“The Council of Directors, or How to Escape Bankruptcy.”
Lesson description
Students participate in a simulation that helps them solve the problem how to escape bankruptcy.
Age level: 16-17 years old
Content Standards
Entrepreneurs are people who take the risks of organizing productive resources to make goods and services. Profit is an important incentive that leads entrepreneurs to accept the risks of business failure
Objectives
- to involve students in solving the problem of bankruptcy
- to teach students present opinions, facts, hypotheses and prove their agreement or disagreement.
Time required:
2 class periods
Activities
- free role play
- belief (opinion) gap
The problem
The Council of Directors of the Don Confectionery Factory (DCF), experts and the representatives of “Doncombank” try to solve a problem: how to escape Bankruptcy. The factory was built at the beginning of the 20th century. The machinery is obsolete. The management from whom the new appointed manager took over the factory had neither training nor enthusiasm to take radical action to instill life into the DCF.
The information
- The assets.
The factory is located on a good site. There is a warehouse not far from it. The machinery in the DCF is usable, but old and not so efficient. In the warehouse there is a certain amount of stock.
- The Financial Situation.
A loan from the bank last year.
No rent to be repaid.
- The Market.
There is a shortage of confectionery factories in the South of Russia. So the production can have a ready sale. But there are some well – known factories in Moscow and Samara with high – quality goods.
- Human resources.
Most of workers are women.
Notes to Students
Please, will you
Share opinions
Disagree tactfully
Interrupt politely
Clear up a misunderstanding
Roles
The Chairman
You have to conduct a meeting successfully.
Manager
You have a plan of modernizing the factory. It is based on the analysis and calculations of experts. You know that you will meet considerable opposition. Try to get the Council of Directors on your side.
Chief Accountant
You have worked for the DCF for 15 years. You are jealously guarded the factory finances. You consider this project (the plan) highly risky.
Production Manager
You are eager to cooperate in the new plans. You are thrilled at the idea of getting new machines for a new production line.
Marketing Manager
You have just been appointed. You have got new plans based on a new market situation.
Personnel Manager
You want to know about the salary of women workers, the details about retraining personnel.
The representative of “Doncombank”
You suggest a new advantage credit on your special conditions:
- to buy 51% of the DCF shares
- to reduce prices
Experts:
Suggest proposals.
Expert Proposals:
- to sell the last 1mln boxes, cost down by 5%
- to reduce 50 men, wages compensation for 2 months
- to retrain personnel
- to use new technology
- to spend 30% of profits for advertising
The Result
Students produce a plan (project) how to escape bankruptcy.
The Task
Summarize the main points of the report.
Write three questions asking the chairman for further information.
Additional Materials
A report of the Chairman of the Company.
Here is a report of a company chairman made at the end – of – year meeting. Read and insert the proper word from the list below. Put the verbs into the correct form.
be going costs financial perform
turnover look back profits domestic
export sales talk training recruit
invest industry spend development
personnel be promising results technology
I’d like to _ _ _ _ _ some of your time _ _ _ _ _ _ _ _ _ _ _ over the year. I
_ _ _ _ _ _ _ to divide my review into three main areas: firstly, finances, secondly, _ _ _ _ _ _ _ _ _ ; and , finally, technology. As to the _ _ _ _ _ _ _ _
front, the _ _ _ _ _ _ _ have been very pleasing. _ _ _ _ _ _ _ has increased by 18%, _ _ _ _ _ have dropped by 5%, _ _ _ _ _ _ are up by 15%. Our company this year _ _ _ _ _ _ _ _ _ _ _ _ quiet satisfactory. But _ _ _ _ _ _ _ _ _ _
have done not very well, especially in Eastern Europe, our largest export market. The _ _ _ _ _ _ _ _ consumer market has been very competitive. Well, let’s _ _ _ _ about personnel. Our policy of personnel _ _ _ _ _ _ _ _ _ _ through _ _ _ _ _ _ _ _ has continued to be a great success. We _ _ _ _
_ _ _ _ _ _ _ _ _ 63 new staff, 15 have retired. Now _ _ _ _ _ _ _ _ _ . The results _ _ _ quite _ _ _ _ _ _ _ _ _ . We _ _ _ _ _ _ _ _ _ _ _ _ heavily in American technology program which links _ _ _ _ _ _ _ _ with the universities.
Suggestions of Experts
Our experts have been working for 10 days. We studied and analyzed al the materials: finances and technology and had a talk with the main specialists. The company output was 5mln r. sweets a year. 4mln were sold, profits were 800mln r. 200 men and women work for the company, wages are 8000 per men. So, annual amount of wages is 192mln roubles.
To sum then, turnover has reduced by 18%, costs increased by 5% and profits are down by 15%. Expenses of the factory are more than its income. In conclusion our experts show you a plan how to increase the income of the company. Here it is.
(the expert gives cards with the proposals and the suggestion to students).
Suggestions of Experts.
Proposals: |
Annual amount of expenditures |
Annual income’s effect |
Annual supplementary profit |
| 1. To sell the last 1mln CD, costs down by 5% |
1,5mld roubles | 1,5mld roubles |
|
| 2. To reduce 50 men, wages compensation | 32mln roubles | 192mln roubles | 160mln roubles |
3. To retrain personnel |
100mln roubles | 900mln roubles | 800mln roubles |
4. To use new technology |
1,5mld roubles | 3mld roubles | 1,5mld roubles |
5. To spend 30% of pro-fits for advertising of new production |
30mln roubles | 1,5mld roubles | 1,5mld roubles |
Doncombank representative
Your company took a short-term credit of 120mln roubles in our bank last year. Your factory has to give back 168mln roubles. The Council of Directors of our bank suggests you another credit, a soft long-term of 500mln roubles for 5 years. But “Doncombank” wants to get 51% of your shares, and proposes changing of the DCF marketing plans.
Notes.
The students solve 2 main problems. They take part in a simulation of a real situation and do calculation and solve economic problems. So the role play is divided into 2 parts: students discuss problems of bankruptcy and each of them is an expert, they do all calculations with figures and facts proposed by the teacher of Economics. Then they continue to solve the problem of bankruptcy sharing opinions. The students choose roles and the teacher help them to conduct the meeting successfully.
The situation “How to Escape Bankruptcy” is a real one. It took place some years ago at the Don Confectionery Factory (DCF), and the new managers of the representatives of “Doncombank” solved this problem successfully. Now there is a new JSC “Industrial Group DCF” and “Doncombank” is the majotity shareholder of the DCF.