INDIANAPOLIS, Ind.—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 top in a global simulation competition, a first in his time teaching the course. Kelley School of Business Indianapolis teams ranked number one in return on equity as well as return on assets, in a competition involving several hundred teams competing 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 earned top rank 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 them, 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,” explained 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. That team included 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.”