Simulating Business in the MBA Classroom

Business schools across the globe are beginning to see the potential of computer simulated real-life business scenarios as a learning tool.

With business schools looking at newer ways to innovate on their existing teaching methodologies to keep pace with the rapidly evolving business world, these computer simulations are proving to be effective and cost-efficient solutions, making the learning process vibrant and experiential.

As a result, computer-simulated scenarios, dealing with various facets of business such as marketing, finance and strategy, are being integrated into the curriculum to give students doses of real-life situations to sharpen their analytical skills.

MBA students get a chance at managing diverse business situations, from being the CEO of a bank managing asset and taking responsibility for liability portfolios, to heading a multinational and negotiating a hostile takeover.

Computer simulations such as Markstrat and Capsim have become part of the curriculum at many business schools. Markstrat, for instance, is a simulated scenario that has been designed for teaching strategic marketing concepts, such as brand portfolio strategy, segmentation and positioning strategies.

Strategy and tactics

In a typical Markstrat simulation, teams of three to six participants compete to successfully pilot their industrial company over a multi-year period. The name of the game isn’t just tactics, but long-term strategy.

Because decisions are made over a six-to-twelve year period, teams are forced to not only plan for short-term profits, but long-term objectives.

Since each team’s actions directly influence the market, competitive analysis is a must. Competitor actions and reactions, new product launches, sales and distribution strategies all define how teams manage their own product portfolio, research and development projects, positioning, pricing and distribution channels.

The competition is real, but so is the teamwork. Participants not only learn from the simulation, but from each other, keeping the level of enthusiasm high.

Devi Singh, director of the Indian Institute of Management (IIM) Lucknow agrees: “We do use simulation games as they enhance learning in courses with complex decision metrics such as strategy and marketing. We use packages such as Markstrat with real life data at our institute."

Siddhartha Rastogi, assistant professor of economics at the IIM Indore adds: “Simulation games are the next best alternative to reality.

“Most of the time, it is not possible to take students out to the field. Hence, we simulate real-life business scenarios through these games. Markstrat and Capsim are the popular ones.”

Markstrat was developed by professors Jean-Claude Larreche and Hubert Gatignon of France-based business school INSEAD, in cooperation with consulting company StratX. Capsim simulation prototypes, on the other hand, were developed by students Craig Watters and Dan Smith while they were studying for an MBA at the Kellogg School of Management in the USA.

Customer needs

Stephanie Zanon, licensing director at StratX Simulations says: “When using Markstrat, participants get to deeply understand and act upon customer needs, learn how to manage marketing as a profit center and how to work in a highly competitive environment. It helps MBA students experience, in a risk-free environment the decisions and challenges they will face in their professional lives.

“Markstrat incorporates solid theoretical foundations which makes the participant experience a strong learning environment. By playing against other human teams, participants get to experience the difficulty of today’s markets and understand implications of competitive forces.”

Dharam Pal, managing director at SansRisk Business Solutions, which represents Capsim in India explains: “There is huge room for simulation to contribute or complement to class room training.

“In a simulation, students get to see how markets actually react to their business and operational decisions. These market reactions impact their business' financial health. Based upon that, maybe they want to look at a strategic shift in their business.

“When participants play these games, one sees their fear and greed come to the forefront. They get to discover that their ability to get the team to go with them may be more important than their having top class business acumen.”

“Most schools use the simulation exercise as credit courses. Our simulations are also being accepted by more and more business schools.

“Outside India, we work with Harvard Business School, Michigan Ross School of Business, Kellogg School of Management and the Wharton School among others,” says Pal.

Markstrat has become a part of the curriculum at NMIMS, Indian School of Business and TA Pai Management Institute. The simulation is currently used by more than 500 academic institutions worldwide.

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