing the framework, expectations and required outputs of their work, and a

tutor.

The role of the tutor normally is not to act as a group leader or resolver of conflicts,

but rather to be available from time to time to offer specialist advice. It is prudent for

groups to keep in touch with their tutor and keep the tutor fully informed about their

progress.


2. Process and Task

Indications of some processes within groups as an aid to recognition

Group process concerns the nature (or ‘dynamics’) of interactions between members

of a group. These notes, companions to the guidelines on ‘1. Task and Process’ for MBA

project groups, broadly correspond with the phases of group development set out in

that first paper and indicate some examples of processes which may be experienced

in a group at various times.

The notes do not attempt to match the potential variety of dynamics within groups

nor do they represent formal analytical schema. Fundamentally, they provide a brief

repertory of some typical processes and are designed to help group members who wish

to recognise signs and potential implications of some process issues within groups.

Indications of some processes within groups

1. Interpreting group process

2. Leadership and followership

3. Interactions and contributions

4. Influence and decision taking

5. Norms, codes and group performance

1. Interpreting group process

Group process often can be subtle and complex. It can be mobilised to take a group’s

activities forward constructively. Alternatively, while ostensibly acting in support of

a group’s formal task, it may cause group activities to be diverted towards other, less

productive ends.

Interpreting complex processes – and making effective use of interpretations –

normally requires training and skill. On the other hand, many people in the course

of their everyday lives become adept at reading the implications of commonplace


processes, including body language; for example, who is inviting contact; who is

closing others out; who chooses to interact with whom; and so on. Most people also

swiftly become to recognise in others common place signs of, say, affection, anger,

boredom, defensiveness, excitement, frustration, and so on. Nevertheless, some

people (perhaps members of a project group) may appear quite oblivious to patterns

of behaviour around them; despite these being obvious to others, they remain below

some members’ level of awareness.

However, it can be prudent to remember that members of different national cultures

may bring with them conventions and expectations (for example, concerning silence,

or group harmony) which may differ from your own. Similarly, when considering the

evaluations and interpretations which follow, you may also find it helpful at times to

reflect on the bases you yourself use to form your judgements.

2. Leadership and followership

Leadership can be exercised in different ways by different people at different times

in the life of a group. However, in the initial phases of a project group’s formation,

members often experience uncertainty relating to leadership and followership

positions. Fundamentally, both leader and follower activities should enable members

to get the best out of the group. Try to evaluate whether they are doing so. For

example …

… Domination as leadership: does one member seek to dominate, or impose his or

her ideas irrespective of others’ views? How does his/her assertiveness influence the

group’s behaviour?

Does there appear to be rivalry for group leadership, or a struggle for power?

… Followership and domination. Who supports or is openly deferential to the dominant

member? Does anyone repeatedly avoid negative or dissenting views, or seek to

prevent alternative or conflicting opinions from being expressed?


Are some members silent? Are they withdrawn? Excluded? Do they appear to follow

the dominant leader, but in fact express minimal commitment one way or another?

… Group centred activity as leadership. Do some members push for tasks or

responsibilities to be assigned to all members of the group, rather than certain

individuals? Is there insistence that everyone must be included in group decisions and

activities, irrespective of what these may be? What is being avoided?

… Followership and group centredness. Are some members seeking to avoid individual

responsibility (or conflict, or commitment, or expression of views) by repeatedly

pushing for a collective ‘we’ response to all issues which are raised? Are some seeking

to block power bids by others?

… Task-centred leadership. Does anyone attempt to focus on the group’s tasks and

resources in an objective way? How is this received? Does anyone express (rather than

asset) chairmanship by seeking others’ ideas and opinions and drawing them into

constructive discussion? How? Are opinions and ideas sought (and expressed) freely,

without destructive criticism?

… Task-centred followership. Who among group members seeks to contribute

constructively to a task-related agenda? Is conflict dealt with objectively, in problem-

solving ways? By whom? Which members appear to be open to ideas and feedback,

and wish to push the work of the group forward?

Does anyone appear uninvolved, perhaps responding mechanically only when

prompted by others?

How are policies recorded? How is time used, or managed?

3. Interactions and contributions

Much as an individual’s status may not correspond with others’ esteem of him or

her as a person, so the frequency of individuals’ contributions to a group may not


correspond with the influence they are able to assert on group processes. Some may

speak a lot but to little effect, while others who say little may engage group members’

attention immediately. The patterning of interaction and individual contribution can

offer useful indications of a group’s modes of working and the extent to which it has

developed. It may be helpful to note …

Who interacts with whom? Supportively? Negatively? Who makes frequent

contributions? Who makes few? To what effect? Do initial patterns of contribution

change? Do infrequent contributors begin to speak more; do formerly voluble

contributors become silent?

How is silence interpreted? How are silent members treated?

Whose contributions are directed towards task fulfilment? Whose interactions

influence the group’s orientation? (Towards, say, work: play; interest; task avoidance;

conflict; co-operation). How? Who helps others to contribute? (For example, by

prompting, supporting, helping them explain or clarify ideas)? Who cuts down or

attempts to close out others?

4. Influence and decision taking

The manifest task of a project group (and the one upon which the project members

ultimately will be assessed) normally involves the production of a written report

and other outputs which satisfactorily fulfil externally defined criteria. Effective

investigation and allocation of a group’s resources (including resources of time)

normally are instrumental to its success, and constructive processes of decision-taking

usually are crucial. Hence, it may be useful to consider some of the questions below.

… Influence patterns and decision process. Are decisions made by certain group

members without reference to others? Who appears to be most effective in influencing

other members of the group? Who appears least? Has this pattern changed?


How are ideas accepted or rejected within the group? Does anyone offer contributions

which repeatedly fail to elicit a response?

Do group members seek to reach consensual decisions, enlisting the positive support

of all? How? Are decisions taken by vote? Why? Does a majority seek to override views

of a minority?

How are decisions recorded? How are they conveyed to group members?

… Decision taking and task facilitation. Who most effectively helps the group to focus

on tasks at hand? How? Who seeks (or volunteers) suggestions concerning the best

way to tackle tasks ahead?

Does the group engage or avoid requests for feedback, opinions and ideas? Does it

solicit or avoid discussion of alternative ways ahead?

… Is progress periodically reviewed? Does anyone attempt to interpret or summarise

what the group has been doing? How is time used or managed?

5. Norms, codes and group performance

As time elapses, patterns or norms of behaviour tend to become established in a

group. Effective operational procedures for allocating tasks, integrating outputs and

optimising the use of a group’s resources (which may involve undertaking some tasks

as individual or in sub-groups) can be critical influences on group performance. As far

as possible, behavioural norms and values should enable a group to function as an

effective entity.

While some norms are likely to have been agreed explicitly, others (for example

concerning matters which appear to be regarded as out of place in the group and,

as a result, are avoided) may be unstated but become established by tacit consent.

Some explicit norms become established as rules and procedures, while others take

the form of tacit behavioural codes, fundamentally expressing the sense of ‘the way


we do things here’. The questions below concern some norms and codes and their

implications for group performance.

Does the group at times operate in sub-groups? How do sub-groups (or individuals)

relate back to other members in the group? Are sub-groups primarily task-centred, or

do they fulfil other purposes? (Such as exporting difficult or uncongenial members, or

masking disagreements or antipathy between particular group members.)

Are group members able to exchange feedback and feelings? About the task? About

one another? Is feedback offered and used constructively, or otherwise?

How is performance kept track of? Evaluated? Who are principal (and effective)

contributors to task performance? Are any ineffectual in their contributions? Do they

fail to contribute? Why?

How is deviance managed? By whom? When?

Is there effort to keep all members informed and up-to-date? Is this consensual? Does

anyone avoid involvement? How is information-sharing managed? By whom? With

what effect?


Bibliography

Adler, N. (2002) International dimensions of organizational behaviour (4th edn) London:

International Thomson.

Griffiths, T & Neale, M (2001) Information processing in traditional, hybrid and virtual

teams, Research in Organisational Behaviour, Vol 23, pp 379-421.

Hertel, G., Geister, S. and Konradt, U. (2005) Managing virtual teams: a review of current

empirical research, Human Resource Management Review, Vol 15, Issue 1, pp 69-95.

Hickson, D. & Pugh, D. (2001) Management Worldwide: Distinctive style amid

globalization, London: Penguin Books.

Hofstede, G. (1991) Cultures and organisations, London: McGraw-Hill.

Hofstede, G. (2001) Culture’s consequences: international differences in work-related

values, (2nd edn) London: Sage.

Huczynski, A. & Buchanan, D. (2007) (6th edn) Organisational Behaviour, London:

Financial Times Prentice Hall.

Schneider, S. & Barsoux, J-L. (1997) Managing across cultures, London: Financial Times

Prentice Hall.

Shin, Y. (2005) Conflict resolution in virtual teams, Organizational Dynamics, Vol 34(4),

pp 331-45.

Tuckman, B. & Jensen, M. (1977) ‘Stages of small group development revisited’, Group

and Organization Studies, Vol 2(4), pp. 419-27.



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BSIM May 2011