Market Reports

The Market Reports contains market group information, while the Firm Reports contains information pertaining to an individual firm. A Market Report is public information, while a Firm Report is confidential.

Sales Report

Total Sales in Units: shows the total sales across the market group. The reporting is broken down by area and by product.

Total Advertising: shows the total advertising spent in this market group by product and area. This allows for some insight into your competitors' use of advertising as a marketing tool. How would you best analyze this information? What is your market share in comparison to your share of advertising within the market group?

Ending Sales Lost: shows the number of Product 1 and Product 2 sales lost in your market group. The sales lost data on your Firm Report specifies the number of units your individual firm could have sold had they had enough units to supply demand. This number is important as you attempt to forecast demand for coming quarters. Are your sales lost typical of the market group as a whole? Are you supplying the unfulfilled demand of a competitor?

Total Wholesale Orders: are the total of all contract orders for the market group. These are orders only. It is uncertain whether all of these orders have been filled. Those orders that were filled have recorded as sales for the quarter. Those orders that were not filled are recorded as backorders and sales lost. This figure is a tool which allows you to discern how many of the total unit sales in your market group can be attributed to contract sales to other firms. If you find that your market share seems to have dropped inexplicably low, you should look at total wholesale orders for your market group. It may be that one firm pushed up total unit sales through contract sales to other firms. You can find contracts for the quarter listed in the contract section of the Dollars and Scents Quarterly. Determining real market share is made more difficult when large wholesalers are present in your market group.

Average Commission: is the average commission paid per product by area. It is an important variable to consider as you analyze your competitors.

Average Sales Rep Salary: is the average sales rep salary paid by area. This is also an important variable to consider in your competitor analysis.

Average Price: is the average price being charged per product by area. It is a quick marker to determine where your firm's pricing falls within the market group. If all firms are close on pricing, the whole market group may suffer from price wars. If firms find a nice distribution from low price leader to niche, the market is more likely to have good growth.

Individual Firm Information: shows the number and name of each firm as well as the retail price each firm is charging per product by area. Also shown is the number of sales reps each firm is carrying per area. This is a good place to determine which markets your competitors are active in and what their individual pricing strategies are.

Sales Representatives: shows the number of sales representatives ready to sell on the firm's behalf next quarter. Firms often are represented by 3 to 15 sales reps in an area. If the number of sales reps is lower than it should be, assume some of your sales reps have quit.

Manufacturing Only Firms: if a firm in your market group is a manufacturing only firm selling through contracts exclusively then you may see a retail price of zero listed. This does not mean that the firm is not selling. Their sales figures are part of the total units sold listing. Wholesalers provide difficult reporting problems to resolve and it is more difficult to determine their marketing strategies. The best way to find this information is to the contracts section of the Dollars and Scents Quarterly. Find out who is selling, how, and for how much.

Financial Report

Stock Price: shows the current stock price for each firm in the market group.

The question most commonly asked about stock price is, "How is it modified?"  What determines its movement?  Firms with an excellent quarter or two of earnings may wonder why their stock is moving up so slowly. Stock prices are determined by a set of statistics as opposed to the setting of prices by supply and demand for shares in the market place.  There are two powerful ratios that dominate the share price calculation:  current debt/equity ratio but only if it exceeds 1-to-1, as it will draw down share price as the ratio increases.  This ratio is a proxy for financial risk in a firm's capital structure.

The second powerful ratio is earnings per share (EPS).  Firms with more shares must produce more earnings in order for the stock price to remain equal with firms that issue fewer shares.  A firm with fewer shares but the same amount of capital (secured in part through debt) will find stock price to be more volatile since earnings and losses will be magnified over the fewer shares.  Firms with all equity (no debt) will have little chance of bankruptcy and little chance of being in the top stock performers.  EPS is tracked over time so one quarter's sudden change in EPS will not suddenly boost or radically damage share price. Other ratios, such as credit rating and market share changes have minor affects on stock price but could have longer term impact on EPS which will have a direct impact on share price.

A good strategy to raise share price is to repurchase shares, GIVEN the firm has sufficient cash to buy back shares at the now reported price plus a premium, and a debt to equity ratio that can withstand a large reduction in the equity section.  Thus, only strong and financially healthy firms can effectively enact such a strategy.  Dividends would also follow a similar strategy.  Dividends carefully administered can raise share price and at the same time, directly add value to the shareholder as measured in the NPV ranking.

Div/Share: is the dividend per share issued for the quarter. Each firm will develop a different dividend policy which is part of the larger strategy. It is illegal in this simulation to issue a dividend with negative retained earnings. If caught, you will be fined. Retained earnings must be positive both prior to and after the dividend issue. You can only increase your dividend $0.50 per quarter. If you drop this to zero then you must begin all over again at $0.50

Net Income: is shown per firm for the quarter. Net income affects earnings per share which influences stock price. Note that earnings must be good over several quarters before you will see dramatic affects on stock price, credit rating and so forth. You cannot expect that stockholders will simply jump up and down at one quarter's good showing. They expect good returns over the entire year.

New Financing: shows the issue/repurchase of all stock. During the initial offering any amount of stock may be issued above the 300,000 minimum. Repurchasing stock is restricted to 10% of outstanding shares. It is important to monitor the stock activity of competitors as this may have a dramatic impact on stock performance.

Bonds: records bond transactions.

Plant Expansion: lists plant hours under construction. Keeping an eye on your competition is crucial. How much are they spending on plant construction in which area? What size operation are they gearing toward? Are they expanding in later quarters? It may also be helpful to identify large firms, especially firms located in low production cost areas. These firms may be excellent suppliers of product in the coming quarters.

Production Report

Raw Material Prices: is the at market price for raw materials for the quarter. If you do not have raw materials in inventory but schedule production in your plant, the goods will be made with raw materials at market price. However, you will loose 2 weeks in production waiting for raw materials to arrive.

Raw Material Prices (futures): are materials which you order in the quarter delivered to you at the end of the quarter. If you enter a decision to purchase raw materials then this is the price you paid for those materials. Raw materials futures are always cheaper than raw materials at market in the next quarter.

Raw Material FAQ: a common question arises when the raw materials futures price listed on the production report exceeds the at market price. Isn't buying futures always supposed to be cheaper? The comparison can be deceptive. What you need to compare the futures price to is the unknown at market price which will be listed in the upcoming quarter. If you find that futures is higher than the at market price listed on the current quarter report, you know that next quarter the cost of at market raw materials will be that much higher.

Other items: the rest of the production report is dedicated to individual firm plant figures. The figures themselves are straight forward. The only difficult item is the listing of new construction hours in 100's whereas everything else is listed as total hours. When these new construction hours come online they will be listed as the full amount. You should always check your firms capacity status of stage 1 and stage 2 each quarter to know if you are losing hours through poor maintenance or if you made a data entry error.

On the production report you can find information on the plants of your competitors in any market group. Let's say that you are a wholesaler with a large portion of the contract sales market. However, you have two close competitors in different market groups. Demand is not being met. You are building additional plant. You want to know if your competitors are following similar plans and to what degree. You go to the production report and "aha!" they are adding more hours of capacity and expanding into a second area.

Economic Report

Current Economic Index: is a relative measure of overall economic performance in the quarter just completed. Contrast its value to past and forecasted future values to determine size and strength of the Global Market.

Next Quarter/Year Forecast: is an economic forecast for the coming quarter. Both the economic forecast for the quarter and for the year are provided by the Global World Bank.

The Consumer Confidence Index: Price quotes for stocks of all firms in the simulation are provided in a special stock market report. The stocks within your market group are quoted in your Industry Report (see STOCK PRICE on the report). The Consumer Confidence Index goes beyond the stocks in your market group and represents all equity stocks on all exchanges in both the EU and NAFTA. The Consumer Confidence Index is a good indicator of the strength of the international equity financial markets and can sometimes be used to forecast overall general economic trends. The index will be useful when considering the issue or repurchase of your firm's stock.

Bill Rate: the international borrowing cost for the government. The Bill Rate is important, as it sets the base on most lending rates for corporations, including yours.

Prime Rate: Firms such as yours carry more risk than governments and must pay in excess of the Bill Rate. A measure of what the most credit worthy firms can borrow at is the Prime Rate. Your firm's individual credit rating is printed on your firm's confidential Firm Report. At best, your firm will be rated a "1" and at worst a "5".

The Exchange Rate: The exchange rate begins at 1 Euro Dollar per U.S. dollar for quarter 1, year 1. The exchange rate has two major impacts on the firm's international, economic environment. It affects pricing strategy in the EU and it affects manufacturing costs if a plant is built in the EU. The pricing of a product in Area 1 (NAFTA) must be in dollars and in Area 2 (EU) in Euro Dollars.

For discussion, let's assume we manufacture and sell perfume in the NAFTA region. We sell one unit (case) at $65.34 and it costs (labor and materials) $45.34 to make. The perfume then contributes $20 to the firm that can be used to pay other expenses (contribution margin).

Should you export the perfume to the EU? Let's say it costs $4.00 to ship/insure/pay the freight forwarder/and pay the import duties. You can sell it in the EU for 75EURO. Is that good or bad? If $1 can be exchanged for 1.1 EURO, a contribution margin of $22.84 is created (including the $4 cost of shipping). Much better than the $20 contribution margin available when selling them domestically. Of course, if you manufacture the perfume in the EU, there is no shipping cost, and the contribution margin rises to $26.84, given the accepted price of 75EURO (of course, labor rate for production in the EU will also depend upon the exchange rate).

Please note: the known exchange rate published on the Economic Report can be used only as a guide to help set price for the coming quarter. The exchange rate used by the Global World Bank to convert EU sales back into dollars will be the exchange rate quoted on next quarter's Industry Report.

How sensitive are contribution margins to exchange rate fluctuations? Try these two questions using your calculator (divide by the exchange rate to obtain revenue figure in the EU).

1. What if the value of the EURO rose so that for $1 U.S. dollar you could buy 0.7EURO instead of the current 1.1EURO? Keep the EU sales price set at the 75EURO. Bring your unit sale back at the new exchange rate and determine the contribution margin.

2. What if the dollar became strong, so it would buy 1.5EURO and you continued to price in the EU at 75EURO? Determine the new contribution margin.

The impact of the exchange rate on pricing in the European Community then, occurs when dollars are brought back to the US accounting system. The value of the contribution margin will change depending upon the exchange rate.

Is there a perceptible difference to the consumer in the EU? Will demand be affected by fluctuations in the exchange rate? If the exchange rate moves up or down, will it influence consumer buying patterns? The answer is, no. Since the buyers in the European Community sees a constant EURO price, there is no change in demand as long as the stated EURO price stays the same. If you move the EURO price up or down, demand will be influenced as it is in the NAFTA market.

The second impact of exchange rate changes affects those firms that elect to manufacture in the EU.

Assume labor in the brewing process (Stage 1) costs $8.20 per hour. It takes 2.5 hours of labor to complete the process. Stage 2 bottling requires much less time. Only, .6 of an hour. However, to maintain quality, those working in Stage 2 assembly must have considerable dexterity. Labor rates in stage two are therefore set at $9.80 per hour.

The total labor cost is then (2.5 X $8.20) + (.6 X $9.80) which works out to be $26.38. This is really good information, but what does it have to do with exchange rates?

Let's assume you decide to build a plant in the European Union. On EU made units sold in the EU, the firm saves the $4 cost of shipping and duties. So far so good. The workers in the EU plant, however, must be paid in Euro Dollars. At the start of the simulation, given the 1/1 exchange rate, labor rates are the same in the EU as they are in NAFTA.

Let's say the EURO appreciates in value so $1 now only buys .8EURO. The labor cost per unit used to be $26.38 or 26.38EURO. Now, the EURO cost is the same but when paid in US dollars is increased by the ratio of the change in the EURO of 1/.8 or 1.25 times. The new labor cost per unit equals $26.38 X 1.25 = $32.97. Given the additional $4 cost to get a NAFTA made unit landed in the EU, is it still cheaper to make them in the EU? At what exchange rate would that advantage disappear?

Market Index: shows the how stocks in the two levels of the simulation, the Advanced game and the Introductory game are doing on average.