Hi,
A major reason for companies to fail or get an sustained edge on the competition is market timing. My background is in investment management.
The business cycle is typically controlled by the interest rate from the local country of operation. The interest rate impacts disposable income to purchase things like cars by consumers, how companies are priced on the stock-market based on their expect future returns according at current risk level (where lower interest rates cause investors to price risk cheaper and thus require less future return so stock market prices increase to a point where they reflect a future lower expected return), and borrowing costs of debt from banks. The business cycle can also be altered by things like war which artificially increase the typical demand for commodities and fuel so that central banks will often be forced to more aggressively target fighting escalating inflation (cost-push inflation) through interest rate increases.
Ideally for a car company looking to develop faster than the others in technology or cost competitiveness they will want to have spare cash available when interest rates are highest so they can purchase temporarily undervalued stock in strategic rivals. Crucial to getting this timing right to provide the once in 5-7 year chance to invest aggressively is to not continue to invest consistently when interest rates have been low for a while and are looking to start to edge up (being caught with excessive debt on increasingly marginal ideas in an increasingly more costly environment).
Options in the game should be provided:
- Borrow from bank lenders for a set period of time at a fixed rate or the variable rate.
- Stock Prices should reflect companies having their values altered by at least 50% due to the effects of interest rates, ‘i’ alone (in valuing future income), other major aspect to valuation is growth trajectory, ‘g’.
- Random effects that change the level and magnitude of the business cycle should be incorporated into the game.
Eg. news headlines pop-up that suggests conflict is stirring between certain countries with significant production of key commodities in the global automotive industry. Over a certain period (random values of say weeks or a few months) the disputes escalate to the point where industrial stoppages or military conflict occur causing inflation. After a lag period of perhaps 1-3 months the central banks change interest rate policy to reflect the change in conditions.
Here in this example an astute car company manager will preemptively want to ride out the anticipated difficult times ahead but cutting back on future expensive and risky development projects and technology acquiring. Not only stop new investment but try to repay as much existing debt before interest rates on variable bank loans increase (cutting profitability). This change should be incorporated at the company development level instead of merely through financial instruments like interest rate put or call options that I would appreciate but most others would feel too complicated I would guess.
So for a proper tycoon simulator you need somewhat realistic pricing changes to stock, interest rates, lag periods for major fiscal policy to impact a nation, and a kind of management simulator aspect to world events.
The detailed variability makes investment risk taking in technology based on market timing more important to not only success but financial survival which would make the game not just more realistic, but from a game-play perspective, fuller, engaging and rewarding.
Your thoughts…
