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Version 4/16/2016

MANUAL
SERVICE STATION NETWORK

MOL freshhh 2016 student competition

EcoSim Business Simulations, Hungary

www.ecosim.hu
SUMMARY
Welcome to the Strategy Simulation Round of MOL freshhh 2016!

In this game You and Your teammates face the exciting


world of retail business! Your team is the management of a
service station network in a virtual country. Service stations
are the next step of the MOL Group retail business: not just
selling gasoline, but to provide high-class services and
goods as well.

The purpose of this manual is to show the economic


environment step by step, the decision possibilities, the
frames in which the virtual service station network will
operate.

Your task is to create a successful business strategy based


on the market analysis. The goal is to manage the
operation of the service station network in the most
effective way, in order to maximize the average Return
on Assets, the ROA (ROA = Profit/Assets) in the next 4
virtual years. The profit is calculated in the Profit and loss statement, and the Assets value is the Total Assets
line of the Balance sheet.

The game has 4 periods, each period represents a year (twelve months). In each period you should make
decision for the next year and indicate them on the online Decision Form which you can reach by logging in
the freshhh.net website. Your decisions are entered into the simulation software which creates reports and
statistics. Continuous reviewing of the Reports in line with the reading of this manual is recommended!

In the game there are 8 networks (8 teams) in one market. The company sells fuel (gasoline 95, gasoline 98,
normal diesel, premium diesel) and other products in the shops in the following categories: basic, non-food,
grocery, food to go, hot beverages.

Your company, the network has 150 service stations which are technically the same. There are 6 fuel pumps
and 100 m2 shop at each service station. It operates with 16 opening hours, between 6:00 and 22:00.

In the game the scope of activities can be extended by selling alternative fuel and by offering car wash service
by initiating various projects. These projects are described at the end of this manual.

In the game the unit of currency is World dollar (W$).

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STRATEGY
The goal is to manage the service station network efficiency in order to maximize the ROA (=Return on
Assets, the ROA (ROA = Profit/Assets)). For this you should take into consideration the marketing mix
(4P=Product, Price, Promotion, Place), the optimal staff number, the logistic capacity, the market information
about the competitors and the demand forecast. These key criteria are in connection with each other, so good
performance in an area has an effect on the other areas too. If a goal e.g. the market share increasing - is in
your focus, the company is likely to be forced to make a compromise in other fields, e.g. margin rate. The
performance of the team depends on the decisions they made, and also indirectly the decision of the other
teams whom decisions can keep your team from achieving the market leader position according to the
average ROA. Also the general market/economic trends must be taken into consideration.

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THE DECISIONS
The service station network is managed by your team by yearly (12 months) strategic decisions.

The decisions to be made and the results are shown in the online report. The decisions can be classified into the
following categories:

I. Supply/Pricing

II. Promotion

III. Opening hours

IV. Human resources

V. Maintenance

VI. Finance

VII. Market information

VIII. Extraordinary events and projects

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SUPPLY/PRICING
The company orders the gasoline, diesel and the alternative fuel from the nationwide fuel
wholesaler. The contracted suppliers of the shop are also specialized wholesalers. I.
The orders can be posted on the decision form for the actual year. The ordered fuel and
products constantly (daily delivery) arrive at the service stations, but since a year is treated as one time unit, a
yearly quantity of fuel and products should be ordered. This means that the order above your store capacity is
valid! The ordered stocks are paid at the period of the delivery.

The accurate order is the responsibility of the management, so if the fuel store capacity is not enough for the
year end stock, the remaining stock will be stored at the wholesaler for 5% of the value of the leased
stored stock. The store capacity of the shop is not limited in this game.

There is a possibility to order in advance (pre-order; e.g. set an order for n+2 year in
the n year), in this case the wholesaler pays back the 3% of the value of the
pre-order. The risk of order and the stock surplus is also the responsibility of the
management.

This table shows the fuel products. The unit of measure is Thousand liter = kLiter.
The purchase price is the price you pay for the wholesaler for the fuel. The wholesaler delivers the ordered fuel
to your Headquarter where you have store capacity, listed below in the table. The pricing of the fuel products is
your task.

Product Unit of measure Purchase price Store capacity

Gasoline 95 Thousand Liter 70 W$/k Liter 1 800 k Liter


Gasoline 98 Thousand Liter 75 W$/ k Liter 400 k Liter
Diesel Thousand Liter 65 W$/ k Liter 1 800 k Liter
Premium Diesel Thousand Liter 71 W$/ k Liter 400 k Liter
Alternative fuel Thousand Liter 49 W$/ k Liter 300 k Liter

The shop product pricing is to set the margin percentage only. You are free to change the margin of all the
five product types.

Shop product assortment What is it?

Basic tobacco, mobile phone cards and newspapers


Non-food lubricant, accessories and tools
Grocery everyday goods, like milk, egg, bacon, bread
Food to go sandwiches, pastry
Hot beverages high-class hot beverages, coffee, tea

The stocks of the shop are valued on the purchase price, so the order should be posted on the purchase
value.

Your customers are price sensitive. The market tolerates smaller price increasing, but there is a point,
where the price is too high and the customers abandon your network.

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PROMOTION
The service station network spend money for the promotion locally and countrywide too. The management of
the company decides the budget for the promotion. The promotion expense has no limit, but the growing
expenses increase the sales in a decreasing measure.

Beside the promotion budget, you can make decision about the discount of the company
II.
fuel card. The fuel card is a pre-pay tool for companies, with which the employees (like truck drivers, couriers)
can buy fuel and goods at the services station. You can decide the discount between 0,5% and 2%. The costs
of fuel card discounts can be found in profit and loss statement, promotion line.

This discount is available only for companies. The company buyers rate for Gasoline is 30%, for Diesel is
60% and for Alternative fuel is 30% also.

OPENING HOURS

The basic opening hours are between 6:00 and 22:00. The opening hours can be extended
to 0-24, but it requires 2 more persons/station in the staff. The additional number of
employees will be hired automatically to reach the minimum number of staff in case of 0-24
III.
opening hours. Besides that the energy costs are also rising with ~45%. And of course at
night, the transit traffic generates new demand opportunities.

HUMAN RESOURSES

There are three types of staff in the simulation.

The Station staff operates the gas stations and the shops. Every station needs at least 5
IV.
employee minimum at the basic opening hours and +2 at minimum for the 0-24 operation.
If you employ more staff than the minimum, the quality of the customer attendance is higher.

The Logistics staff operates the fuel logistic of the network, between the headquarter and the gas stations.
The logistic staff is capacity based, one logistic employee can manage 400 kLiter fuel sales. So you should plan
the amount of kLiter sales and then optimize the logistics staff by hiring or dismiss.

The Admin staff is fixed number and their salaries is the average of the salary of the Logistics and the Station
staff.

Wages
The salary for the Station and for the Logistics staff is different in the beginning of the
game. The wages can be changed, but it cannot be less than the 300 W$ / person
minimum salary. More salary means more employee satisfaction and performance. The
wage is yearly.

Training
The management spends money on the training of the employees too. Language,
communication and technical trainings have effect on the level of the operation and customer service. You can
set the total budget of training. Note that if you do not spend on training at all, it has a very negative effect.

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HSE,LOGISTICS AND MAINTENANCE
The HSE (Health, Safety and Environment) and maintenance expenses (187 500 W$/period
at the beginning of the game) are for the safety of the service stations, minimizing the
environmental pollution and improving the aesthetic level (decoration, design). The more
money the company spends for HSE & maintenance, the more attractive it will be.
V.
The company needs logistics equipment (machines and vehicles) to distribute the fuel
among the gas stations. The necessary logistic machinery capacity is 4 W$ / kLiter fuel
sold. It means that you need 4 W$ value capacity to sell (distribute) 1 kLiter fuel.

The shop products are delivered by the wholesalers to the shops of your gas station, so
you need to distribute the fuel only.

FINANCE
The company can receive money from the profits and the investments and from external
sources (bank loan).
VI.
The bank automatically provides overdraft loan (short term loan) in case the company run out of cash. The
bank provides money so that the cash reach the minimum level. In the next period the loan should be refunded,
if the company still needs it, the bank will provide a new loan. The interest of the loan will be paid in the next
period, interest rate is 6%/period.

The team also can decide to ask for long term loan from the bank. Long term loan last as much long as the
company wants it to. It can be taken up in any period, and can be repaid totally or partly in any period. The
interest has to be paid in the current period upon the amount of the actual long term loan. The interest rate is
3% per year. The long term loan limit for your company is W$ 9 500 000.

The company has long term loan in the beginning. Currently only the interest should be paid, which is
3%/period.

For the suppliers of the company (wholesalers, service providers) pay the invoices with app. 30 days due date.

Dividend: In case of profit, the dividend payment is 100% of the profit according to the will of the owner of
the company during the whole game.

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FINANCIAL STATEMENTS
The financial statements include the profit and loss statement, the cash flow and the balance sheet.

Profit and loss statement

The first part of the profit and loss statement shows the net revenue in a period; the sales, the cost of goods
sold (shorting: COGS), and the gross margin of each product types. The companies receive interests (1%) on
the cash balance at the end of the year; the income of the interest is also included in the profit and loss
account. Other income is basically unused in this game.

The second part of the profit and loss statement shows the costs which are deducted from the gross margin.
- Promotion: costs of promotion
- Wages: all the amount paid to the employees
- Training: budget of the training of the employees
- HSE & Maintenance: costs of HSE & maintenance
- Energy: energy and other utility costs
- Office overheads: office and other administration costs
- Depreciation: depreciation costs of fixed asset, yearly 2,5% of the fixed assets + the depreciation of the
logistics
- Projects: costs of started and ongoing projects
- Market research: costs of market research
- Interest: interest of investment loan and the other loans of the previous period
- Other miscellaneous costs: other costs, e.g. lease storage costs

Balance sheet

The left side of the balance sheet shows the companys assets, which are the followings:

Land: land of the service stations and the HQ


Fixed assets: the equipments of service stations and buildings. Depreciation is 2.5%/year.
Inventories: Fuel and shop products stock at the end of period (stock remained after sales)
Cash: The closing cash from the Cash flow.
Machines: the value of the logistics, equal to the closing capacity

The passives (liabilities) of the balance sheet (right side) are the origin of the companys property, which are the
followings:

Long term loan: investment loan


Short term loan: (automatic)
Suppliers: debit to the companys suppliers
Share capital: the amount that the founders invested into the company
Reserves: accumulated net earnings of the company
Profit/Loss: profit/loss made in the period

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ROA: the Return on Assets percentage shows how profitable a company's assets are in generating revenue.
ROA = Profit (or loss) divided by Total Assets.

Cash Flow

Operating costs: Calculation in year 0 =SUM(F30:F35)+SUM(F37:F40)-suppliers+suppliers of year -1 (590


000W$)
Purchase of machine: your decision of logistics investment + the initial costs of the running projects
Purchase of fuel: ordered and pre-ordered fuels multiplied by the purchase prices
Purchase of shop products: ordered shop products
Loan payback: the amount of paid back loan
Dividend: equal to the profit of the last year (in Y1 you pay the Y0 profit as dividend)

Sales: Total Sales from Profit/loss and carwash income and interest income
Loan: the amount of loan you asked for
Overdraft: the automatic, short term loan

MARKET INFORMATION
Information about the market and the competitors is available in order to help the
team to make decisions. These are the following:

Sales data/market share price: 1 000 W$


VII.
Margins and Prices on the market price: 1 000 W$

Operational expenses price: 1 000 W$

Projects running price: 1 000 W$

Market forecast price: 1 000 W$

Average ROA in the market price: 1 000 W$

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ACQUISITION AND CONSTRUCTION
Three smaller service station networks are on sale. You can make a bid to buy one of them in the 2nd decision
round. Each networks have city and commuter located service stations.

One team can only achive maximum one network, so make your priorities.

Service station network Number of stations The minimum bid for each network

Gold Lion 34 4.500.000 W$


Octan100 16 2.100.000 W$
Bar-gain 9 1.100.000 W$
The effects of the succesful aquisition:
- The fixed assets will grow with the notional amount of your bids.
- The purchase of machine in the cash-flow will grow with the notional amount of your bids.
- Your number of stations (and your sales) will grow.
You shall be careful about the amount of your bids, because it can effect your ROA grossly.

PROJECTS
Beyond the above mentioned operative and periodic decisions, there are various
available projects. You can start any of these projects to widen the service of your
service station. The starting costs come up once, in the starting year of the project.
The permanent costs are valid in every year, including the starting year.
VIII.
Project description Effects Initial expenditure (W$) Permanent
costs
Added to purchase of
(W$/period)
machine and fixed
assets Project costs

1. Alternative fuel - Enter a new market 350 000 0

The gas station network will be able to - The shop and the car
sell alternative fuel (LPG). New pumps wash sales will both
and tank will be installed. The alternative increase
fuel is well-known cheaper than the
others and the customers do not tolerate
too high price.

2. Network construction - The estimated 1 700 000 0


revenue of a highway
You can decide to build new pair of
based service station
service stations along the highways of the
is triple of an average
country, maximum 5 pairs. These are
station.
good opportunities, but the construction
and the license fee is not cheap. This is
not a cost, because you invest your cash. - You can start the
The depreciation will be the cost of the construction in each
investment. period.

3. Renovation of shop & Hot beverages - New product line! 1 800/station 100 / station

The complete renovation of the shop in - The shop and the fuel
order to make a high-class coffee corner. sales will increase

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4. Car wash - Enter a new market 950/station 260 / station
(estimated sales:
Hand wash and machine wash units.
2500 - 3 000 Car
The average price is 0,5 W$ / car and the wash
maximum price is 1 W$/car in other car client/year/station)
wash units in the city.
- The shop and the fuel
You can build it in 1-150 station.
sales will increase

5. Network optimization - Decrease costs in 1 100 000 0


proportion
You can sell the 10 less profitable stations
of your network. - Some turnover loss

6. Green Energy Innovation - Lower energy costs by 800 / station 100 / station
15-20%
In order to reduce the energy
consumption of the station, the total - Green station badge
heating and cooling system is replaced
and a new fridge room is also installed.

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