AIRLINE: A STRATEGIC MANAGEMENT SIMULATION Developments in Business Simulation & Experiential Exercises, Volume 14, 1987 192 AIRLINE: A STRATEGIC MANAGEMENT SIMULATION Jerald R. Smith, University of Louisville Peggy A. Golden, University of Louisville ABSTRACT This paper describes a new PC-based computer simulation which is unique in two respects: it is modeled on a service industry, and it begins with a case study. Overview Airline: A Strategic Management Simulation (Smith and Golden, 1987) presents a novel format for simulation games. It provides new dimensions in three areas: 1. The players manual includes a case study of an actual commuter airline. 2. The players manual includes peripheral classroom materials including outlines for strategic plans, industry studies, annual reports to stockholders, strategic audit instruments and peer review. 3. The game simulates the commuter/regional airline business which is a service industry. These features permit the instructor to treat the simulation as the core of a strategic management or marketing strategy class. The case (Mid-Continent Airlines) is based on Midstate Airlines which is a privately-owned commuter airline serving the upper Midwest. The management problems presented in the case are not difficult to understand yet can be solved by a number of strategic options. Solution of the case early in the semester assists the students in understanding the business relationships involved in the operation of the airline that they run in the simulation. The simulation is a highly competitive, market-driven game that allows a full-spectrum of strategic decision-making. Student teams make 28 decisions involving marketing, human resource, operations, financial and capitalization strategies. In addition, there is an option to purchase market research studies. Each decision set has an associated incident or mini-case. These special decisions involve social responsibility issues as well as diversification options and other strategic management problems. Logistics Airline supports 4-12 student teams of 3 to five players each. This means that it can be used by a class ranging from 12 to 60 students. The number of markets available to the students expands as teams are added. This unusual feature provides an appropriate marketplace regardless of the class (industry) size. Under normal circumstances a class would be treated as an industry. If it is to be used in a “mega- section,” several industries can be created. The simulation is designed to run on an IBM-PC compatible computer with 256K of memory and 2 disk drives. It is written in compiled BASIC and the algorithms that compute student results take approximately 1 minute to run. Instructors have two options for running the simulation: 1. Students input their own decisions, turn in a disk for computation, and then print their own reports. 2. The instructor inputs decisions from student decision forms and prints the reports. Curriculum Organization In a typical 15 week semester, the use of Airline would begin the second week of the semester with the case assignment and an introduction to the simulation. At this point, student teams are formed. The optimal team composition is a member from each of the functional disciplines. However, there is no magic formula for success as long as the members can work together in the decision- making processes. The case analysis leads logically into the development of a strategic plan for the simulation. These activities assist in team formation and lead naturally to the first decision set for the simulation. The simulation can then be started week 4. The end of “1 year” coincides with midterm. At this point, student teams may be asked to perform a strategic audit, present a stockholders report or both. The second year of play includes some difficult incidents that involve external diversification and corporate image decisions. The third year of decisions permit refinement and honing of the skills gained earlier in the semester. Appendix A shows a typical syllabus. The Instructor Perspective If the simulation is used as described above, the instructor may need some minimal preparation prior to the beginning of the semester. This involves becoming familiar with the organization of the manual, the scenario of the simulation, the rules of the game, and the processing of the simulation. The actual content of the players manual is 100 pages including an annotated sample decision form, a sample printout, incidents and historic operating data. The case is approximately 18 pages long. The remainder of the manual contains guidelines for strategic planning, implementation and evaluation. There are some cosmetic features including sample maps and descriptions of available aircraft equipment. The game has few rules and the acceptable ranges for decisions are printed on the decision forms, input screens and error trapped in the software. Instructors need to be familiar with the scenario and simulation options; however, expertise in the commuter airline industry is unnecessary. The software package Includes an administrator’s disk and a student disk. The student disk may be used if the students have access to a PC workstations for students to enter their own decisions and print their own reports. The administrators disk contains all the necessary programs to input decisions, transfer decision files to and from student disks, process Developments in Business Simulation & Experiential Exercises, Volume 14, 1987 193 the industry and print reports. It also contains an administrators report and utilities to restore student files. The software is menu driven with on-screen instructions; a typical processing cycle for a twelve-team industry takes about 30 minutes if the instructor inputs decisions and prints results. It is considerably faster to use the student disk option. It would be beneficial for the instructor to run a sample industry with some colleagues or student assistants in order to get a “feel” for the game. This can be adequately experienced with 4 companies in an industry run for 2 or 3 quarters. Such a pre-game experience will make the instructor familiar with the software and the manual. Grading the Simulation The authors weigh the simulation as 50% of the semester grade with additional points for peripheral activities such as stockholder’s reports, audits and strategic plans. Students are required to turn in weekly decision packets that include minutes of team meetings, rationale for decisions, and any analyses performed. Grading the simulation is about the same as grading a major case-study. It consists of objective measures (return on sales, cash management, asset management) as well as subjective measures such as learning-curve improvement, peer review, and assessment of risk-taking behaviors. Summary Airline is in its third semester of use and appears to provide a core learning experience for business policy curricula. It addresses the AACSB common body of knowledge areas. In addition, students are enthusiastic about the simulation since the turbulent industry simulated by the game provides classroom excitement. Table of Contents Volume 14, 1987 Simulation Gaming as An Experimental Context for the Study of Multicriteria Decision Making How to Multiply Your Management Game Grading the Personnel In-Basket Exercise Simulation: The Players™ Perspective The Acute Susceptibility of Nominal Grouping to Negativity The Relative Value of the National ABSEL Meetings: An Analysis of Perceptions by Faculty and Deans A Survey of Behavioral Labs Used by American Business Schools A Structured Framework for Applying Conceptual Models to Problem Analysis: Hardening Up An Expert System Approach for Teaching Marketing Case Analysis From Theory to Practice: A Model for Teaching Beginning Advertising The Use of a Simple Forecasting Technique During an Interactive Computerized Business Game An Investigation of the Relationship Between Formal Planning and Simulation Team Performance and Satisfaction The Exponential Logarithm as an Algorithm for Business Simulations Learning macroeconomic Theory and Policy Analysis Via Microcomputer Simulation Laptop: A Principles of Marketing Simulation Teaching About Sampling in a Marketing Research Class Integrating Decision Support Systems and Business Games Demand Generation in a Service Industry Simulation: An Algorithmic Paradox ABSEL - At a Crossroads? Research on Predicting Performance in the Simulation An Expert System for Financial Planners "Developing Various Student Learning Abilities Via Writing, the Stock market Game, and Modified Marketplace Game in Beginning Macroeconomics" Professional Activity Reports: Getting back to Basics Œ A Preliminary Investigation "A Comparison of Performance, Attitudes, and behaviors of MBA and BBA Students in a Simulation Environment: A Preliminary Investigation" Decision Styles and Student Simulation Performance: A Replication Personal Power Strategies: An Experiential Exercise LTL I: A Trucking Simulation Game Total Enterprise Business Games: An Evaluation Can the Skill of Management be Taught? Developing Critical Thinking and Effective Communication Meaningful Notebooks and Enhanced Learning Using a Totally Menu-Driven Data base and Decision Support (DSS) Program Using a Computerized Menu-Driven Data Entry and fiWhat-Iffl Program as a Pedagogical Enhancement for Management Simulation Using a Joint Project Involving MBA Marketing Management and Undergraduate Marketing Research Students to Teach Marketing Research Testing the PAGE Technique: Results and Further Developments A Comparison of Student Perceptions with Accepted Expectations for Business Simulations "Conflict Management in Action: Verbal Strategies, Nonverbal behaviors and Conflict Styles" Dramatic Monologues as Surrogates for Experiential Learning Influencing One™s Superior: An Assessment and Exercise Personality Traits and Organizational Cultures: Two One-Hour Experiential Learning Exercises Computype: A Strategic Marketing Game Open System Simulations and Simulation Based Research "Teaching Forecasting to the Masses: Little Decision Support Training, But a lot of Answers" Goal Setting and Performance Evaluation with Different Starting Positions Œ The Modeling Dilemma The Gamesmanship of Pricing: Building Pricing Strategy Skills Through Spreadsheet Modeling Teaching MPR Experientially Through the Use of Lotus 1-2-3 Business Simulation Through Activities of a Manufacturing Company Simulated Stock Broker Teaching Employee Counseling Skills to Management Students: A Simulation Airline: A Strategic Management Simulation Developing Simulations and Experiential Exercises on the Personal Computer: Some Critical Issues A Powerful Tool Œ For What? An Integrative Systems Approach to Simulating Free Enterprise in a Small Business Course in a Business School Profits: The False Prophet The Use of Expert Systems to Develop Strategic Scenarios: An Experiment Using a Simulated Market Environment An Interdisciplinary Workshop: Spreadsheet Modeling and Case Analysis Techniques for Beginning Executive MBA Students An Innovative Approach to an O. D. Class Œ The Creative Interaction The Application of Spreadsheet Software Technology to Complete Taxpayer Elections Experiential Learning as the Cornerstone of an Industry Management Course "Identifying, Exercising and Enhancing Right Brain Skills in the Business Classroom" Utilizing Envisionary Technology in the Business Policy Course: An Experiential Pedagogy Business Simulation in the Policy Course: A Survey of American Assembly of Collegiate Schools of Business The Moving Van: Vehicle to Success of Disaster for the Two-Gender Work Force Oil and Gas Well Investment Analysis Using the Lotus 1-2-3 Decision Support System Team Cohesion Effects on Business Game Performance