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Outgoing Kelley School of Business seniors rank at the top in global simulation competition

Published:

July 25, 2012

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To be in charge of a $100 million sensor manufacturing company is a challenge for any business school senior. But two teams in Todd Roberson’s J411 Analysis of Business Decisions course ranked at the top in a global simulation competition, a first in his time teaching the course. Kelley School of Business Indianapolis teams ranked first in return on equity as well as return on assets in a competition involving several hundred teams from as far away as Israel, Germany and Turkey.

“It is a happy thought to know my team ranked number one against a large number of international competitors,” said Michael Parrett, a member of Team Baldwin, which ranked first in return on assets. “J411 is the last class I completed before earning my degree, and it is always nice to end with flair. My confidence in entering the business world couldn’t be higher.”

In the Capstone Simulation, teams of five students are put in charge of running a $100 million company that manufactures sensors. They must invent sensors, meet customer demands, price and promote the product, develop specifications and come up with the production schedule, which involves organizing their factory, hiring workers and financing the production. Each week represents a year of business during the eight-week simulation.

“They get the ability to see how all of the business disciplines work together,” said Roberson, senior lecturer in finance. “In this game you have to put things through research and development, marketing, financing and production. So they get to see how all of those business disciplines work together.”

Team Digby ranked first in return on equity, which was an astounding 170 percent. Team members were Joshua Bohac, Anees Khan, Robert Medaris and Michael Shannon.

“We took a gamble,” said Bohac, an accounting and finance major. “We were not an equity-based company. We wanted to fund everything with debt instead of stock. We wanted to get our leverage as high as possible. We knew the game was weighted 200 percent in the last round, so our plan was to blow the numbers away.

"We didn’t think we’d finish in first place. We kept buying back stock. At the end we bought as much as we could, and it paid a huge dividend. We just issued as much debt as we could and luckily we made a profit; it earned us into a positive return on equity.”

Bohac admits the model isn’t sustainable; the company would eventually need to stabilize and, once they gained a good foothold in the market, reissue stock. Roberson said their financing tactic was “classic end-gaming.”

“It was a decisive, high-risk strategy,” he said. “Sometimes taking decisive action at the critical moment can make all the difference in the world, but it can also go wrong.”

Team Baldwin went with a consistent strategy. That team consisted of Dean Floyd, Eduardo Medina, Michael Parrett, Bianca Romo and Zoe Stuart.

“What separated us from the competition is we stuck to the plan even when times looked rough,” said Parrett, a management and human resources dual major. “We understood the dynamics of the game and made decisions for long-term success rather than short-term gain. In the beginning our company looked very weak compared to our competition, but by continuing to think long term we finished on top.”

Whereas Team Digby took outsized risks, Roberson said Team Baldwin’s business model was sustainable.

“I would say Team Baldwin was probably in the top couple of teams I’ve seen overall since I’ve been teaching the course," Roberson said. "They had a consistent strategy throughout and conceived and executed tactics that worked with their game plan.”

Students say the course, which is the capstone to their Kelley education, teaches them strategy and how to manage the various aspects of a business.

“It was very intuitive, very eye-opening,” Bohac said. “In the future I would always be able to use this as a great experience in business. If I get into a position where I manage, even in accounting, I have to know how a business works.”