The value of business simulations as pedagogic tools in education has been debated for over twenty years. This paper proposes a methodology for analyzing and understanding in-depth the educational validity of business simulations. It is based on Principal Component Analysis and Structural Equation Modelling, which are used for estimating models of educational value generation. The proposed methodology has been used for analyzing the educational validity of a business game conducted among students using the well established marketing strategy simulation package MARKSTRAT. It was found that such a simulation does indeed create value for participants and helps them to develop strategic marketing skills. We identified three types of educational value generated: capability for experimentation with strategic marketing, understanding of relevant concepts and creation of professional skills applicable and useful in future real life job situations. Also, the relations among these types of educational value have been examined. It was found that the experimentation has a very strong impact on the understanding of concepts, and both of them have medium to high direct impacts (of similar magnitudes) on professional skills development. Finally, it is the perception of the participants about the professional skills applicable in their future jobs they acquired in the business simulation game that determines their overall impression and level of satisfaction.