Decision-making guide 8/5/25, 08:18

Decision-making guide
Copyright© Cesim Oy 2000-2025

1. Simulation platform introduction

1.1. General user interface options
1.2. Home
1.3. Decision checklist
1.4. Decisions
1.5. Results
1.6. Schedule
1.7. Teams
1.8. Readings
1.9. Forums
2. Introduction
2.1. Market introduction
2.1.1. Company
2.1.2. Products
2.1.3. Markets
2.1.4. Distribution channels
2.1.5. Customer segments
2.2. Demand
2.2.1. Total market size
2.2.2. Companies' market shares
2.3. Winning criterion
2.4. Successful decision-making flow
2.5. Best practices for good teamwork
3. Market outlook
4. Products
4.1. Product portfolio
5. Markets
6. Corporate
7. Research and development
8. Projections
8.1. Income statement
8.2. Balance sheet
8.3. Ratios
8.4. Segment-specific overviews
9. Results

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9.1. Summary
9.2. Market research
9.2.1. Market research reports
9.3. Market specific Awareness, Intentions and Sales
9.3.1. Awareness/Sales
9.3.2. Intentions/Sales
9.4. Market overviews
9.5. Sustainability
9.6. Financial statements
9.6.1. Income Statements
9.6.2. Balance Sheet

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1. Simulation platform introduction

1.1. General user interface options

1. Profile - Here you can change your email, password and add a personal
picture to be displayed on various parts of the user interface. You can also
change your account's language and time zone, and determine the
automated email notifications you wish to receive. Please enter a valid email
address to avoid missing out on important information from your instructor
or teammates. You will also need it should you require the "Forgot my
password" feature.
2. Help - Here you can reach the Cesim Support team if you run into problems
or issues relating to in-game functionality. For any content-related
questions, contact your instructor.
3. Logout - Use this button to log out.

1.2. Home

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1. Results summary - These graphs show your performance in relation to the

competition. You will see this after the completion of Round 1 (or Practice
round 1, if present).
2. Activity - This section shows you recent activities, including the history of
decisions submitted and the rounds' deadlines.
3. Tasks - If your instructor has assigned a quiz or a peer evaluation to your
course, you will find it here. Should you be required to submit document(s)
to the platform, the link will be shown in this section.
4. Messages - Forum posts will be shown here.

1.3. Decision checklist

The Decision checklist displays all decisions made in the game. It shows both
a Team Decision Area and the individual Student Decision Areas. Each team
member has a decision-making area, where they can input any figures and
see the effects they have on the projected results. By default, the students
always start with their own Student Decision Area when logging in to the
game. When the deadline passes, the round results will be calculated based
only on the Team Decision Area.

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The Decision checklist offers several tools to manage the decision-making

process:

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1. Round-based drop-down menu - Use the drop-down menu to select the

desired round. You may select previous rounds in order to review the
decisions made during those rounds, although modifications will be
disabled. By doing this, you can also access the previous market outlooks.
2. Legend - The different colours of the cells will help you to identify the active
decision area and whether a change has been made to the decisions.
3. Go - This button allows a player to view another teammate’s Student
Decision Area, or the Team Decision Area. Any modifications will be
automatically recorded in their respective area. Any modifications made in
the Team Decision Area will be used as final decisions when the round ends,
should no further actions be taken. Be careful about relying on direct
modifications to the Team Decision Area. If any team member overwrites
(copy as team’s decisions) existing decisions in the Team Decision Area with
their own, there is no backup for the overwritten decisions. Making plans on
your personal Student Decision Area ensures the decisions are safe, as your
teammates cannot overwrite decisions in your own area with a single click.
4. Copy as team's decisions - This button copies a player’s decisions from the
Student Decision area to the Team Decision Area. Once copied, the previous
set of decisions cannot be recovered. Decisions can be copied from the
Student Decision Area to the Team Decision Area as many times as needed
prior to the round deadline. If decisions are made directly into the Team
Decision Area, then no additional steps need to be taken, as they will be
automatically used to calculate the results when the round ends.
5. Import - This button transfers the decisions made in a Team- or other
player’s Student Decision Area to the importing player’s own Student
Decision Area. Once imported, the original decisions of the importing player
cannot be recovered.

1.4. Decisions
The Decisions are split into sub-categories (e.g. Demand, Production, etc.).
Some areas should be filled in first, as they affect other areas.

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There are two general types of input fields:

1. Decision cells - The decision cells can appear as input cells, drop-down
menus, checkboxes or buttons.
2. Estimation cells - Estimation cells are where you can enter sales estimates,
personnel turnover, etc. These estimations act as a basis for the budgets
shown in the system.
The system automatically updates the budgets and calculations as you make
decisions and/or estimations.

1.5. Results
The round results are calculated as the deadline passes, using the decision
sets in each team’s decision area. The results from previous rounds, including
possible practice rounds, are accessible and you may also download the
results as presented in an Excel file or as a slideshow of main indicators.

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1. Universe-based drop-down menu - This allows you to choose any universe

in the course. A universe is a group of competing teams affecting each
other’s results.
2. Round-based drop-down menu - This allows you to choose the desired
round results.
3. Excel - Here you can download an Excel file showing the results of the
chosen round.
4. Print - This button allows you to print the results of the round.
5. Slideshow - This button will allow you to view a slideshow of the key
indicators of the round.

1.6. Schedule

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The Schedule page displays a timetable of the rounds’ deadlines. The results
are calculated as soon as the deadline of the round passes. Unless otherwise
restricted, decisions can be made on each round as soon as the previous
round’s deadline passes.

An instructor can choose to have up to three practice rounds for a course.

Once the practice round(s) are over, the game will reset to the initial market
situation. The initial decisions for the first actual game round are imported
from the first practice round. Other than that, the practice rounds have no
effect on the results of the actual game rounds.

1.7. Teams

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cesim Decisionsarea: Latestchanges:

MARKETING CliffordWa... Nochanges

HOMEDECISIONSRESULTS SCHEDULE TEAMS READINGS FORUMS

Universe1

Teams

•Green EditView $Red ••View Blue •

CliffordWalker RM RaulMurphy PP PaulaParker

AP AnthonyPeterson DW DaisyWhite KS KarlSánchez

HarryReyes EM EvelynMartin MR MarshaRodríguez

The Teams page contains the teams' compositions across all the universes of
the course. On this page, you may also edit your own team’s information, such
as the team name, slogan and/or team description.

At the start, when no deadlines have passed, you can join any team that has
an empty slot. Simply click the Join Team button. After the first deadline has
passed, only the instructor can move participants between teams.

1.8. Readings

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This section contains documentation that participants need to read and

comprehend in order to enjoy the game. The generic reading materials
include this decision-making guide and a case description. Instructors can
also upload additional materials here.

The case description gives information regarding the business case that is
being played on the course. It gives a general understanding of the company,
industry, trends and challenges.

1.9. Forums

The forums are a great place for players to contact their instructors or fellow
players, especially in situations where face-to-face time is limited.

There is a Team Forum, a Universe Forum and a Course Forum. The Team
Forum allows your team members to see posts and reply to them. The
Universe forum only exists if multiple universes feature on the course, and can
be seen by all players in the respective universes. The Course Forum is
available for every player registered on the course.

Instructors can view and reply to forum posts in the three sections. As such,
the Course Forum is a good place to ask questions that everyone on the

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course can benefit from, while the Team Forum is the ideal place to discuss
sensitive team-related issues.

Players will be notified by email whenever something is posted on their team

forum area (unless they choose to disable this function in the Profile section).

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2. Introduction
The following chapters will walk you through the products’ journey from
creation to end-user. Your job is to assess which is the best setup for your
products and company.

2.1. Market introduction

The image below gives a general overview of the company’s supply chain.

2.1.1. Company

The simulation begins at the start of the newly established company’s first
year of operations. The product offering consists of sodas with a variety of
features. The products to be sold are ordered from a production company of
the group and actual production decisions are thus not part of this simulation.

2.1.2. Products

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The company is able to offer a product portfolio of up to 6 differentiated

products. The products can have a varying selection of attributes, physical
design, and additional features.

2.1.3. Markets

The company can operate in two geographically separate markets. The

markets are of different size and have different growth rates. With each
product, the team is able to decide whether it will be sold in a single market or
in both markets. Selling a product in two markets yields higher economies of
scale with regards to savings, but the positioning might be suboptimal for
products that are offered to a larger, more heterogeneous clientele.

2.1.4. Distribution channels

The company utilizes three different distribution channels: Convenience

stores, Hypermarkets, and On-trade. Companies can allocate their efforts
towards the visibility and presence in each channel type. The distribution
channels are similar for both markets, but they can be prioritized separately
for each product offering.

2.1.5. Customer segments

There are four customer segments: Easy Living, Experiencers, Hedonistic and
Thinkers. The segments react to your actions with different sensitivities to
price, features and advertising. Moreover, they each favor different
distribution channels from which to purchase products. The customer
segments are similar for both markets, but they can be prioritized separately
for each product offering.

2.2. Demand
The decisions of one company affect all the companies’ outcomes in the
market. Products that are very similar decrease their respective market
shares. In other words, very similar products cannibalize each other since
there is significant overlap regarding their customer bases. Advertising and
channel investment expenditure have a long-term influence on demand, but
this diminishes over time.

2.2.1. Total market size

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The total market size is dependent on the following four factors.

Market growth rates

Average price level in the market
Average level of advertising
Number of differentiated products available
The ability of a single company to affect a market's total demand is minimal
compared to its ability to affect their own market share.

2.2.2. Companies' market shares

The market shares are dependent on:

The relative level of prices

The relative level of advertising
The relative level of channel investments
Product attributes

2.3. Winning criterion

The goal of the simulation is to maximize the share price at the end of the
game. The share price is primarily affected by the level of earnings, as well as
R&D activities and the capability of the management team. Reasonable R&D
investments are a signal of future favorable growth. The management's
capability is assessed by its long-term performance in terms of being able to
make sensible decisions in different situations. Therefore, all the rounds have
an impact on the share price.

The distribution of sales between the segments and markets has a slight
effect on the share price. Strong positions in segments or market areas of
rapid growth are accounted positively. However, markets associated with
significant growth potential tend to be riskier due to several uncertainties. The
share price is also affected to some degree by marketing communications.
Advertising has a long-term effect on success as it increases market
awareness of your products. Similarly, a team’s channel investments can
improve channel coverage in the long run. Thus, investors tend to favor
companies that commit to proper long-term expenditure towards marketing
communications.

2.4. Successful decision-making flow

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These instructions will help you as you go through the decision-making tool
for the first time. When you are more familiar with the model, you can make
decisions as you prefer.

The analysis of the previous round’s results is an integral part of the decision-
making process. When making decisions towards the first round, please
consult the market research report available in the Results section. This will
give you some hints as to how you should proceed with your decisions. You
are able to find all the results for every round in the Results section.
Remember to review budgets periodically to see the effects of your estimates
and budgetary decisions.

2.5. Best practices for good teamwork

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For each round, appoint a "CEO" who is ultimately responsible for

coordinating the team effort and submitting the final decisions. Circulate the
CEO role from one round to another.
Pay special attention to timing. Each team member can work independently,
but be sure to coordinate efforts for maximum synergy.
Use the Team Forum to exchange ideas about strategy and decision-
making. The forum will store your correspondence so that you can refer to it
later on while deciding how to implement your strategy.
Agree on an internal deadline for each round, by which time each team
member will have made his/her own decisions and suggestions. This
deadline should leave enough time for the team to select the optimal
decision prior to the actual deadline.
Use the Decision checklist to inspect and select the final team decisions.
Here you can see all team members' decisions side by side. You can also
access each team member's Student Decision Area. You can use a team
member's decisions set as the starting point for the team decisions, and
then make the necessary adjustments. You can also directly edit team
decisions in the Team Decision Area.

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3. Market outlook

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1. Market outlooks
It is essential to read the “Market outlook” before you start to
make decisions. It contains important information on current
market trends and possible future developments.

2. Total market size estimate

The expected growth of demand and total market size are
shown in a graphical format. There is a separate graph for both
market areas.

3. Parameters
The simulation parameters are presented here. Some of them
are market specific while the lower part of the table represents
the global parameters. You can take advantage of this
information when appropriate, such as when launching a new
product or updating an existing one.

Food for thought

The information presented on the page includes forecasts for the year,
which tend to be accurate. However, the market sizes are impossible
to forecast entirely accurately since other factors, such as the
companies' product offerings and pricing, will affect demand.

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4. Products

Product attributes are important determinants of demand. Decisions

regarding the product portfolio are challenging because different customer
segments respond to product attributes in different ways. The products are

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defined in the Products page.

4.1. Product portfolio

There are six product slots available for each team. The number of products
offered by a team is one of the most important aspects of a successful
product portfolio. It is recommended to increase the number of products in
your portfolio gradually as the markets evolve. However, a more aggressive
strategy might work in some situations. The decision to (re-)launch a product
or withdraw an existing one is made by toggling the market buttons. You can
either select one of the markets, both of them or neither of them. If you have
not selected any market, the product will not be available for purchase.

1. Competing products
This section provides an overview of how the products for each
market area stacked against each other in the previous round.
You can select an individual product to inspect it in more detail.

2. Packaging focus
Packaging focus plays an important role in product
differentiation as the tastes of customer segments differ from
one another. Therefore, review the results carefully after each
round and try to figure out the latest trends.

3. Product name
Each product can be named for easier identification. The name
has no effect on demand or cost.

4. Product markets
The markets covered by each product are decided by clicking on
the respective market. You can place the product in both
markets by selecting both market areas.

5. Product upgrade
You do not have to modify the product characteristics for every
round. When products are modified, the production line will
incur extra adjustment costs. If you are satisfied with certain
products that were offered during the previous round, it is
recommended to maintain the same product attributes. This will
avoid the incurring of further production line costs. You can
prevent making accidental changes by toggling the selection to
Old, which will enforce the product characteristics from the

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previous round.

6. Additional features
Use the feature icons to implement up to five features for each
product. Highlighted icons indicate selected features.
Remember that different segments have different sensitivities to
demand regarding features and adding new features will
inevitably increase costs. The feature selection also limits the
maximum levels of variety and quality for that product.

7. Product attributes - Variety and Quality

Different customer segments appreciate product attributes in
different ways. However, it is safe to say that, ceteris paribus, all
segments prefer products with greater variety and quality. On
the other hand, the greater the variety and quality the higher the
unit cost. The idea is to therefore find a balance between the
level of attributes and the appropriate unit cost.

The attributes can be set to the maximum level dictated by the

competence of the company, which is in turn indicated by the
competence indices. The initial level of competence indices is
100 for both attributes. Index figures beyond 100 represent
beverages with greater variety and higher quality. By investing in
research and development, companies are able to launch
products with variety and quality indices that go beyond 100.

8. Capability usage
Trade-offs are present in the planning of a product. Each of the
features affect the taste and other characteristics of the
beverages. As a result, the implementable product quality
decreases in line with the company's competence index as you
add more features. Moreover, each feature entails various
regulatory requirements and affects the overall variety potential.
Therefore, the maximum attainable variety decreases every time
you decide to implement a new feature.

The capability usage indicator shows the current level of

capability implementation as a proportion of the theoretical
maximum (100%). If the capability usage index is close to 100
and you want to add a new feature, you have to decrease the
product attributes in order to implement new features.
Alternatively, you might have to remove other additional
features.

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The system continuously calculates the capability usage index

and does not allow decisions that would result in an
unachievable capability usage.

9. Fixed production costs

Presence in a market area creates a constant amount of fixed
administration costs per market area. Furthermore, additional
fixed costs depend on the number of products offered in a
market, with a constant amount incurred for each product. In
short, the more products you offer in a market area, the more
administrational costs you incur.

Launching a new product, or altering an existing product,

requires certain adjustments to the manufacturing facilities and
production processes. These adjustments result in certain fixed
costs that are called production line costs in this simulation. You
are able to avoid these costs by maintaining the same product
attributes from the previous round. Therefore, long-term plans
regarding product portfolio often help companies to save money.

10. Supplier selection

Here you get to select the raw material suppliers used by your
sister company in production. The suppliers have differing cost
levels that affect the unit costs of your products. Furthermore,
each supplier varies in both quality of the raw materials and
sustainability of their activities, creating tradeoffs between
costs, sustainability, and quality. The appreciation for supplier
quality and sustainability varies between the customer
segments, but in general, each segment values better quality
and sustainability. Similarly, your supplier will affect your ESG
score. More information regarding the customer preferences and
ESG scoring can be found in the Marketing research document.

You must choose at least one supplier, but you can also choose
two, in which case the cost level and the quality and
sustainability scores are a simple average of the two suppliers.

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5. Markets
After designing a product portfolio, it is recommended to continue with the
marketing communication strategy. By clicking the Markets tab, you are able
to access the marketing communication and pricing decisions.

1. Product selection
The Products page makes it possible to select a different set of
products for each market. If a particular product is set to be

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offered in both markets, it can have different pricing, advertising

and channel investment decisions for the two markets. In other
words, if the company chooses a full portfolio for both markets,
decisions still need to be made for all 12 product offerings.

2. Product information
The most important product attributes are displayed in this
section. The interface automatically updates the information as
you make decisions regarding the products.

3. Charts
The simulation provides useful information about sales
distribution that will help you in your decision-making. The
information is displayed across three tabs.

4. Pricing
The company is able to set the prices for all its products in both
market areas. Therefore, the same product can be sold at
different price in different markets. Note: Price sensitivities can
vary between different markets and segments.

5. Sales forecast
A sales forecast is an estimate rather than an actual decision.
Sales forecasts play a crucial role regarding budgeting. The
more accurately you are able to estimate demand, the better
your standpoint for making other decisions.

As well as providing an estimate, the sales forecast will have a

slight effect on the products’ unit cost. This is attributable to the
fact that it is also a basis for the order made to the production
company. Naturally, the production company adjusts their output
to match demand. However, the greater the difference between
forecasted and actual demand, the greater the increase in unit
costs as a result of last minute adjustments.

6. Advertising
The company sets an advertising budget for every market,
product and segment. Advertising that is set to a segment will
always spill over into other segments. Advertising is a form of
pull marketing directly aimed at end customers. Advertising
expenditure has a long-term effect on demand.

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When making decisions regarding advertising, pay attention to

the sales margin that you are expected to generate for the
product in each specific market.

7. Channel investments
Channel investments are allocated for each product in the three
available distribution channels. Channel investments are
examples of push marketing that are directed at the distribution
channels to achieve broader store coverage and higher selling
motivation. Like advertising, channel investments have a long-
term impact on demand.

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6. Corporate
Under the corporate tab you will find decisions regarding labor policies and
data collection.

1. Labor policies

Here you can set company-wide labor policies. Each of these

decisions can improve your public image and product demand,
but there are always drawbacks in the form of increased costs.
The customer segments value the labor policies differently. The
labor policies also affect your ESG-score. More information
regarding the customer preferences and the ESG-scoring can be
found in the Marketing research document.

2. Personal data management & Sustainability certifications

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Part of the marketing strategy involves the companies’ setting

policies for collecting and handling data. Personal data
management can improve your product demand. However, there
are always drawbacks, in the form of increased costs. Also,
collecting data without compliance negatively affects your ESG-
score.

You have the option to get a sustainability certification for your

company. There are three levels of certifications: bronze, silver,
and gold. You can acquire a certain certification if your ESG-
score is good enough. Note that the sustainability certifications
are in effect only for the round they are acquired: the following
round you must decide if you want to get a certification and pay
the cost, given that your ESG-score is high enough. A
sustainability certification will affect the demand of your
products positively. The reaction to certifications varies between
the segments. More detailed information about the customer
preferences can be found in the Marketing research document.

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7. Research and development

Research and development plays an important role in the simulation as a
determining factor regarding the level of sophistication in your products. In
addition to being affected by R&D investments for the current round, the
competence indices will respond to company-specific competence indices
from the previous round, as well as the average level of competence in the
markets. It is always less costly to develop pre-existing market competence
than to create entirely new competence.

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1. Team’s own R&D investments

Here you can decide upon the R&D investment for this round. By
investing in R&D, the competence of each product attribute can
be increased separately. The funds allocated will reap profits
from the next round and forward, when the improvements will
become available to production lines.

2. Change in product attribute competences

This graph gives you information regarding the changes in
maximum competence indices of your team and those of other
competitors. It is important to plan a long-term strategy and
analyze the competition’s investment behavior.

3. R&D investments in the market

This graph presents the cumulative expenditures in R&D of your
team and the competitors. While it does not explicitly tell you of
the direction of their development, it will give a rough estimate
of their overall expenditure trend.

Food for thought

Research and development investments are very strategic in nature

and it is difficult to apply any exact investment calculation method. At
best, calculations include heavy assumptions and uncertainties.
However, when considering R&D investments, you should take into
account the number of products you would need to sell in order to
recover the money being spent on development. It is easy to lose
substantial amounts of money with careless research and
development expenditure.

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8. Projections
You can easily access the projections from any decision making page by
selecting the Projections button in the top-right corner of the page. They
continuously update as you make decisions or estimations and form the
projected results for the round. The actual results calculated at the deadline
will differ due to estimations never being entirely accurate. Projections are
divided into four main sections: Income Statement, Balance Sheet, Ratios and
Segment-specific overviews.

8.1. Income statement

Here you can follow the group's projected profitability, both as a whole and

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for each individual area. Any losses from previous rounds are carried forward
as per the "loss carryforward" principle. Thus, even heavy losses may level
out during later rounds, as future incomes incur lower taxation. Deferred taxes
do not expire – for example, potential losses made during the first round will
continue to be deducted from taxes until all losses are covered.

8.2. Balance sheet

The Term of payment decision area allows the team to set the payment period
that will be applicable to all customer segments and market areas. A longer
collection period has a small positive effect on demand but it also increases
the amount of Accounts Receivable. Receivables and payables are
automatically calculated as a percentage of sales and production costs. Loans
are automatically taken if the company does not have enough liquidity to run
operations.

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Food for thought

Your goal in the simulation is to maximize the shareholder value. With

this in mind, you should aim to run the company with as tight a
balance sheet as possible, without jeopardizing current profits and
future growth opportunities. If you can generate the same profit but
with a lighter balance sheet, you have utilized your assets more
effectively and thus need less money from investors.

8.3. Ratios

The Ratios page shows key financial figures that the team can use to assess
the effectiveness of company operations.

8.4. Segment-specific overviews

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The segment-specific overviews provide a one-glance summary of the

products offered, with a separate tab for each market segment, as well as a
tab for a combined summary of them all. You can view each product’s design
and the main figures for margin calculation.

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9. Results
When each round’s deadline passes, the results will be calculated on the
basis of the teams’ decisions, and divided into different areas of interest. The
following chapters will give further insight to these sections.

9.1. Summary

A set of key financial figures has been selected to give the participants a

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quick overview of the performance. The calculation of financial ratios is based

on the following well-known equations.

Gross profit
Gross prof it, % =
Total sales

Operating profit
Operating profit, % =
Total sales

Net income
Return on sales, % =
Total sales

The Summary page provides participants with information regarding the

companies’ competence indices. As previously mentioned, investments into
research and development affect the competence indices with a delay of one
period. Therefore, both the previous and following rounds’ competence
indices are shown.

9.2. Market research

Market research reports outline the performance in each geographic area with
regards to sales and product characteristics. In addition, there is a graphical
presentation of linkages between product awareness, buying intentions and
final sales.

9.2.1. Market research reports

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The market research report can be adjusted according to your requirements

by using the filtering tools on the first Market research page. After you have
set the desired filters, press Compare to move to a more detailed view.
Pressing Compare when no filters are set will show all the details.

The following product details are presented in these reports.

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1. Product characteristics
Detailed information about product characteristics enables
teams to analyze the key success factors with each segment
and target market area.

2. Price
While the product features help build customer interest, a poorly
set price can undo all the good work.

3. E-score
For each of your product, the following factors are compared to
the other products on the market to derive the E-score:

Plant-based packaging
Packaging focus
Quality of supplier
Sustainability of supplier
Product complexity
The scores range from 1 to 10, 1 being the worst and 10 being
the best. If your product is more sustainable than the other
products in the market on average (e.g., better quality and
sustainability of suppliers, lower complexity, more sustainable
packaging focus etc.), you’ll get a better score for the dimension
in question. The final E-score is a simple average from the
individual items.

4. Sales
In addition to total sales, the composition of sales by segment is
presented. Please remember that high sales numbers do not
necessarily mean high performance. Proper pricing is also
required.

5. Market share
The product market share is presented separately for each
segment.

9.3. Market specific Awareness, Intentions and Sales

This section provides charts to compare the general position of the team’s
products against their competitors in each market area.

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9.3.1. Awareness/Sales

The sales figure is the actual sales figure (or demand as they are equivalents).
Awareness is measured and portrayed on the same scale, meaning one point
of awareness indicates one person who is aware of the product.

The ratio is affected by advertising. On average, awareness figures are about

five times greater than sales figures. Awareness is affected by the same
advertising efforts that are used to calculate the actual demand for products.
The higher the awareness figure is, the more likely it is that the marginal
benefit of advertising is negative. There is no optimal position in the chart.

9.3.2. Intentions/Sales

Intentions are measured and portrayed on the same scale as sales, meaning
one point of intention indicates that there is one person who intends to buy
the given product.

The intentions/sales ratio is affected by channel investments. On average,

intentions are 12% higher than sales, meaning there are more of those who
eventually do not buy the product than those who intended to buy something

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else. Intentions are affected by the same decisions as sales, except for
channel investments. Intentions can be seen as a kind of demand and channel
investments cause the demand to actualize as sales. The lower the channel
investments are, the higher the intentions to sales ratio is. The higher the
intentions to sales ratio is, the more likely it is that the marginal benefit of
channel investment is positive. Sales can exceed intentions if the product’s
channel investments are high and other demand-generated products are not
readily available in the channels due to competitors’ low channel investments.
There is no optimal position in the chart.

9.4. Market overviews

The Overview pages provide simple graphical information regarding the
companies’ operations, as well as some general characteristics of each
market area. The pages are divided into four sections: Best-selling products,
Market shares, Average prices per segment and Sales and profitability.

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The Best-selling products section shows the available products in the

market area, and their unit sales for each segment.
The Market shares section combines the unit sales of each segment, and
shows each team’s relative share on the market area.
The Average prices per segment section combines all the products sold in
the market area, and calculates their averages for each segment.
The Sales and profitability section gives the total sales volume as well as the
average operating profit for the market area.

9.5. Sustainability

On this page you can view the company specific ESG scores. The team
specific Environmental scores are calculated as a weighted average of your

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product-specific scores. Each score is weighted with the share of sales of the
product. For example, consider a company with three products. The product-
specific E-scores are 5.60, 7.86 and 4.64, and their shares of the sales are
30%, 30% and 40% respectively. The company specific E-score would be
5.60*0.3 + 7.86*0.3 + 4.64*0.4 = 5.89.

The Social and Governance scores are calculated based on your decisions
regarding labor policies, employee diversity and employee satisfaction, as well
as data collection. Further information about the scoring can be found in the
Marketing research document.

On the Corporate page you can find information regarding supplier selection
and corporate policies of each team.

9.6. Financial statements

Financial statements are displayed via Income Statements and Balance Sheet.
Income Statements are in three different variations: one consolidated view
and two market area-specific views. The consolidated Income Statement
gives the overall picture while the market area-specific Income Statements go
into detail regarding product levels.

9.6.1. Income Statements

There are three different income statements: one for each market area and
one for the combined results. The pro forma reports, called "Income
statement, Market 1" and "Income statement, Market 2" provide information
about the financial performance in each separate geographical area. "Income
statement, Total", on the other hand, depicts the group-level performance
with both geographical areas combined. Pro forma reports for individual
markets provide participants with complementary details and actual group-
level performance is not necessarily directly observable from them. For
example, certain group-level expenses are not allocated to market areas at all
and, as a result, only appear on the official income statement. This section
presents the reported income statement items.

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1. Product sales
Product sales show the company’s total sales revenue from the
market. This item is a direct indicator of company size. Pricing
and positioning are the main factors influencing the product
sales. Generally speaking, greater advertising expenditure and
channel investments also result in larger sales.

Different strategies can be taken in the simulation. Firstly, a

volume-directed strategy, based on economies of scale in
production, enables lower pricing. Companies that select this

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strategic approach take the stance that low pricing is completely

offset by high sales volume and that satisfactory profitability can
be achieved as result. On the other hand, companies might also
select premium pricing that depends on the launching of new
products with advanced characteristics. This position predicts
that the higher price level covers the high production costs
despite relatively low sales volumes. Which of these two
strategies, or any intermediate strategy, is more successful
depends on implementation and market development. The
difference of price sensitivities in relation to segment size is an
especially important determinant of strategic success.

2. Variable costs
Variable production costs, i.e. unit costs for each product, form
the majority of total variable costs. Unit costs are subject to
economies of scale, so that the larger the production volumes
for a product, the smaller the unit cost. Therefore, companies
may benefit if a product can be sold in both markets. The initial
sales estimates are a basis for the order made to the production
company. The production company ultimately adjusts its
production to match the total demand. The greater the
difference between sales forecasts and actual demand, the
greater the increase in unit cost owing to necessary last-minute
volume adjustments by the production company. It should be
noted, however, that the effect of poor forecasts on unit cost is
not very dramatic; a few percentage points at most.

3. Administration
Presence in a market area creates a fixed amount of
administrational costs per market area. Further additional fixed
costs depend on the number of products offered in a market,
with a constant amount charged for each product. In short, the
more products you offer in a market area, the more
administrational costs you incur.

4. Production line costs

Launching a new product and/or altering an existing product
require certain adjustments to manufacturing facilities and
production processes. These adjustments incur certain fixed
costs called production line costs in this simulation. You can
avoid these costs by keeping product attributes unchanged from
the previous period. Therefore, long-term plans regarding your
product portfolio often help you save money.

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5. Advertising
Advertising expenditure is entirely under the management's
control. The amount spent on advertising should be in line with
the sales volume and gross profit. A useful rule of thumb is:

Advertising budget = Pre-advertising unit margin x Total unit

sales x Estimated advertising elasticity

If, for example, advertising elasticity ranges between 0.1 and 0.3
depending on segment and market area, a reasonable
expenditure on advertising should average 10-30 % of the
product’s contribution margin. Nevertheless, alternative
strategies may also result in favorable results depending on
market development. For example, successful companies may
adopt an aggressive strategy and invest relatively large sums in
advertising when launching new products. This can help create a
positive product image that has a long-term effect in the minds
of customers. Despite the long-term impact, all advertising
costs are expensed during the period when the investment is
made.

6. Channel investments
As with advertising, channel investments are completely under
the management’s control. The channel investments should be
in line with the management’s vision and chosen strategy.
Despite channel investments having a long-term impact on
demand, prudent accounting policies mean they are fully
expensed during the period when the investment is made.

7. Research and development

In this simulation, all research and development costs are
expensed against profit in the year the investments are made.
R&D is a long-term investment in nature but it is also a risky one
with an uncertain payback. Following a conservative approach to
accounting, the company has decided to expense investments
immediately. As a consequence, profit for the year may fluctuate
depending on the intensiveness of research and development.

8. Market research
This is a fixed cost that cannot be avoided. Companies are
committed to incurring this cost in order to receive market
research reports.

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9. Interest income
Companies earn interest income on cash and bank receivables.

10. Interest expenses

Debt capital, i.e. loans from financial institutions, results in
annual interest payments. The interest rate on loans directly
affects interest payments and the prevailing rate is visible on the
market outlook page.

11. Operating profit

Operating profit, or earnings before interest and taxes (EBIT), is
indicative of the company's operating efficiency. Generally, the
team that has the highest operating profit relative to the capital
employed performs the best in the simulation. However, it
should be noted that in the short run, i.e. one or two periods,
differences in marketing and research and development
expenditure greatly affect the operating profit. Fluctuations
caused by these factors tend to smooth out towards the end of
the game as companies mature.

12. Direct income taxes

Multinational companies are usually subject to numerous tax
codes and rates. In general, different countries tax the
companies based on the operations located inside their borders.
In reality, international conventions and the general principle of
double taxation avoidance increase the complexity. Cesim
Marketing, however, is a simulation, and we have decided that
group-level earnings are only subject to a single tax rate. This
simplifies the financial reporting.

Another factor that affects income taxes is tax loss

carryforwards. This means that if a company has made losses in
previous years, it will only pay taxes after reaching a positive
level of cumulative profits.

13. Profit for the round

Profit for the round is calculated by subtracting net financing
expenses and income taxes from operating profit.

9.6.2. Balance Sheet

One of the financial reports is a consolidated balance sheet that combines the

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information from both market areas. The Balance sheet enables participants
to observe companies’ solvency and the development of capital structure.
Simplified financial reporting applied in this marketing simulation means that
only the necessary and relevant items are presented.

1. Accounts receivable
Accounts receivable is the amount that customers owe the
company. Sometimes called trade receivables, they are
classified as current assets. To record a journal entry for a sale
on account, one must debit a receivable and credit a revenue
account. Companies are able to affect the item by adjusting the
term of payment.

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2. Cash and cash equivalents

Cash, and cash equivalents, define the company's liquidity. The
company carries at least a minimum level of cash on the balance
sheet at all times. Companies earn interest income on these
liquid funds. The interest rate is the same for all companies in
the markets.

3. Share capital
The amount of share capital reported on each company’s
balance sheets only accounts for the initial amount for which the
original shareholders purchased the shares from the issuing
company. Obviously, any price differences arising from price
appreciation or depreciation in the secondary markets, i.e. share
price movements, are not included. The number of shares is
fixed in this simulation and the share capital will therefore remain
unchanged throughout the simulation.

4. Retained earnings
Profits from previous periods are visible here. High retained
earnings are a clear sign of long-term profitability.

5. Profit
Profit is simply the bottom line in the same period's income
statement. High profit, in turn, is a sign of short-term
profitability.

6. Loans
The system will automatically raise loans to sustain liquidity and
strengthen the financial position if cash inflows from operations
are weak. Naturally, these liabilities bear interest.

7. Accounts payable
Accounts payable is a file or account that shows the amount of
money that a company owes to suppliers. All companies make
their purchases according to the same terms.

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