ARCHIVES: Quarter 3 Year 2018

REMINDERS FROM YOUR SIMULATION ADMINISTRATOR

1. Peacock is now closed to all Advanced Firms. Any contracts entered with Peacock will be canceled.

2. If your firm began construction on a manufacturing plant in Quarter 1, 2018 then your plant will be ready to produce product in Quarter 3, 2018 with those hours. If you added hours in Quarter 2, 2018 the hours will not be ready to produce product until Quarter 4, 2018.

3. Firm to Firm contracts are allowed and encouraged. If your firm does not have enough product to satisfy demand you might consider using the chat room/message board to negotiate a contract to purchase finished goods from another firm. You may request the general forum password from your simulation administrator, Kristi. Note that you must NOT enter a contract with another simulation firm without having first negotiated all details and agreed ensuring both teams agree to all the terms of the contract.

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 2018, 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, 2018 demand estimates compared to Q1, 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 2018.  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 Simulation Teams. Any contracts entered this quarter and all future quarters will be deleted.

 

If your firm does not have a manufacturing plant you may negotiate with other simulation teams to purchase finished goods. You may NOT enter a contract with another simulation team without that team's confirmation of agreement to all contract details. Entering unauthorized contracts is illegal and will not be tolerated.

 

If your firm does not yet have the password for the Chat Room/Message Board forum please contact Kristi your simulation administrator for assistance.

 

*Remember that Peacock does NOT sell raw materials or plant hours. To purchase raw materials, use the "Raw Materials" decision form. These materials must be ordered one quarter in advance of using them in production. These will always be your cheapest source of raw materials.

 

To order plant hours, use the "Capacity" decision form to order stage 1 and stage 2 plant hours in the area or areas of your choice.

 


STOCKS:



     List of firms in order of net present value 

             Stock No.    NPV    Index  
                31        1.85      1   
                35        1.49      2   
                21        0.77      3   
                44        0.71      4   
                32        0.53      5   
                23        0.44      6   
                55        0.33      7   
                25        0.33      8   
                54        0.33      9   
                53        0.23     10   
                41        0.23     11   
                43        0.12     12   
                34        0.06     13   
                33        0.01     14   
                52       -0.10     15   
                24       -0.13     16   
                22       -1.00     17   
                45       -1.42     18   
                51       -2.94     19   
                42       -2.98     20   


Stock  
Number      D  a  t  e  s
        20174  20181  20182 
=====  =====  =====  =====  
   21    3.83   3.98   4.05 
   22    2.91   3.23   2.01 
   23    2.76   3.06   3.48 
   24    2.42   2.38   2.52 
   25    2.90   3.30   3.56 
   31    3.96   5.70   6.39 
   32    2.72   3.40   3.08 
   33    2.59   2.83   2.85 
   34    2.62   2.76   2.95 
   35    4.02   4.96   6.08 
   41    2.41   2.69   2.90 
   42    4.28   3.39   1.43 
   43    2.39   2.58   2.77 
   44    2.66   2.96   3.46 
   45    2.46   2.21   1.15 
   51    3.88   3.66   1.04 
   52    3.31   3.49   3.54 
   53    2.99   3.27   3.55 
   54    3.01   3.35   3.58 
   55    3.25   3.71   3.95 

  Mkt    3.07   3.35   3.22 
TBill  0.0200 0.0025 0.0037 


          Stock        Shares        Closing                 
         Number        Traded         Price           Change 
         ======      ========        =======         ========
            21              0          4.05            0.07  
            22              0          2.01           -1.22  
            23              0          3.48            0.42  
            24              0          2.52            0.14  
            25              0          3.56            0.26  
            31              0          6.39            0.69  
            32              0          3.08           -0.32  
            33              0          2.85            0.02  
            34              0          2.95            0.19  
            35              0          6.08            1.12  
            41              0          2.90            0.21  
            42              0          1.43           -1.96  
            43              0          2.77            0.19  
            44              0          3.46            0.50  
            45              0          1.15           -1.06  
            51              0          1.04           -2.62  
            52              0          3.54            0.05  
            53              0          3.55            0.28  
            54              0          3.58            0.23  
            55              0          3.95            0.24  

           Mkt              0          3.22           -0.13