Bankruptcy is all part of the game for Harvard students

John Vandergraft at Concept Bright is plotting a takeover, the supply of jeans in Los Angeles has dried up and your flagship department store in Valparaiso is being hammered on price in three of its four products. Capitalism, you might conclude as Maple Five's cash ebbs away, is not as easy as it looks.

Capitalism the computer game, that is. The strategic simulation from Interactive Magic is so tough that it is being used by a professor at Harvard Business School in the final examination for his entrepreneurial marketing course.

Tom Kosnik, who also teaches technical marketing at the Stanford School of Engineering, thinks so highly of the game that he has organised a tournament between his two schools. He also plans to challenge a colleague at the London Business School to recruit a team.

"I've been looking for a good business `sim' for at least a decade," he says. "I want to get people to learn how to do business by doing business rather than by listening to lectures. Capitalism is very realistic and people love it." He adds, conspiratorially: "I go bankrupt a lot."

The game was developed by a programmer in Hong Kong who had little experience in business. One of its quirks, reflecting the relaxed regime in which he lives, is that taxation plays a minor role.

Players start the game with $6m in their personal account and $5m in their new corporation. The money can be spent on shops, manufacturing plants, research labs or resource businesses. At its heart is a system for linking business units - from purchasing to sales - in nine boxes within each firm. Players have to control their supply lines, invest in training and equipment, manage their brands and position themselves within each market.

Professor Kosnik's students tended to adopt three main strategies. Some built diversified conglomerates, while others concentrated on retailing finished goods. A third group constructed vertically integrated chains.

"Two of the teams were very ideological, refusing to make or sell cigarettes and liquor. It was interesting seeing the ethical conflict when they realised how profitable they are." Others stumbled over the high cost of researching high-tech products.

While the game itself is intricate and fun, much of the educational benefit comes from working in management teams. One participant in the tournament noted that "business is like juggling". Professor Kosnik found that players who lost were more likely to draw useful conclusions.

Interactive Magic's chairman Bill Stealey - who earned his spurs as co- founder of Microprose, developer of award winning simulations like Civilization, a build-an-empire from stone-to-space age game - is planning a revamped version next year which can be played across the Internet.