# Goodwill - Resources

14.07.2019

Factor “Resources” is 1 out of 8 factors that GMC simulator uses to calculate the company's goodwill value. Below are presented parameters from decision and management report that are most correlated with goodwill factor “Resources” when calculating the company's goodwill value. Parameters include direct and inverse correlation:

1. Product quality: 0.50
2. Workers available for next quarter: 0.48
3. Notice of strike weeks for the next quarter: -0.52
4. Machines available for the next quarter: 0.45
5. Average machine efficiency %: 0.42
6. Number of visits: 0.45

“Workers available for next quarter” and “Notice of strike weeks for the next quarter” can be combined into a new metric “Available hours for assembly in next period”, which will measure the company's capabilities in terms of production (capacity) using the following formula:

Available hours for assembly in next period = (Workers available for next quarter * (420 + 84 + 72)) - (Workers available for next quarter * Notice of strike weeks for the next quarter * 48 + Hours of absenteeism and sickness)

We will create the same metric “Available hours for production details in next period” for “Machines available for the next quarter” and “Average machine efficiency %” using the following formula:

Available hours for production details in next period = Machines available for the next quarter * (420 + 84 + 72) * Average machine efficiency % - Hours breakdown

Form the following list:

1. Product quality: 0.50
2. Available hours for assembly in next period: 0.50
3. Available hours for production details in next period: 0.45
4. Number of visits: 0.45

It should be noted that correlation of factors above with goodwill factor “Resources” is relatively low, but in general we can say that goodwill factor “Resources” characterizes existing production capacities of the company.

Diagram below shows dependence of goodwill factor “Resources” on available hours for assembly in next period for the 14C1 scenario in 1 period. Quality of products is 146 - 154 - 140, available hours for production details in next period are 5830, number of visitors is 81686.

General trend - the greater available hours for assembly, the higher goodwill factor “Resources”. However, it is not so much important the absolute value of the company's resources, but the dynamics of their change, mainly relative to competitors in the group. Most likely, GMC simulator estimates dynamics of resource increase / decrease relative to competitors in the group and determines values of goodwill factor “Resources” according to them.

Examples of mechanics of changing goodwill factor “Resources”:

1. When taking absolutely identical decisions by teams in different groups, value of goodwill factor “Resources” can vary between 0.965 - 1.036 depending on competitors in the group.
2. In group where all 5 teams made the same decisions, value of goodwill factor  “Resources” was 1.036. At the same time, efficiency of the machines and quality of products gradually decreased.
3. Even with a large number of workers (more than 60), lefting 1 of them can reduce goodwill factor “Resources” to minimum (0.931).

Hints:

1. Goodwill factor “Resources” can vary between 0.931 - 1.036.
2. Value of goodwill factor “Resources” depends on decisions of competitors in the group.
3. Presumably, maximum value of goodwill factor “Resources” (1.036) is guaranteed to be achieved on average, following these rules:
1. Constant or increasing number of workers relative to competitors.
2. Constant or increasing number of machines relative to competitors.
3. Notice of strike weeks for the next quarter = 0.

Automatic forecast of Goodwill and Investment performance is built into the Calculation model, which can be purchased in our store.