assignment

People Express Part 1

The purpose of People Express project is for you to understand how strategic decision-making of a firm affects its financial performance over time in relationship to growth and profitability. For the project, you need the People Express Flight Simulation from Strategy Dynamics.

The project includes the following components:

Simulation Report 1 (Group)

Simulation Report 2 (Individual)

Final Simulation (Group)

• Presentation

• Project Packet:

Presentation slides

Strategy report

Model (TBD)

Important: Attendance from all students is required on all days of group presentation. Absence on any of these days will result in a zero on your presentation grade.

The following section describes how to generate simulation report 1.

Simulating Don Burr Strategy

1. Gain an understanding of the proper use of People Express Flight Simulator.

   • At a minimum, read the associated User’s Guide.

   • IMPORTANT: Ensure that you (and your team) know how to enter data, as well as read & interpret the Reports and Graphs.

1. Run the “Base Case.” See User’s Guide; beginning on page 20. You do not need to turn this one in. This is a practice run.

1. Run the “Don Burr Case” for 5 years. In this regard, you will have to interpret what we have discussed in class regarding Burr’s strategy, then apply the following simulation parameters:

   • Number of Aircraft: Increase at an increasing rate. Start by adding one plane per quarter, until you get to 75 at the 5-year point—an increase of about 100% per year in planes.

   • Employees: 55/aircraft (Hire enough to staff the planes you buy and to replace people who leave the firm).

   • Fraction of Revenue for marketing: .15 (15%). You can lower this fraction over time.

   • Price ($/Seat-mile) = .09/seat-mile.

   • Target Service Scope = .60 (60%).

1. Turn in your “Don Burr Case” report. (One per group)

• From the simulation model, import Tables “User Decisions” and “All Public Variables” to Excel.

• The first section of your report should show your 5-year strategy. (i.e. your decisions)

• Using Excel’s chart function, draw line graphs of:

1. Number of Aircraft (How many aircraft was purchased per quarter)

2. Employees (How many employees were hired per quarter)

3. Fraction of revenues for marketing

• Two other decision variables stay constant in Don Burr Case. So you don’t need to draw charts for these variables.

• The X-axis in your graphs should show the appropriate timeline.

• Put title on each graph.

• The next section of your report should show results of your strategy.

• Again, using Excel’s chart function, draw line graphs of:

1. Fleet Size (Total number of aircrafts you have)

2. Revenues ($million/Year)

3. Load Factor (%)

4. Net Income ($million/Year)

5. Employees per Aircraft

6. Stock Price ($/share)

7. Reported Service Quality

8. Ratio of Peoples Fare to Average Competitor Fare ($/Seat Miles)

• Your report should look similar to the worksheets on pp 31-32 of the User’s Guide.

1. As you work through this project you should be able to discover the answers the following questions:

   • As the quantities of aircraft and people change in the “Don Burr Case,” what happens to other variables, such as:

• • Length of the Workweek?

  • Employee Retention?

  • Experience of Employees?

  • Customer Satisfaction?

  • Capacity?

  • Demand?

  • Revenue?

  • Net Income (Profitability)?

  • Share Price?

• What was wrong with Don Burr’s strategy?