ARCHIVES: Quarter 2 Year 2019

ADMIN Notes:

1. If you have not already done so, your firm must remember to set all change variables to ZERO to maintain "Current" numbers listed in the decision menus. Stock Issue, Long Term Loans, sales rep Salary and Commissions must be set to zero to maintain existing numbers. If you want to increase, enter the amount by which you want to increase or (-) to decrease current numbers.

 

2. To access the chat room/message board forum, please request the general forum password from your simulation administrator, Kristi. Kristi will send you the general forum password that will allow you to enter the platform. You may then register for an individual firm account with the forum to post messages or enter the chat room. The chat room/message board forum is how your simulation administrator Kristi will make special announcements mid-week, so it is important that all firms have an account set up.

 

3. Remember the importance of Quality Control (QC) in the Scent Industry. In the Scent Industry, QC is as important to branding a product as advertising, pricing, and sales reps. Enter the QC as a total budget with a percentage of the budget to be directed to Product 2. To ensure a consistent level of quality from quarter to quarter, be sure to BASE you budget on a per unit value (new purchases, units produced during the quarter, and any units still in inventory from previous quarters).

 

4. To request a Special Report, please contact your simulation administrator, Kristi. The Special Report contains additional reporting data on all firms within a given market group (ROI, ROE, Current Ratio, Production Efficiency Factor, Average Compensation, and more). The report is updated each quarter with new data and we do not archive old reports, so please request the special report for a given quarter before the following quarter's deadline, or the report may not be available. There is a $2000 simulation dollar fee for each report, billed as a miscellaneous expense in the following quarter.

 

ECONOMIC NEWS:

GDP grew nearly 2% in the quarter.  It appears those economists predicting high rates of growth to be accompanied by serious inflation were correct.  Politicians in NAFTA and the EU are becoming more sensitive to inflation’s serious threat.  Most people on retirement incomes and pensions have some cost of living adjustments.  However, the increases are generally capped at 3% or less per year.  It appears that in 2019, a 3% COLA will not be sufficient.  Given that many are already being pressed to cover heating and medical bills, a ‘quiet’ crisis among the aged population is upon us.

 

Central banks keep absorbing excessive liquidity in the system.  T-Bill rates again moved up another ½%.  This is not good news to cash strapped firms engaged in major expansions or needing additional operating cash due to increased sales.  The exchange rates remained fairly stable.

Labor negotiations are underway in many NAFTA industries.  Unemployment is down to acceptable levels so workers, especially those in unions, are ready to push for a ‘fair’ wage.  There have been some protests about rising costs and low wages throughout the EU.  As of yet, EU unions and political parties have not publicly addressed the issue.


  

INDUSTRY:

 

A market research report attempted to predict demand from retail stores for scents in Q3 and the all important Q4 holiday period.  The study found most stores, including chains, anticipate the best sales level in a decade.  Many expect to place additional orders in Q3 to increase inventories going into their normal Q4 buying pattern.  Manufactures and distributors should prepare for some increase in Q3 sales due to inventory buildup of retailers.  This buildup, most likely, will be one time only and will not detract from normal Q4 sales.  Q4, 2019 demand estimates compared to Q4, 2018 follow:

NAFTA
P1 = + 7%
P2 = + 4%


EU
P1 = +10%
P2 = +20%

 

Excluding EU P2, the estimates seem reasonable given the growth in GDP and increases in disposable incomes.  The reason for the sharp increase in P2 demand in the EU was not explained in the research study.  It is not known if the increase was simply inventory related or also included anticipated increases in consumer demand. 

 

It should be noted retail store managers thought access to credit is going to be limited due to high interest costs.  While they are betting on consumers using their credit cards over the holiday season, they do think the growth in the economy and consumer spending will be sharply curtailed in 2019.  Note that this means a slowing of growth to a moderate level, not a downturn in demand.

 

Regarding raw materials, prepare for a sharp increase in Q4.  Type 1 could jump by a dollar per unit and Type 2 by $.45.  The increase is due in part to new labor and transportation costs.  Another factor is the sudden increase in demand.  As firms ramp up production, they require a much higher volume of raw materials.  The raw materials industry has a bit of a bottleneck in this regard.  The situation should work itself out next year and prices of raw materials could retreat somewhat.  This report suggests the management team consider advance purchases of raw material … as made possible by the financial officer, in consideration of other financing obligations and possible deterioration of financial ratios.

 


 

CONTRACT:

 

Peacock is now closed to all firms. If your firm does not have a manufacturing plant to produce your own products then you will need to purchase finished goods from other firms. If you have not already done so, you will need to set up an individual account in the chat room/message board system. You may ask your professor or simulation administrator for the general forum password.


STOCKS:

     List of firms in order of net present value 

             Stock No.    NPV    Index 
			      46        0.78      1   
                56        0.76      2   
                51        0.49      3   
                35        0.43      4   
                53        0.42      5   
                22        0.36      6   
                44        0.22      7   
                32        0.20      8   
                23        0.13      9   
                34        0.09     10   
                43       -0.14     11   
                33       -0.15     12   
                21       -0.15     13   
                52       -0.21     14   
                26       -0.32     15   
                24       -0.34     16   
                41       -0.69     17   
                54       -0.71     18   
                31       -0.90     19   
                45       -1.64     20   
                42       -1.79     21   
                36       -2.01     22   
                55       -2.50     23   
                25       -3.22     24   


Stock      D  a  t  e  s
        20184  20191  20192 
=====  =====  =====  =====  
   21    2.82   3.01   2.94 
   22    3.11   3.49   3.78 
   23    2.65   2.90   3.07 
   24    2.91   2.87   2.83 
   25    4.40   2.32   1.30 
   26    3.08   3.05   3.04 
   31    2.77   2.39   2.06 
   32    2.62   2.86   3.11 
   33    2.85   3.02   2.98 
   34    3.18   3.56   3.36 
   35    2.67   3.01   3.27 
   36    3.65   3.30   1.81 
   41    3.08   2.85   2.64 
   42    4.03   3.12   2.21 
   43    3.83   3.54   4.07 
   44    2.89   3.19   3.43 
   45    2.86   2.18   1.35 
   46    2.75   3.53   3.64 
   51    2.69   2.93   3.25 
   52    2.91   3.09   2.98 
   53    2.84   3.04   3.59 
   54    2.42   2.75   1.89 
   55    3.55   2.47   1.16 
   56    2.93   3.59   3.82 


  Mkt    3.06   3.00   2.82 
TBill  0.0200 0.0025 0.0037 


          Stock        Shares        Closing                 
         Number        Traded         Price           Change 
         ======      ========        =======         ========
            21              0          2.94           -0.07  
            22              0          3.78            0.29  
            23              0          3.07            0.17  
            24              0          2.83           -0.04  
            25              0          1.30           -1.02  
            26              0          3.04           -0.01  
            31              0          2.06           -0.33  
            32              0          3.11            0.25  
            33              0          2.98           -0.04  
            34              0          3.36           -0.20  
            35              0          3.27            0.26  
            36              0          1.81           -1.49  
            41              0          2.64           -0.21  
            42              0          2.21           -0.91  
            43              0          4.07            0.53  
            44              0          3.43            0.24  
            45              0          1.35           -0.83  
            46              0          3.64            0.11  
            51              0          3.25            0.32  
            52              0          2.98           -0.11  
            53              0          3.59            0.55  
            54              0          1.89           -0.86  
            55              0          1.16           -1.31  
            56              0          3.82            0.23