Finance

At the commencement of each year, a budget is allocated to you to cover the investments in R&D, marketing and distribution for your Red Ocean product as well as your Blue Ocean one.  Your budget should also cover your investment in corporate projects.

Your budget is linked to the success of Blue Buddies in the previous period. Your budget for period 2, for example, will be equal to a fixed percentage of your revenues in period 1.  However, there is a maximum level of budget for each decision round.  Similarly, there is a minimum budget level for each period.  If you are not generating sufficient contribution internally, the Finance department may be able to borrow funds or stretch creditors so that you can continue operations.

In general, your budget for each period will be between 70 and 300 million dollars. You will have to work within this given budget.  You do not have to worry about budget calculations as BOSS does that for you.  You may consult the budget chart at any time; it provides details on how you have decided to spend your budget in the upcoming period, based on your current decisions.

If total spending exceeds the allocated budget for a period, you will receive an error message.  

The decisions for your Red Ocean product are automated during the Blue Ocean rounds.  Thus, a share of your total budget is already spent when you start the decision round.  You may, however, reallocate part of the Red Ocean budget to the newly launched product.  To do this, all you have to do is to spend the budget you need on the Blue Ocean decisions; the Red Box Manager will reduce his expenditures so as to save the budget you need for Blue Box. If you decide to reallocate too much budget from your Red Ocean product to your Blue Ocean product, you will get a warning or an error message, explaining you that you are endangering your Red Ocean sales and taking on too much risk.

Note that the budget screen will always show the original Red Box decisions so that you can measure the financial efforts required from Red Box.

 

Figure 6 – Budget Form

Note that if your objective is to maximize your return on investment, you should not necessarily spend your entire budget in every situation.  If you have outstanding performance, you may be granted a large budget.  However, spending it completely might be a waste of resources.