BizCafe Student Manual

Transcription

1 BizCafe Student Manual Interpretive Software, Inc. Introduction... 1 Running BizCafe Each Period... 2 The BizCafe Manual... 3 Section 1: Business Essentials... 5 Management... 6 Marketing... 7 Operations... 8 Accounting...9 Planning and Integration Section 2: The BizCafe Case Location and Retail Space Layout Market Potential Documentation Accounting and Your Electronic Checkbook Starting Situation and Start-up Decisions Weekly Decisions Section 3: BizCafe Operations Guide Getting Started and Login Navigation Detail of Menu Choices Start-up Decisions Accounting Accounting-Income Statement Operations Environment Simulation Appendix A: Using BizCafe in a Group Appendix B: BizCafe Glossary Index Print Revision 4/14/2008

2 About the Author Stu James is President and founder of Interpretive Simulations, one of the leading publishers and developers of business simulations worldwide, and co-author of numerous widely-used simulation products, including PharmaSim, AutoSim, StratSimMarketing, StratSimManagement, ServiceSim, CountryManager, and MarketShare. These and other Interpretive simulations are an integral part of the curriculum at many of the world s top business schools in the areas of marketing, strategy, and international business. On the academic front, Stu is currently Visiting Lecturer at the University of Michigan (EMBA and EP programs), the Colgate-Darden Graduate School of Business at the University of Virginia (MBA Core Marketing), and the Cheung Kong Graduate School of Business (CKGSB). Stu has also served at the Allen Center for Executive Education at the Kellogg School of Business, and the China Europe International Business School (CEIBS). In addition, he has worked with American Honda, CIGNA, The Davidson Institute, General Electric, Harvard Business School, McKinsey & Company, Volkswagen, and several major college textbook publishers. Stu has extensive experience in facilitating simulation events, having directly worked with thousands of executive and MBA participants over the past 20 years. Acknowledgements The author would like to thank many people for their support in the development of this simulation. Mike Deighan, Payton James-Amberg, Karen Kelly, Kristen Knecht, Tony Naidu, Anne Louque, Michael Mische, and Clayton Shumate were all part of the development and testing team and the simulation is significantly better due to their efforts and suggestions. Interpretive especially appreciates the early users of the simulation who provided invaluable feedback. In particular, Jackie Shemko and her classes at Durham College provided a number of helpful suggestions. Thanks also to Tony Naidu and Sue Overton for the design and content of the cover. Stuart W. James July 2007

3 Introduction Computer-based simulations are a popular and useful tool for learning and applying business concepts. Simulations offer students the opportunity to experience much of the realism of making business decisions in a low-risk, experiential learning environment. BizCafe is a great way to learn about running a business. It is designed to help you learn about the challenges and rewards of making good decisions in a small, service-based business. You will learn about management, operations, marketing, and accounting by running your own coffee shop for up to 16 simulated weeks. In BizCafe, you will typically be making decisions as part of a student management team. Teamwork is increasingly important in business today, and a valuable part of the BizCafe experience is learning how to make the best decisions when confronted with several different opinions. Your group will have to decide how to sort out your priorities and objectives in the context of a limited checkbook and a changing environment. Competing in the BizCafe environment will be a new experience for most of you, and this may well be the first time you use a simulation in the context of education. Therefore, take some time to familiarize yourself with the program and manual before beginning the exercise. While working through the simulation, you will find it helpful to refer to the manual for information and tips. To get the most out of the BizCafe experience, we recommend the following approach: Read Section 1: Business Essentials Section 1 of the BizCafe manual provides a brief overview of the basic parts to running a business. You may have already covered some of this material in your textbook, but this section will provide a simple review and a good context for the simulation. Read Section 2: The BizCafe Case Section 2 of this manual presents a description of the coffee shop business and the decisions you will be making as a manager of this business. A thorough understanding of your cafe's situation will help you make better decisions. Learn How to Operate the Program Section 3 provides information on how to use the simulation software, as well as a detailed description of each menu option. While reading this section, it is best to login to the simulation to become familiar with the menu structure and options, and to learn how to operate the program. Important: There are two versions of BizCafe, a benchmark competition version and a direct competition version. In the benchmark competition version, you operate in your own BizCafe Introduction - Page 1

4 environment and set your own pace whereas in the direct competition version, your decisions will interact with other student decisions in the class, however, everyone must be on the same schedule during the simulation. Running BizCafe Each Period Here is the general process to follow each period in BizCafe: Enter Decisions Advance the Simulation After reviewing information about your business (case in the first period, reports after that), decide on management, marketing, and operations decisions. Remember to check special decisions and watch for changes in the complexity of decisions (such as multiple beverage sizes or weekend hours). This should be a team process! Once you are satisfied with your decisions, use the advance option under the simulation menu to move to the next week. If you are using the directly competitive version rather than the benchmark competitive version, the simulation will be advanced at a specified time according to your course schedule so that everyone competing in the industry will have a chance to enter their decisions. Review Results Review the results by using the various reports available in BizCafe. The simulation does not specifically tell which decisions worked and which did not. Instead, you must analyze current results in order to evaluate your success. Repeat Repeat the decision-making process for each simulated week until you have completed the assigned number of periods. At the end of the simulation, you will be able to see how your cafe performed for up to 16 weeks of operations. Competing firms will be following their own strategies and reacting to your decisions. The simulation always starts from the same position, but each game will proceed on a unique course depending on the strategy that each team chooses. This will allow competitive comparisons and illustrate how businesses can evolve differently. Using BizCafe should be a fun and rewarding experience. You will gain a practical understanding of how various factors interact and affect one another. By analyzing information, making decisions, and observing the results, you will experience first hand the challenges and rewards of running a business. BizCafe Student Manual - Page 2

5 The BizCafe Manual The remainder of this manual is divided into three sections: 1. Business Essentials Section 1 provides a brief introduction to business: what it is, why it is important and what concepts will be used in the simulation. In addition, each of the basic functional areas covered in BizCafe will be discussed. 2. The BizCafe Case Section 2 presents the information on your coffee shop in a form similar to a business school case. This will also serve as an introduction to the situation at the start of the simulation. 3. BizCafe Operations Guide Section 3 outlines the operational aspects of using BizCafe, including how to get started, the menu and help systems, and a detailed description of each report and decision screen. BizCafe Introduction - Page 3

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7 Section 1: Business Essentials Why study business? To start with, all of us interact with businesses every day. Many of us will spend much of our lives working at a business. As consumers of products and services, we decide on a daily basis whether to purchase a product or service and which particular one to choose. Some of us may decide to study business because it is a fascinating and dynamic activity that offers us good career opportunities. Others may study business because it helps us better understand how the economy operates and how our actions and decisions may affect those around us. No matter what your particular reason for choosing to study business, you will find that businesses share many common traits. These issues are common whether the business is small or large, for profit or non-profit, or provides a product or service. Businesses need to consider what they want to accomplish (objectives), whom they serve (markets and other stakeholders), and how to create and deliver value for these markets and stakeholders. Within this general framework there are many variations, but keep these simple ideas in mind as you further explore topics in business. BizCafe is an opportunity to explore business through the use of a dynamic computer simulation. In the simulation you will open and manage a coffee shop in a university town for up to 16 weeks. During this exploration you will learn about different aspects of running a business at a fundamental level and gain insights into questions such as: Who should I hire? What should I pay them? What price should I charge? How do people find out about me? What should I purchase? What equipment do I need? How do I keep track of money my revenues and expenses? Using business terminology, we might translate these questions into the different functional areas of a business at a fundamental level as follows: Management Marketing Operations Accounting = Who should I hire? What should I pay them? = What price should I charge? How do people learn about my business? = What should I purchase? What equipment do I need? = How do I keep track of money? In no way do the questions reflect the full range of issues in each of these functional areas, but they do represent a good place to start and that is the purpose of BizCafe to allow you to experience some of the issues in running a business before your paycheck depends on it! Before we go into more detail on these functional areas, we should talk about general organizational approaches used in companies. For instance, in a traditional functional organization, all of these functional managers would typically report to a President or CEO of the company. Thus, there would be a human resource manager (or Vice President), a marketing manager, an operations manager, etc. all of whom would report to the President of the company. Business Essentials - Page 5

8 However, there are alternatives to this approach such as organizing by product or service, or by geographic area, for example. With BizCafe, we will focus on the more traditional functional approach, but realize that one of the most important decisions for a company is deciding how best to be organized. The remainder of this section provides a brief description of each of these different functional areas of running a business. Your textbook and instructor will likely provide much more detail and examples, but for purposes of BizCafe, this general introduction to each of these basic functional areas will provide a helpful framework. Management Though management could encompass running the entire business (e.g. managing the business), in the context of BizCafe, as well as many business courses, management often refers to the more narrow definition of human resource management, or managing people. However, even with this more narrow definition, management is one of the most challenging, complex and important areas of running a business. Let s consider some of the key areas that (human resource) management encompasses. These include, but are not limited to, job analysis, recruitment and selection, compensation and benefits, training, and employee motivation and morale. There are many other important aspects to management, but these are common to almost all organizations, large or small. Let s take a few moments to better define each of these in a broad sense. First, within the organizational structure, what jobs need to be done? Someone must define both what general roles are necessary within the company as well as the specific tasks to be done by the employee in that role. Generally, this would be considered job analysis and would result in a series of job descriptions and job specifications. Once these are determined, the company will also need to understand how many employees will need to be provided in order to perform these functions. The expected level of work that needs to be done should drive the overall staffing level. However, determining that expected level of work is not a simple matter. Typically, a manager would look at expected sales and estimate the support necessary for that level of sales based on historical data or industry norms. It is important to remember that service quality and profitability objectives should also play a role in determining appropriate staffing levels. Once the jobs and staffing levels have been decided, the next issue for management is how to recruit and select the best employees for the jobs. Recruiting would include on-campus recruiting, internet sites, newspaper ads, job fairs, television advertising, as well as developing supporting materials such as brochures and other materials and scheduling on-site visits. Selection would encompass all the different ways of matching the best candidates for the jobs. This would include, for example candidate testing and interviewing procedures to sift out which candidates are best qualified for the job (and who are likely to accept and be retained). This brings us to the next aspect of management, which relates to compensation and benefits. This would include deciding on appropriate salaries for different positions and candidates as well as choosing different benefit options for your employees. Compensation would also include incentive compensation and bonuses. All of these decisions will impact your ability to recruit, motivate, and retain employees. BizCafe Student Manual - Page 6

9 Employees also need to be trained. This is especially important when they start, but training and education should be part of an on-going process of developing employees to maximize their potential. Employees are one of a corporation s most important assets. To not develop their skills is not only poor motivation for the employee but also often a poor investment decision. Finally, related to training and compensation is motivation and company morale. Training and compensation are two ways to provide motivation, but obviously there are many other considerations for how to improve employee job satisfaction and morale. This topic begins to bring in behavior theory, company culture, managerial styles and leadership, all of which are topics in their own right. The bottom line is that there are many factors that will impact an employee s performance. As a manager, one must take all of these into account to the best of one s abilities to bring out the best in an employee as well as meet company objectives. As you may imagine, it is a daunting task to do well. In BizCafe, management is simplified to two decisions that represent all of the above issues at a very basic level. The first decision is hiring the right amount of servers to keep your café running smoothly and keeping customers and staff satisfied. Second is determining the right amount to pay your staff (servers and managers) to motivate them and meet your financial objectives. Though simple, these two decisions will impact the performance of your business. Marketing Marketing also encompasses a wide range of activities within an organization. At its most fundamental level, marketing is the process by which a company creates and distributes something of value to its customers. Let s break this down into more manageable chunks. Create the creative aspect of marketing is what turns ideas into products and services that customers want. This would basically be the product (or service) development process. It could be something as simple as creating a new flavor of ice cream, or as complex as managing the release of a new car model. How this process occurs varies considerably. Some companies just come up with ideas and market them; others follow a very deliberate product development process. A company must balance financial risks and rewards when deciding on appropriate product development processes. However, in addition to financial trade-offs, one must also consider the company culture and management style. Distribute Another aspect of marketing focuses on how to best deliver a product or service to a customer. For instance, could the item be purchased electronically, say on a website? Or does the product need to be consumed in person (such as an ice cream cone)? Distribution covers all the issues around where a product or service is purchased and potentially consumed. Value Value refers to the relationship between the benefits of a product or service and the cost of that product or service. The benefits include not only the functionality of the product/service, but also the emotional benefits. For instance, does someone derive more emotional benefit from wearing a certain brand of clothing vs. another even if they both have the same functionality? The cost of the product or service is most often associated with the price of it, but there are other costs to consider as well such as the time it might take to consumer or shop for the product. Pricing is a complex issue as well. For instance, a company might only be able to set the price to a distributor and not the ultimate price a customer pays for a product (indirect vs. direct marketing). Consider what influence the company has over the ultimate price in this situation and how the company can adjust its policies to achieve its goals. Business Essentials - Page 7

10 Customers By definition, a customer is someone who purchases a company s product or service. But a company must think about which potential, or target, customers to seek. Who should they target in their advertising? What would be appealing to this potential customer? Customers are different and a company must take into consideration a potential customer s needs during the product development process, their behaviors and preferences when designing promotion and distribution options, and their likelihood to pay a particular price when deciding on how much to charge for a product or service. For example, a company that produces women s running shoes wouldn t target high school football players in their advertisements and ask those football players about possible product improvements! Often people in marketing refer to the 4Ps of marketing Product, Price, Promotion, and Place (distribution). You will find these concepts sprinkled about in the above paragraphs. These tend to be the focus of decisions in the marketing area, but remember that marketing is ultimately about creating something of value for a target customer. Whoever does this best is likely to have a successful business. Those who don t provide this value often fail. In BizCafe, marketing is simplified to two decisions that represent all of the above issues at a very basic level. The first decision is the price to charge for your beverage. How much are your potential customers willing to spend to experience a cup of your coffee? How will the price impact demand for your product? How do difference price points impact the profitability of your business? The second decision is how much to spend on advertising and promotion. How will people learn about your café? How can you entice them to buy from your café instead of the one down the street? These choices will also have a great impact on the success of your business. Operations In a more traditional product-based business, operations would typically encompass the areas of manufacturing (capacity and production), quality control, purchasing and materials management, and storage and distribution of the product to the channel or customer in a timely manner. This process is often referred to as supply chain management the overall process beginning with demand forecasting and ending with delivery of product to the customer. As more of the economy moves toward service-based businesses, we have to expand our view of what operations means. For instance, what would be considered operations in an organization such as a university or a hospital? When we think of service operations, the line between management and operations becomes all the more fuzzy. At this introductory level, we ll focus more on the physical plant (the café itself) and purchasing, but realize that operations management is a vast and increasingly important area of business. In order to have an effective operation or business, a business must be designed to meet a certain level of demand. This would include answering the fundamental operations question, if our organization expects some level of sales, how will we be able to fulfill it with the quality and timeliness our customers expect? Thus, operations management begins with having a good understanding of expected demand. This is not a simple question. For instance, marketing may provide a sales forecast for the next year. That is a good starting point, but how accurate are those sales forecasts? More importantly, for operations, it may not be the annual demand that is the issue, but instead, other time segments such as months, days, or even hours. Perhaps the issue is more peak demand (capacity) such as is the case for a utility company. These are the types of issues that keep operations managers up at night. BizCafe Student Manual - Page 8

11 Once demand has been considered, this must be translated into the different operational aspects necessary to meet demand such as the physical plant and equipment, amounts and timing of purchases, systems, quality considerations, employees, training, etc. Often, very complex information systems and statistical processes go into both the planning process and the day-today operations. In BizCafe, operational decisions are simplified to a few basic issues that will give you a glimpse into the challenges of operations. One set of issues centers on the café and equipment. For instance, what hours will you open? What furniture will you purchase? Which espresso machine is the appropriate choice? The second set of issues is around demand forecasting, purchasing, and inventory. Here you will make decisions about how much coffee to purchase as well as the quality of the coffee. Since coffee is perishable, forecasting demand as accurately as possible is important, as any unused coffee must be discarded at the end of the week. In addition, you will decide the appropriate approach for purchasing cups. Do you order in bulk at a lower price (with the added benefit of a logo printed on the cup) or purchase them as necessary locally at a slightly higher cost. Accounting Accounting serves two primary purposes. First, all businesses have certain state, local, and national reporting obligations. Examples of these would be yearly corporate income tax returns, as well as state unemployment, Social Security, and Medicare reporting requirements. Without accounting systems, a business could not accurately fulfill these filing requirements. Second, a well-designed accounting system also provides a manager with important information about the state of the business. This information may be in the form of basic financial statements such as an income statement or balance sheet, or they may be more specific in nature such as costing, vendor, or customer analysis reports. Another issue to consider with regard to accounting is whether a system is cash-based or accrual. Cash-based is probably the easier of the two to understand. Money that is received is counted or recognized as income or revenue at the time it is deposited. Money that is spent is counted as an expense when it is spent. An accrual accounting system is somewhat subtler in nature. In an accrual system, the idea is to recognize revenues and expenses when they are used. For instance, if a sale is made, but payment is delayed by 90 days, the sale is still recognized at the time of the sale rather than when payment is received. On the expense side, issues such as depreciation come into play. Depreciation, or expensing a purchase over time, is used for assets (items) such as computers or equipment that have a useful life of more than one year. For example, a computer might cost $1000, but the expense is spread over five years ($200 / year) because it is likely to be used for approximately five years. In BizCafe, accounting is captured in three reports. One is your checkbook. This represents your cash-based accounting system. You start out with cash in the bank from a loan. More cash comes in when coffee is sold. Cash goes out when items are purchased or when employees are paid. You may look at your checkbook at any time and it gives you an up-to-date balance of how much you have in your account, how much money was deposited, and how much was spent. In addition to your checkbook, you also have an accountant who prepares an income statement and balance sheet monthly for your café. Thus, at the end of each month, you will be able to see at a glance your revenues and expenses as well as the balances of key accounts. Though simple, these two views of your financial health will provide you with a great introduction as to why accounting is such an important tool for measuring the performance of a company. Business Essentials - Page 9

12 Planning and Integration All of these functional decisions and processes will take place in the simulation. How well your business operates will be determined by the quality of these decisions in relation to the environment (market, competition) and in relation to each other (integration). The overall planning and integration process has two basic steps: (1) analyzing the situation, and (2) choosing a course of action. This process is much more detailed and complex than the two simple steps, but if you remember that everything you are doing in business planning is part of one of these two steps, you should be better able to work through this process. Analyze the Situation As a business manager, your primary focus when analyzing the situation is to gather information to help you identify opportunities that will help your company be successful. The purpose of this information is to help you make better decisions as a manager. For instance, what information would be helpful to have when deciding about the price to charge? You might want to know how much it costs you to make what you sell (cost of goods sold), how much your competitors charge, and how customers respond to different prices. All of these would go into your decision process leading us to point number two, choosing a course of action. Choosing a Course of Action To make a good decision, three circumstances must be present. First, as discussed above, one needs to have good information regarding the decision. Second, one must have an objective. With an objective or goal in mind, one can think about how their decision would likely impact their ability to achieve their objective. Third, the person making the decision must be able to understand the information, accept the objective, and be able to discern the likely impacts of different decisions on possible outcomes. This is in no way a simple task. Typically, the person making the decision will not have perfect or complete information, but a decision still must be made. So a decision-maker must also learn how to be comfortable choosing a course of action in the imperfect world of reality while constantly looking for ways to improve their ability to make better decisions. Integration Finally, a general manager must think about integration of decisions. If we go back to our pricing decision, one element we left out was the likely impact of a change in price on the other functional areas. For instance, if you decided to lower the price by 20%, what impact would that have on demand? On your operations? On your net income? The general manager must make sure that all of these functional decisions are in line with the companies overall objectives and that all of the decisions are integrated. Next Step Now that you have some background on the general context of BizCafe, the next section of the manual will introduce you to your new business and the decisions that you will be making in the simulation. Best of luck in running your café! BizCafe Student Manual - Page 10

13 Section 2: The BizCafe Case Jane Valdez was ready for a change after 30 years of hour workdays, 6 days a week. Jane had grown up in Collegetown and graduated from the local university there, majoring in engineering with a minor in business. After graduation, she worked at Hewlett-Packard and Apple Computer in the 70s and 80s. But, like many of the technology workers of that era, she soon forged out on her own, starting several companies, failing at two, but hitting on a successful formula with her third venture, handheld computing devices for hospital applications. In 1995, she took her company public and eventually sold the company before the high tech bubble burst. Soon thereafter, she was a founding partner of a successful venture capital firm, but now she is ready to return to her roots and slow down a bit. However, she wants to share her success in a unique way, by helping college students learn about business by operating their own company. Select student teams will receive $25,000 of start-up funds to manage their own coffee shop for a year as an independent study for credit. Location and Retail Space Layout Jane studied various locations and found a good potential storefront on Main Street, not far from the business school, and on the downtown pedestrian mall. There are a number of retail establishments nearby such as restaurants, clothing shops, as well as service businesses. Map of Proposed Coffee Shop Location in Collegetown The retail space available contains 1000 sq feet with glass frontage on Main Street and 2 nd Street providing good visibility for pedestrian foot traffic (see layout). The space is next door to R.C. Fox Women s Clothing, an independent retailer catering to more upscale buyers. Across the The BizCafe Case - Page 11

14 street is a trendy restaurant, Salamanca, which is primarily a dinner destination. Next to the restaurant is Readerwise Booksellers, an independent bookstore which has been in business over 20 years. Store Layout and Nearby Commercial Establishments Rent is $24 sq. ft. / year, or $24,000 total for the year. A deposit equal to one month s rent must be paid in advance and monthly rent of $2000 is due on the first day of each month. In addition to paying rent, the lessee (your company) will also be responsible for paying utilities water and electricity. These are estimated at approximately $500/month based on historical usage of the restaurant that had previously occupied the location, but may vary based on hours open and traffic. Market Potential Jane expects the coffee shop to be a success because of the good location downtown near retailers and the business school. For instance, businesspeople might stop by on their way to work or for a meeting place, students could go between classes and at night, and local residents would find the shop a great place to meet friends or relax while they are downtown shopping. She expected long-term demand to be primarily a function of the quality of the experience (atmosphere, length of wait, friendliness of the staff, etc.) and the price charged for the coffee. The students had some sales information on a specialty drink shop that recently closed due to the owner moving to another area. Though not a perfect comparison and incomplete, Jane believed this information would be helpful to the students when trying to calculate the necessary operational capacity for the shop. BizCafe Student Manual - Page 12

15 Table of Weekly Demand (Cups Ordered) Pat s Coffee and Chocolate Week Starting Daily (M-F) Saturday Sunday Price Jan 1 st 1000 cups 750 cups 550 cups $ 3.50 Jan 8 th Jan 15 th Jan 22 nd Jane also suggested to the students that the shop could stimulate additional demand through ads in local papers and radio stations, and by offering special promotional deals. In addition, the local weekly circular has a weekly poll on many of the local businesses including two awards given to specialty drink shops. Jane knows the importance of such awards for wordof-mouth and creating a sense of buzz around a business. So Jane wanted to be sure her students were aiming to win one of these two awards. Best in town specialty drink - ambiance Best in town specialty drink - satisfaction Staffing and Operations Jane knew that the easy (and fun) part of running a business is creating the concept and getting everything set-up, but that most retail shop success, especially service oriented ones, is made in the trenches the day to day running of the business. Will her students hire enough quality staff to serve the customers in a friendly and timely manner? Will they have enough supplies and inventory so they don t run out of what customers want? Will they be able to handle the before class / work rushes? It sounds easy enough, but her students will likely need a cadre of part-time college students to work at the shop. Keeping them organized, attentive, and happy working there won t be simple. Accounting and Your Electronic Checkbook Each week you can keep track of your expenditures by reviewing your electronic checkbook. Payments are automatically made at the appropriate time based on your decisions. In addition, at the end of each month, your accountant will create a monthly income statement and balance sheet for you. Fortunately, the university was able to find a retired accountant who would provide these services to your student team for free. You can track your current cash balance at any time by reviewing the checkbook (or monthly on your balance sheet). Your daily cash receipts from sales are taken to the bank s night deposit and show as an increase to your cash balance the following morning (except Sunday). If you don t have enough cash, you may be eligible for a small business loan if you provide sufficient rationale to your lenders. The BizCafe Case - Page 13

16 Starting Situation and Startup Decisions Jane decided that it would be best if you started with some basic furniture and equipment. Fortunately, she was able to find some used tables and chairs at a local cafeteria for $2000 as well as a basic 2-cup espresso maker for $3000. This is your default start-up furniture and equipment. However, if your instructor allows, you will be able to upgrade to a nicer set of tables and chairs as well as a high capacity espresso maker as part of your start-up decisions. The new equipment may improve the operation and perception of your café. This upgrade is only available at the beginning of the simulation. The cost of this equipment will come out of your checking account as of January 1 st and be depreciated over five years. Furniture Used - $2,000 (current) New - $4,000 (optional) Both options provide sufficient seating for the shop. Used furniture is from a local cafeteria that recently closed. Your team will also need to purchase new equipment for producing your product (espresso makers or blenders). There was already a counter, sink, and enough room in the storage area for coffee beans, fruit, cups and other items necessary to run either business. Espresso Makers Duo Dual capacity (2 cup) - $3,000 (current) AutoFour High capacity (4 cup) - $6,000 The AutoFour model is potentially 30% faster than the Duo model in addition to the higher capacity. Weekly Decisions Management Managers. Each store starts with 2 full-time managers to cover Monday - Friday. The first management decision is what to pay your managers. One manager must always be on site from 1 hour before the shop opens until one hour after the shop closes. You are guaranteed to always have 2 managers, but their effectiveness (productivity) will depend upon the wages you pay them and how well you manage the server staff. Should you decide to open on weekends, a third manager will be required (and automatically hired). You must pay the same weekly amount to all managers. BizCafe Student Manual - Page 14

17 Servers. In addition, students must hire servers and set their wages. Wage rates are competitive with other shops in the simulation. Pay them less than the competition and they might be tempted to change jobs. Plus, a lower wage might not attract the best employees. Workers like to be busy, but not stressed out, so be sure to hire an appropriate number of servers to meet demand. Each server is part-time and works approximately 10 hours per week. Marketing Pricing. Coffee typically comes in three sizes: small, medium and large. A small cup is set at 12 fluid ounces and contains 1 shot of espresso; a medium cup is 16 ounces and contains 2 shots of espresso; and a large cup is 20 ounces and contains 3 shots of espresso. Each week you will need to set a price for each size. Prices must be set to such that the difference between sizes ranges from 10 cents to $1.00 (increasing with size). Jane has also set a minimum of $1.00 per cup and a maximum of $6.00 per cup. Your simulation instructor may restrict the size offerings to only a medium size serving depending on the goals for the course. Be careful about increasing prices as it may frustrate and disappoint customers, but better to have a price that works than one that doesn t cover your fixed costs. Promotion. Students may choose to advertise in one of the local newspapers or radio stations. Optionally, these ads may be uploaded to student sites on the Internet with a link from the simulation ( BizCafe News ) for everyone to view. There are three messages that may be chosen one for general awareness, one for $.50 off (print only), or a 2 for 1 coupon (print only). Operations Shop Hours: Students set the days and times the store will be open for business. The shop may open between 7-10am, and close between 8-11pm. The hours M-F must all the same. In addition, if your instructor allows, you will be able to open the store on the weekends and set those hours as well. Purchases of coffee and cups: Coffee beans are ordered weekly in bulk with any shortages made up with local purchases. Coffee quality must be chosen as well (Good Quality, High Quality, Organic). Any coffee left at the end of the week is discarded for quality / freshness reasons. Printed cups with logo can be ordered in bulk on a weekly basis as well. If the logo cups are not ordered, standard cups from a local vendor are available on an as-needed basis, but at a slightly higher cost and without logos. It is estimated that each shot of espresso requires approximately 7 grams of coffee or about 1/64 of a pound, but you may want to allow a bit extra in case your servers spill some. Small cups use 1 shot, medium use 2 shots and large cups use 3 shots. Thus, a large size would use approximately 3/64 of a pound of coffee. Once used, the used coffee grinds are discarded. The BizCafe Case - Page 15

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19 Section 3: BizCafe Operations Guide BizCafe is designed to be easy to use and is compatible with most Internet browsers. The operations guide will help you start up the simulation and provide more detailed descriptions of each of the reports and decision screens. Getting Started and Login To use BizCafe, point your Internet browser to the student login page at as shown below. You will receive your login information either from your instructor or directly from Interpretive. After logging in (and placing your order if you haven t yet done so), click on the Simulation link at the top of the screen and you will go to your course site where you can access the simulation and manual, comparative results, and other pertinent information as shown below. Click here to see simulation related information Help and FAQs Information about your order Class simulation schedule Click on the Access Simulation link in the left hand column to access BizCafe. Then choose the BizCafe Simulation link and the simulation will launch, placing you on the main page as described in the following section on navigation. BizCafe Operations Guide - Page 17

20 Navigation Each page of the BizCafe site contains an easy-to-use menu system consisting of three parts: (1) specific menu options and links to decision-making tools and input screens, found on the left side of the BizCafe browser window; (2) green navigation and general control buttons across the top; and (3) pull-down menu to show the current week in the upper right-hand corner. Navigation Buttons Café Name and User Info Menu System (6 categories + choices) Change the week view BizCafe Screen Display The left-hand BizCafe menu is divided into six parts: Startup, Decisions, Accounting, Operations, Environment and Simulation. Each part includes menu links that correspond to different reports, decisions, or actions. For example, under Startup there are links for Case and Startup Decisions. The menu system is expandable and collapsible. For instance, click on Startup, and the Case and Startup Decisions will collapse back into Startup. Note: Until you make your startup decisions, no other menu options will be available. The green navigation and general control buttons are found at the top of the window and change depending on the report being viewed. The options are BACK, MAIN, PRINT and HELP. The PRINT and HELP buttons all apply to the report currently on the screen. For instance, if you click on the PRINT button when viewing the Income Statement, the statement will be sent to your default printer. Clicking on the HELP button brings up a screen with information relevant to the page you are currently viewing. Every screen throughout the simulation has the BACK and MAIN buttons at the top of the page. The BACK button lets you reach the last page you visited and the MAIN button brings you to the homepage of the simulation that you were brought to when first entering the simulation. The box in the upper right-hand corner has a pull-down menu that lets you choose which week you would like to be looking at. It will be set to current week unless you change it. Changing this will show you your results for previous weeks once the simulation has been advanced. This can be helpful for reviewing historical information. BizCafe Student Manual - Page 18

21 Detail of Menu Choices The links on the left of the BizCafe window lead to all the information and tools you will need to analyze your current position, plan a strategy, and input your decisions. These links are divided into six categories: Startup, Decisions, Accounting, Operations, Environment and Simulation. One of the easiest ways to find out more about an option is just to try it out. If you need more information, use the on-screen HELP button or consult the manual. All of the menus may be expanded or contracted. For instance, after making your startup decisions, you can click on Decisions to expand that menu to see all the different decision areas for your weekly decision process. Startup Startup - Case Under the STARTUP section you can find a copy of the BizCafe case from this manual. This will allow you to have easy access to the background information contained in the case. Remember that not everything provided in the CASE is immediately available to you. For example, you may not be able to sell three drink sizes unless your instructor has selected that option. Please make sure to carefully read the case before making ANY decisions. BizCafe Operations Guide - Page 19

22 Startup Startup Decisions At the beginning of the simulation there are three startup decisions that must be made before you can proceed past the startup menu. These decisions are naming your café, choosing your furniture, and choosing your espresso maker. Naming your café has two primary purposes. First is that the name will be how your café is listed on the website results. Second, the name of your café may impact your performance if your instructor chooses. In addition, you may also want to think about how your name may work with a logo. If your instructor chooses, your logo design will also impact simulation results. Used furniture is available from a local cafeteria for $2,000. Alternatively, you may choose to upgrade to brand new boutique furniture that costs $4,000. Choosing the new furniture may improve your image with certain customers, but it does cost extra. Either option will be depreciated monthly over a five-year period. A used two-cup espresso maker is available from a local restaurant for $3000. You may instead choose a four-cup espresso-maker, which also can make a shot of espresso up to 30% faster. The upgraded espresso maker costs $6,000. Again, the upgraded espresso maker will improve your capacity and productivity, but it does cost extra. Either piece of equipment chosen will be depreciated monthly over five years. Upgrading to the better furniture and high capacity machine is only available during the startup decisions. A sample screen for the startup decisions is shown below. IMPORTANT: Only the team leader will be able to finalize your startup decisions. Once you check the finalize box, you will not be able to change these decisions. You will then move on to the next phase of your first period decisions! BizCafe Student Manual - Page 20

23 Decisions The Decisions Menu is where you enter decisions for each simulated week. Generally, you will make your decisions after examining the environment, setting some objectives, considering your competition, and thoroughly analyzing the reports provided in the BizCafe simulation. There are four general types of decisions in BizCafe in addition to the startup decisions already covered: management, marketing, operations and special decisions. All of these decisions are entered using the links under the Decisions menu. When you click on these links, a summary of your decisions for this area will appear. At the bottom of this report is an enter decisions button. Clicking on that button will bring up a screen in which you may adjust decisions. You may adjust your decisions as many times as you like before the game is advanced. Decisions - Management Click on the MANAGEMENT link under the Decisions section to enter your management related decisions for the week. These decisions cover how much your managers will be paid each week, how many servers you would like to hire, how many you need to fire, and how much the servers will be paid an hour. The initial screen for management decisions is shown below. Total manager salaries Click here to change decisions Total server wages Total of all employee costs including payroll taxes Click on the [Enter Decisions] button to adjust your decisions. A pop-up window will appear with various input fields for management decisions as shown below. When you click on the [OK] button, your decisions will be saved and you will be returned to the management decisions screen. Click on [Cancel] to exit the screen without saving your changes. One of your first decisions will be deciding how many servers to hire and what to pay them. If you enter those decisions and click on the [OK] button, those changes will be reflected on the main management decisions screen. BizCafe Operations Guide - Page 21

24 Remember to check the DECISION SUMMARY screen at the end of your decision process to make sure all your choices have been entered and saved correctly. Also note that you can change your decisions as often as you like until the simulation is advanced. After the simulation is advanced this screen will display your previous decisions so that you can easily see what has changed. In addition there will be a new section at the bottom of the Management Decisions screen labeled Management Notes. Be sure to check here for helpful hints that relate to last week s management decisions and café conditions. These will be messages such as the servers are unhappy, or two servers have quit. It is up to you, as the management team for the café, to analyze the reason for these messages and choose an appropriate action to address the problem. Decisions Marketing To make changes related to marketing, click on the MARKETING link under the Decisions section. Here you can adjust the price you would like to charge per cup of coffee (or for all three sizes if that option has been selected by your instructor), and decide how much you would like to spend on newspaper and radio advertising. Set the price for your coffee here Choose a general advertisement or choose a coupon to print in the paper here You must choose [OK] to set the changes to your decisions. Decide how many times a day you want a spot on the radio here Notice that the decision screen provides prices quotes based on per day or per spot, and you are working with a weekly budget. Thus, newspaper advertising that is listed at $200/day will cost $1,400 for the week. Similarly, the radio expense is provided on a per spot basis and you may choose how many per day to run (spot = 1 airing of the ad). When you choose the [OK] button it will calculate the total cost for the week in the right column next to radio. After the simulation is advanced, the notes section will tell you how many people redeemed coupons and the total cost of those redemptions (redemption = someone providing a coupon at time of purchase). BizCafe Student Manual - Page 22

25 Decisions Operations When you click on the OPERATIONS link under the Decisions section you are able to make decisions related to how your cafe is run. This includes the hours your store will be open, how much coffee to order, and how many cups to order. In addition to the amount of coffee, you can also choose the quality of coffee good quality, high quality, or organic, each of which has a different cost. For cups, you may choose to order large quantities in bulk with your logo printed on them. During the week, if you run out of either cups or coffee, whatever is needed will be purchased locally for you automatically, though at a higher cost and the cups will be without the logo. Cups are non-perishable, so you can store any extra that you don t use during the week. However, any extra coffee must be discarded at the end of the week, so spend some time making sure you order the right amount of coffee. The amount of coffee and cups being purchased and the cost Operational notes such as the number of cups in inventory Remember when setting the hours that you only have two managers working each day, and they have to be at the cafe an hour before the store is open and an hour after it closes. For example, if you are open 7am to 11pm, one manager works from 6am-3pm and one works from 3pm to midnight. Be sure to check the operational notes section when making decisions for helpful hints and operational information such as if you needed an emergency supply of cups or coffee, how many cups remain in inventory, and how much (if any) coffee was discarded that week due to purchasing more than was needed. Decisions Special The SPECIAL menu choice under Decisions is where you will find one-time decisions such as naming your café, creating your café logo, opening on weekends, etc. The café logo and café ad links allows you to use your more creative side. For instance you may enter a link to a site (such as PhotoBucket, MySpace, or SpaceBook) you ve created for your café or your logo. This process may be part of an assignment, or optional. These links will show up in the BizCafe News each week. BizCafe Operations Guide - Page 23

26 Once your ad or logo is uploaded, copy your graphic file address link and paste it into the link box on the Special Decisions page in the simulation. Remember your ad and logo must be a graphic file to be seen (a jpg file is best). Decisions Decision Summary Use the Decision Summary to review your decisions each week. It may also be worthwhile to print this out for your records, though you may always view old decisions by changing the week from the list box at the top of the screen. This printout will contain the same information as in each decision menu for the period, but all in one place. Please refer to the appropriate sections of the operations guide for more information on the specifics for each decision. BizCafe Student Manual - Page 24

27 Decisions Service Capacity The SERVICE CAPACITY menu choice is a tool to help you refine your operational decisions. The primary purpose of this report is to estimate your daily operational service capacity based on the decisions that you have currently entered. Thus, as you change the number of servers you hire, your service capacity will change. When you are satisfied with the service capacity calculated, you won t need to hire any additional servers. This table also shows you what time you open and close, and the total number of hours you are open each day. The Servers per Hour column shows the average number of servers you have working per hour during each day of the week based on your current hiring decisions, which is then used to determine the final column, Est. Daily Capacity, which is approximately how many cups you have the capacity to serve each day based on your current decisions. An estimate of the number of cups you have the capacity to sell each day of the week The average number of servers working each hour BizCafe Operations Guide - Page 25

28 Decisions Breakeven Worksheet The BREAKEVEN WORKSHEET menu choice is a tool to help you refine your pricing decisions and your demand forecasts. The primary purpose of this step-by-step process is to obtain the lowest breakeven price based on your estimated demand, or alternatively how many units you would have to sell to break even at your chosen price. Breakeven analysis is used to calculate either the price necessary to charge at a particular level of sales, or the number of units necessary to sell at a particular price to cover normal operating costs (fixed costs). This relationship between the price, variable cost, units sold, and the fixed costs can be shown as follows: Breakeven Price = Fixed Costs Anticipated Sales + Variable Cost Breakeven Units = Fixed Costs Price - Variable Cost Put into words, these equations answer the questions, What price would I have to charge in order to cover my fixed costs if I plan to sell x number of units? and How many units would I have to sell in order to breakeven if I charge x per cup? It is important to note that breakeven analysis is a forward-looking analysis. In other words, you should use your expected price, expected costs and expected units that you will sell in the next period. You should also be careful to make sure your time period matches. For instance, if you want to calculate your breakeven number of units you need to sell in a day, be sure to use an estimate of your fixed costs for a day, not a week or a month. Clicking on the BREAKEVEN WORKSHEET link brings you through a step-by-step process to obtain the lowest price you could break even with at your estimated demand, or alternatively how many units you would have to sell to break even at your chosen price. The worksheet helps you estimate your inputs. The first page summarizes the process as described above. After reading this introduction, just select the [Click to Start] button that will bring up the following screen for step 1 of the process, estimating your total fixed costs each week. BizCafe Student Manual - Page 26

29 You can estimate your total weekly fixed costs by using the Step 1 Worksheet, or on your own. The Worksheet automatically takes all of your costs that do not vary based on units sold and provides a weekly total for them. When you have a number, choose the [Enter your Total Fixed Costs] button at the bottom of the worksheet, and enter your total fixed costs estimate in the input field provided and select [OK]. You will then move to step 2, entering your variable cost (or COGS) as shown below. Similar to the fixed costs, you may enter the variable cost calculated or your own estimate. Finally, you will come to a page that lets you choose which analysis you would like to calculate either the units necessary to breakeven at a particular price or the price necessary to charge to breakeven with a certain number of units sold. BizCafe Operations Guide - Page 27

30 In the above example, we chose to calculate the breakeven units. To do so, enter the average unit price and then select [OK]. You will then proceed to a screen where the breakeven units are calculated based on your assumptions as shown below. BizCafe Student Manual - Page 28

31 Accounting Under the Accounting section of the menu you will find information pertinent to the café s finances. The checkbook is always available so that you can see all the cash that flows into your account and all the checks that you write to pay for purchases and salaries. However, the income statement and balance sheet reports are created monthly by your accountant, so those won t be available until week 5 (first week in February). Accounting Checkbook The CHECKBOOK link provides a record of all receipts (revenues) and disbursements (payments) for the current week much like your own personal checking account statement. Your beginning balance is shown at the top right and your final balance for the week is shown on the bottom right. The difference between these two values represents your net change in your cash position based on receipts and payments for the week. In your first decision period, you will see several entries for the startup phase. This will include the initial loan, utility and rent deposits, as well as any of the costs for the startup decisions after they have been finalized. Deposits Description of activity Current running balance after payment and/or deposit Payments Until the first month is complete, the checkbook represents your best measure of financial results. Be sure to watch how the balance changes during the week. Are your receipts covering your disbursements? If not, are the disbursements one-time or on-going? You should be able to recognize in advance whether or not your café is successful or not. Important: If, at the end of any week, your checkbook would have a negative balance based on your decisions and the environment, your checking account does have overdraft protection. For a fee of $50 for the week, the bank will ensure that you have sufficient funds. The amount of the overdraft will be considered a loan and interest will be charged on the balance. BizCafe Operations Guide - Page 29

32 Accounting Income Statement At the end of each simulated month, your accountant will prepare an income statement and balance sheet for you. The income statement is a record of your revenues and expenses for the month. The revenues will total your receipts for each day of the previous month. Underneath your revenue is the cost of goods sold (COGS). This represents the total direct cost associated with those revenues. For example, when you sell a medium-sized drink, there are the direct costs of the coffee and the cup. These are included in the COGS value. Subtracting the COGS from the revenue line results in the gross margin. In order to be profitable, your monthly expenses will need to be less than your gross margin. These are the current and year-to-date columns. This is your year-to-date net income. This shows you what your net income was for the month Important: The income statement and balance sheet for a month include only transactions during that month, which is a unique reporting period. It will not match the totals for the 4 or 5 individual weeks. Thus, for January, the income statement will include transactions only in the period from January 1 st January 31 st. On the expense side, you will see the amount paid for management and staff, which include any payroll taxes in addition to salaries. Your advertising and promotional costs for the month are shown on the following line. Note that any promotional discounts (such as $.50 coupons) are included in revenues, not expensed here. As an example, if someone purchases a $3.00 drink that has a $.50 coupon, $2.50 will be added to revenue rather than $3.00 being added to revenue and $.50 being added to Advertising/Promotion expense. Next comes rent and utilities, which are paid monthly. Rent is due the first day of the month and utilities are paid in the first week of the month after use. Rent and utility deposits, however, do not show up on the income statement and are instead only included on the balance sheet as an asset. Interest on the loan is paid midmonth. BizCafe Student Manual - Page 30

33 Depreciation is calculated monthly based on the of the assets depreciated over five years with a residual value of zero. Examples of depreciated items would be furniture and the espresso maker. Thus, monthly depreciation on an asset depreciated over five years would be calculated based on the following equation original value of asset / 5 Years * 12 months, or $purchase price / 60. These expense categories are then totaled and subtracted from the gross margin to calculate net income. Net income is the profit generated by your business for the most recent month. Once February has been completed, the year to date column will reflect the sum of all previous months as well as the current period. The values in this report are linked allowing you to see the detail of the transactions that created the balance. For example, clicking on the number that represents revenues will show you the daily revenues for the previous month. Accounting Balance Sheet Clicking on the BALANCE SHEET link under Accounting allows you to view the current balance in your asset, liabilities, and shareholder equity accounts. Like the income statement, your accountant generates the balance sheet monthly. Unlike the income statement, which shows results over a certain time period, the balance sheet is a snapshot of your organization at a current point in time. Thus, when you receive your first balance sheet the first week in February, you will see the levels of your assets and liability accounts as of January 31 st. Cash, deposits (such as for utilities and pre-paid rent), equipment, accumulated depreciation and inventory are listed on the left side under assets. Liabilities such as taxes payable and loans are listed on the right under liabilities and shareholder s equity. Retained earnings will match your year to date net income. All of the categories are linked, so if you do not understand how these numbers were obtained, click on the link to view the detail for that account along with a brief explanation of the account. BizCafe Operations Guide - Page 31

34 Operations The Operations section of the menu provides information on your daily operations, purchases, inventory, and service capacity. Operations Daily Receipts The DAILY RECEIPTS part of the Operations section provides receipts by day and by size of cups sold (if multiple sizes have been selected by your instructor). In the top table, the first two columns are date and day of the week. The third column, Capacity, estimates how many cups of coffee your shop could have handled serving that day, taking into account the available equipment and the servers on staff (and their productivity). The fourth column, Cups Served, shows you how many cups your shop actually served that day. Thus, comparing your cups served to your capacity is one way to measure how busy your staff was during the day. If you served at capacity, it probably means that your servers were always busy and possibly that some people may have left due to the long lines. Next is the Price/Cup column, which calculates the average price your coffee was sold for each day. This reflects both the mix of cups sizes sold (if selling multiple sizes) as well as the use of promotional coupons (such as 2 for 1 or $.50 discount). Finally, the last column shows the fourth and fifth columns multiplied to show your total revenue for the day. Keep in mind these numbers, as well as the total revenue for the week as added at the bottom of the column, are just revenues, not profit. This shows the number of cups you could have served on the left and the number you actually sold on the right. Total revenue for the week The lower table shows the receipts and cups sold by size for the most recent week. Receipts = cups served x price per cup. The last column displays the total receipts for each size cup, then subtracts promotional discounts (coupons redeemed), resulting in a final revenue for the week, which will match the total revenue for the week in the top table. BizCafe Student Manual - Page 32

35 Operations Materials The MATERIALS link under the Operations section is where to find information related to purchase, usage, and inventory of cups and coffee. For instance, you may want to check this report before ordering cups as you may have enough in stock (inventory) to meet demand for the coming week. In addition to the current inventory of cups, you can also review cost and usage information on both cups and coffee. Remember that unlike cups, coffee is perishable and any coffee not used during the week will be discarded at the end of the week. If you do not order enough coffee or cups to meet demand, a local source will be used to on an as needed basis to fulfill orders. However, the local source is somewhat more expensive, and for the cups, your store logo will not be printed on them. BizCafe Operations Guide - Page 33

36 Environment The Environment section of the menu allows you to get an idea of what the local market is doing. You can see competitors ads if they choose to display them in BizCafe News, and you may find out how your employees wages compare to the local averages. All of this comparative data is important to keep an organized, attentive and satisfied staff. Environment BizCafe News The BizCafe News is where to view your competitors logos, ads, and potentially other competitive information depending on the settings for your game. This is also where you will see who won the best of awards for the previous week. Note that in the benchmarking version of the simulation, the BizCafe News does not provide this information for other student teams in the class. In the directly competitive version, clicking on the menu button for your competitors will provide information on their café hours, coffee, prices, and promotions as shown below. The benchmark version will only provide your café s information. BizCafe Student Manual - Page 34

37 Environment Local Labor Report The LOCAL LABOR REPORT found under the Environment section provides the local averages for manager and staff wages, average turnover rate average turnover rate (which tells you about how often the staff at local businesses is quitting) and the area s minimum wage. Remember that if your managers and servers are paid less than the averages, they will become unhappy. However, if you have an occasional server quitting, you can compare with the average turnover rate to see if you are close to the norms for your local area. View Comparative Results Refer back to the Comparative Results screen on your class website to see how you or your team compares with others competing in your simulation event. BizCafe Operations Guide - Page 35

38 Simulation This section of the menu contains links that control the game. The ADVANCE, REPLAY and RESTART buttons may or may not be available during your simulation. If your instructor chooses, the advancement, replay and restart of the game may be turned off. If your instructor does allow students to use these options, only the team leader can perform them. Important: Advance, Replay and Restart would only be available if running the benchmark version of the simulation. In the direct competition version, everyone will be advanced based on a schedule set by your instructor. Please see your course website for the current schedule. Simulation - Advance If the ADVANCE menu link is available to you during the simulation, the team leader can control when your game is advanced to the next week. In other words, once your decisions are made for one week, you can choose the advance link and see your results to then determine what changes will need to be made to your decisions for the following week. Simulation Replay If your instructor allows it, you can go back one week in time by having your team leader choose the REPLAY menu link. This will set you back one week in time and allow you to make adjustments to the most recent week s decisions. In effect, an undo button for the simulation. Simulation Restart The team leader may choose the RESTART menu link, if allowed by the instructor, to erase all decisions and results for all periods, and completely start over. Some instructors like students to do a few practice weeks and then restart, in which case this button would be used to reset you back to the beginning of the simulation. BE CAREFUL WHEN CHOOSING RESTART! BizCafe Student Manual - Page 36

39 APPENDIX A - Using BizCafe in a Group If you are using BizCafe in a classroom setting, you will likely be asked by your instructor to work in groups. Each group will pool its skills and resources to manage collectively the management, marketing and operations roles. Thus, the specific decisions your group will make depend on the responsibilities you are assigned. Group work is the way business is most often conducted today. It can be rewarding and frustrating. Thus, it is critical that you learn how to make every group experience a success. One of the most frequent complaints with group work is the amount of time wasted in trying to get organized and make decisions. There are also complaints that individual members are not "pulling their weight." To reduce these problems, your group should answer the following questions in your first meeting: 1. When, where, and how often should we meet? 2. How should we efficiently and effectively conduct our meetings? 3. Should we choose a general manager? What authority should this person have? 4. How should we divide the tasks among group members? 5. How do we resolve issues and make final decisions? 6. How do we encourage and maintain a high quality of contribution? 7. How will we deal with personal conflicts among group members? Over time, the group should assess whether it is functioning efficiently and effectively. The group may have to reorganize to best meet the current needs of the business as your product portfolio changes, new competitive situations arise, and more information becomes available. BizCafe Appendix - Page 37

40 BizCafe Student Manual - Page 38 May August 2008 ONLY

41 APPENDIX B BizCafe Glossary Accounting: The way in which a business keeps track of and provides important information about its financial state; and fulfills its state, local and national reporting obligations. Accrual Accounting System: An accounting system wherein money in the form of revenues and expenses is counted when it is used, not necessarily when payment is made or received. A sale is recognized at the time of the sale, even if payment comes later. Ambiance: The mood, character, quality, tone, and atmosphere of an environment. Balance Sheet: A snapshot of your organization at a particular point in time, containing the current balance in your asset, liabilities and shareholder equity accounts. Breakeven Analysis: A way to calculate either the price necessary to charge at a particular level of sales, or the number of units necessary to sell at a particular price to cover normal operating costs (fixed costs). Capacity: The estimation of how many cups of coffee your shop could have handled serving a given day Cash-based Accounting System: In this system, money that is received is counted or recognized as income or revenue at the time it is deposited. Money that is spent is counted as an expense when it is spent. Checkbook: This represents your cash-based accounting system. It is a record of all receipts and disbursements for the current week. Compensation: Something given or received as an equivalent for services or debt. Competition: Nearby businesses of a similar nature producing a similar product, which may attract customers that would otherwise support your business. Cost of Goods: How much it costs to make the product, or create the service, that is being sold. Customers: Someone who purchases a company s product or service. Customer Analysis Report: An evaluation of who the customers are and what they are looking for in regards to a particular product. Customer Satisfaction: The extent to which a business is fulfilling the needs and desires of its customers. Disbursements: Payments, or expenses costing the business money. Distribution: Where a product or service is purchased, and everything that leads up to and helps achieve this action. Depreciation: A decrease or loss in value, as because of age, wear, or market conditions. For accounting purposes, there are different methods and time periods by which the value of an asset is depreciated. For example, an asset worth $1,000 might be depreciated over 5 years using BizCafe Appendix - Page 39

42 straight-line depreciation. In this situation, each year $200 of the asset s value would be depreciated. Expenditures: All of the expenses of a company; what was actually spent in a fiscal period. Expenses: Costs and charges that you must pay. Forecasting: Predictions of spending or costs based on calculations in advance. Human Resources Management: The management of people, which includes: job analysis, recruitment and selection, compensation and benefits, training, and employee motivation and morale. Income Statement: A report of a firm s overall results for a period, including a breakdown of major expenditures and a calculated value of the net income. Inventory: The stock and materials on hand at a business, including raw materials, finished goods, etc. Inventory would be listed as an asset on the balance sheet of the company. Job Description: A written description of what a job entails, including what tasks and skills are expected of an employee. Management: In BizCafe, management often refers specifically to the aspect of managing people such as hiring, setting wages, etc. However, more generally, management often refers to the managing of people, products, materials, and any other number of items. Manufacturing Capacity: The maximum amount that can be produced or manufactured in a particular period of time. Materials Management: Managing the materials in a business, from raw materials to the finished product. Marketing: The process of planning and executing the conception, pricing, promotion and distribution of ideas, products and services to create exchanges that satisfy individual organizational needs or wants. Organic: Grown using fertilizers or pesticides that are strictly of animal or vegetable origin, thereby creating a product without the use of drugs, hormones or synthetic chemicals Operations: The areas of manufacturing, quality control, purchasing and materials management, and storage and distribution of the product to the channel or customer in a timely manner. Place: Refers to distribution, or how products get to the stores so that it is convenient for us to buy. Price: Involves all factors that affect how much is paid for a product. The amount of money a person is charged for a product or service. Product: The bundle of attributes that we buy to satisfy our needs and wants, be it an item, service or intellectual property. Product (or service) development process: The process by which a business takes products from ideas to products that are sold. Usually this process is well defined and used repeatedly. BizCafe Student Manual - Page 40

43 Promotion: Involves all activities that companies use to communicate with us from advertising to sales people, and the activities companies use to get us to buy from them. In BizCafe, a coupon for a special deal such as $1 off and the advertising associated with it is an example of a promotional activity. Purchasing: Ordering supplies and other raw materials Quality Control: The process by which a business ensures that its products are meeting standards. Receipts: Revenues, or money coming into the business. Recruitment: The process of discovering employees and drawing them to your business to work. Revenues: A particular item or source of income. Stakeholders: Those who have invested in the business and have an interest in profits. In BizCafe, this would include Jane Valdez. Value: The relationship between the benefits of a product or service and the cost of that product or service. These include functionality and emotional benefits. BizCafe Appendix - Page 41

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45 BizCafe Index A accounting accrual system 9 defined 39 balance sheet 9 BALANCE SHEET 30, 31 basic financial statement 9 cash-based system 9, 39 defined 39 CHECKBOOK 29 defined 39 expenses 9 income statement 9 INCOME STATEMENT 30 revenues 9 accounting startup 29 initial loan 29 utility and rent deposits 29 ads 34 advertising 30 calculate the total cost 22 newspaper expense 22 radio expense 22 ambiance 13 defined 39 analyzing business planning 10 choosing a course of action 10 factors of running a business 2 identify opportunities 10 reports 21 the situation 10 annual demand 8 aspects of running a business 5 assets 9 residual value 31 atmosphere 12, 39 average price 32 average turnover rate 35 B balance sheet 13, 29, 30, 31, 39 assets and liability accounts 31 benchmark competition 1 benefits of a product or service 7, 41 BizCafe News 15, 23, 34 breakeven analysis 26 defined 39 BREAKEVEN WORKSHEET 26 C café ad, create link 23 hours 15, 23, 25 logo, create link 23 naming your 23 perception of 14 calculate breakeven units 28 capacity 20, 32 defined 39 cash deposits 31 checkbook 9, 29 defined 39 disbursements 29 electronic 13 negative balance 29 overdraft protection 29 receipts 29 coffee 23 pricing 15 COGS 27, 30 company culture 7 objectives 10 comparative data 34 compensation defined 39 competition 10 defined 39 competitor information 34 corporate income tax returns 9 cost of goods sold 10, 30 defined 39 coupons redeemed 22, 32 course of action 10 cups 23 BizCafe Index - Page 43

46 served 32 customer analysis report 9 defined 39 defined 39 satisfaction defined 39 D daily receipts 32 decision-making process 10 decisions adjust 21 advertising 8 competition 21 enter decisions button 21 environment 21 first decision period 29 functional 10 MANAGEMENT 6, 21 MARKETING 21, 22 one time creating your café logo 23 naming your cafe 23 opening on weekends 23 OPERATIONS 21, 23 price 8, 10 promotion 8 SPECIAL 21, 23 summary 22, 24 Decisions Menu 21 demand forecasting 8, 9 depreciation 9, 20, 31 defined 39 equation 31 detail of transactions 31 disbursements 29 defined 39 distribution defined 39 E employee compensation and benefits 6, 7, 40 development 7 factors that will impact performance 7 hiring decisions 25 interviewing procedures 6 job satisfaction 7 motivation and morale 6, 7 recruitment and selection 6, 40 retain 6 testing 6 training 6, 9, 40 training and education 7 wage rates 15 environment 10, 29 Environment Menu 34 equipment 5, 9, 14 depreciation 14 upgrade 14 espresso maker 31 estimated daily capacity 25 estimated demand 26 estimating your total fixed costs 26 expenditures 13 defined 40 expenses 5, 30 defined 40 F financial health 9 fixed costs 26 forecasting defined 40 functional areas of a business 5 furniture 14, 31 G getting started 17 gross margin 30, 31 H historical data 6 human resources management 6 defined 40 I income statement 9, 13, 29, 30 defined 40 industry norms 6 input screens 18 integration 10 interest on loan 30 inventory 13 BizCafe Student Manual - Page 44

47 J defined 40 brief descriptions of 19 pull-down 18 monthly depreciation 31 job analysis 6 description 6 defined 40 specificatons 6 L leadership 7 loan interest on 30 small business 13 local labor averages 35 location 12 login 17 logo 20, 34 long-term demand 12 M manage 14 management decisons 7 defined 40 notes 22 style 7 managers 14 manufacturing capacity 8 defined 40 market 10 potential 12 marketing 7, 15 4 P s of 8 creative aspects 7 customers 8 defined 40 distributution 7 indirect vs direct 7 product (or service) development process 7 product emotional benefits 7 product value 7 sales forecast 8 materials management 8 defined 40 Medicare reporting requirements 9 menus N navigation buttons, green 18 net income 31 notes section 22 O objectives 5, 10, 21 one-time decisions 23 operating costs 26 operational aspects 9 capacity 12 decisions 9 notes section 23 operations 8, 13, 14, 15, 32, 33 defined 40 fundamental 8 guide 3, 17 management 8 MATERIALS 33 Operations Menu 8 ordering cups 33 organic defined 40 organic coffee 15 organizational approaches general 5 P payments 29 payroll taxes 30 peak demand capacity 8 place defined 40 planning and integration 10 planning process 9 price 10, 12 adjust 22 defined 40 product defined 40 product (or service) development process defined 40 product-based business 8 BizCafe Index - Page 45

48 productivity 14, 20 profitability 6 promotion 15 defined 41 promotional costs 30 discount 30, 32 purchasing 8, 15 coffee 9 cups 9 defined 41 Q quality 6, 12 considerations 9 control 8 defined 41 R receipts 29 defined 41 recruitment defined 41 rent 30 reorganize 37 reporting obligations 9 revenue total for the day 32 for the week 32 revenues 5, 29, 30, 31, 39 defined 41 review historical information 18 your decisions 24 S salaries 30 sales information 12 server hours 15 servers 15 Servers per Hour column 25 service 6 service capacity calculator 25 service operations 8 service-based businesses 8 shareholder equity account 31 simulation access simulation 17 ADVANCE 36 manual 17 menu 2 navigation 18 REPLAY 36 RESTART 36 small business loan 13 snapshot of your organization 31, 39 Social Security 9 staff 12, 14, 30, 32, 34 staffing levels 6, 13 stakeholders 5 defined 41 startup case 18, 19 decisions 14, 18, 21 café naming 20 costs 29 espresso maker 20 furniture 20 upgrade 20 funds 11 state of the business 9 state unemployment 9 stimulate additional demand 13 storage and distribution 8, 40 supplies 13, 41 supply chain management 8 T target customers 8 timing of purchases 9 tools BREAKEVEN WORKSHEET 26 decision-making 18 service capacity calculator 25 U usage information 33 utilities 12, 30, 31 deposits 30 V value 5, 29, 31, 32, 39 defined 41 variable cost 26, 27 view old decisions 24 BizCafe Student Manual - Page 46

49 W wages 14, 15, 34, 40 weekly budget 22 decisons 14 fixed costs 27 word-of-mouth 13 Y your first meeting 37 BizCafe Index - Page 47