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University of Alaska-Anchorage * College of Business & Public Policy
M A N A G E M E N T
Management Simulation * Semester 1 * 2008
S I M U LA T I ON
Course Intro & Overview
M A N A G E M E N T
Professor Ed Forrest
S I M U LA T I ON
• Telephone:
– (O)786-4161
– (H) 694-4674
• Email:
– [email protected]
• W3site: http://www.cbpp.uaa.alaska.edu/afef/
M A N A G E M E N T
Course Objective
S I M U LA T I ON
Provide the
opportunity to
experience
running a
$100M
business ….
You
Da’
Boss
M A N A G E M E N T
Your Product Line:
S I M U LA T I ON
SENSORS:
M A N A G E M E N T
S I M U LA T I ON
YOUR JOB
• Take on key
management
positions w/in your
corporation
• Make the myriad of
intertwined
decisions
necessary to
create, produce &
successfully
market your
products…
M A N A G E M E N T
S I M U LA T I ON
YOU…
• Analyze the consumer,
market, company &
competitive situation
• Discern & implement your
corp. growth & competitive
strategies
• Must make & integrate
decisions in & across all
functional areas (Marketing,
Research & Development, Production,
Human Resources and Finance).
M A N A G E M E N T
The Simulation…
S I M U LA T I ON
…enables you to observe
impact of your decisions
on business performance
w/in a competitive
market…
• comprised of others in
this class
• as well as other MBA
students from
universities around the
world
Product Place
Target
Market
Price Promotion
M A N A G E M E N T
S I M U LA T I ON
THE CAPSTONE SIMULATION
Most widely used Business –
Simulation Program in the
World
• Adopted by major Fortune
500 companies
..General Motors, General
Electric, Honeywell, Dell,
John Deere, Citibank,
Alcoa, BP, Allstate,
Samsung, Goldman
Sachs, Microsoft…
M A N A G E M E N T
S I M U LA T I ON
By End of Course You will have:
• Conducted a situational analysis of consumers,
competitor & market conditions
• Developed & implemented strategies & plans to
enhance organizational performance
• Selected—according to operant competitive
strategy-- appropriate performance assessment
measures
• Formulated a business plan based on the results
of a market situation & SWOT analysis.
• Formulated, implemented & assessed the
effectiveness of distinct competitive strategies
• Determined & implemented specific tactical
decisions that demonstrate functional alignment
w/ selected competitive strategies
M A N A G E M E N T
S I M U LA T I ON
You will Compete against 5
other Corporations in class….
•
•
•
•
•
•
Andrews
Baldwin
Chester
Digby
Erie
Ferris
Plus be ranked against– 1000+ other
University teams simultaneously
competing –world-wide…
M A N A G E M E N T
S I M U LA T I ON
& How –to date-have we fared in
this World-Wide
Competition??
M A N A G E M E N T
S I M U LA T I ON
•
2001 Top Ten Teams,
World-Wide, for Round 8
Top Ten Teams, World-Wide, for Round 8
by success measurement
There are currently 940 active teams that have played Round 8.
For a team to make this list: Cumulative Profits above 0 Overall Market Share (in dollars) greater then
5.0% Asset Turnover less then 8.0
Profit for Round 8
Round 8 - Mean - $ 25,324,003
•
Top Ten Active Teams Professor School/Course Simid Team Value
•
1 Dr. Minu Afza College of Business - Bloomsburg University
93 481 Business Policy & Strategy CAP1742 Digby $ 238,235,245
2 Mr. Bill Gardner Penn State University -Fayette Campus
Contemporary Business Seminar CAP1513 Andrews $ 193,853,427
3 Dawn DeTienne University of Colorado at Boulder
Senior Seminar CAP1656 Andrews $ 184,258,599
4 Prof. Howard Feldman University of Portland
Managerial Decisions and Policy-Undergrad B CAP1787 Erie $ 181,422,390
Dr. Ed Forrest University of Alaska
5
Marketing Management CAP1611 Baldwin $ 163,281,864
6 Dr. Eric Wiseman University of Colorado at Boulder
Business Senior Seminar CAP1818 Chester $ 157,930,382
7 Dr. Murrow Drury College
Strategy and Policy Formulation CAP1838 Erie $ 149,235,238
8 Dr. Pettus Millikin University
Business Policy CAP1748 Baldwin $ 147,967,873
9 Doug Mayer Hartwick College
Management VII-secA CAP1811 Digby $ 137,339,216
10 Dr. Bruce A. Schooling Point Loma Nazarene University
Strategic Management CAP1794 Digby $ 121,289
th
5
M A N A G E M E N T
S I M U LA T I ON
2003 Top Ten Teams,
World-Wide, for Round 8
•
For a team to make this list: Cumulative Profits above 0 Overall Market Share (in dollars) greater than 6% Asset Turnover less then 8.0
Your class was ranked: with 711 Capstone ® teams completing round 8 by Apr 12, 2003. teams per game of 6 Category: All
•
URL: http://www.capsim.com/prof/viewtopten.cfm?round=8&simid=C4806&version=K
Date/Time: 04/12/2003 10:07:35
eNote:
Text:
Cumulative Profit for Round 8 - Mean - $ 125,355,000
Top Ten Active Teams Professor School/Course Simid Team Value
1 natalie marsh Strayer University
Business Policy & Strategic Planning C4779 Baldwin $ 459,411,986
2 John Hall University of Florida
Global Strategic Management I2MBA 2002 C4923 Baldwin $ 386,472,583
3 natalie marsh Strayer University
Senior Seminar - Business Administration C4778 Erie $ 382,697,422
4 Peter Stanwick Auburn University
Strategic Management C5095 Chester $ 353,185,127
5 John Pearce Villanova University
Policy Administration C5033 Ferris $ 348,535,130
6 Gavin Fox Georgia Southern University
BUSINESS SIMULATION C5041 Digby $ 343,761,703
7 Shirley Schooley Birmingham-Southern College
Strategic Management Senior Project Course Sec B C5356 Digby $ 341,865,002
8 natalie marsh Strayer University
Senior Seminar - Business Administration C4778 Ferris $ 339,568,171
•
th
9
9 Edward Forrest University of Alaska
Marketing Management C4806 Chester $ 333,620,198
10 Donald Kreps Kutztown University
mba capstone C4797 Digby $ 327,188,363
M A N A G E M E N T
2005 S I M U LA T I ON
#1
M A N A G E M E N T
S I M U LA T I ON
2006-
5
th
M A N A G E M E N T
S I M U LA T I ON
and
th
8
M A N A G E M E N T
Last Year
S I M U LA T I ON
3
rd
M A N A G E M E N T
S I M U LA T I ON
M A N A G E M E N T
S I M U LA T I ON
BA686 Management Simulation
Spring 2008
M A N A G E M E N T
Tonight- We Will:
S I M U LA T I ON
1. Step back & take a look
at the “Big Picture”
2. Overview simulation
logic, logistics,
proformas &
procedures..
3. Incorporate & begin
analysis of the “initial”
situation…
M A N A G E M E N T
The Big Picture
Situation/SWOT
Analysis
S I M U LA T I ON
Strategic
Planning
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Functional
Integration
Marketing
Performance
Assessment
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
M A N A G E M E N T
S I M U LA T I ON
Step#1-
…as delineated on syllabus
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Marketing
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
•Political
•Economic
•Socio-cultural
S I M U LA T I ON
•Technological
M A N A G E M E N T
Conditions
•Market Potential
(size, growth rate)
•Customer
Behavior (needs &
Customers
wants/ segmentation,
price sensitivity)
•Industry
Structure
Analysis
(entry/exit barriers,
buyers, sellers,
substitutes)
Company
•Competitor
Response
Profiles
•Economic
Analysis (costs,
(capabilities,
current and future
actions)
•Company Fit
profitability)
Competitors
(strengths,
weaknesses,
resources,
culture, goals)
M A N A G E M E N T
SWOT Analysis Identifies:
S I M U LA T I ON
S
W
O
T
Things the company does well.
Internal
External
Things the company does not do well.
Conditions in the external environment
that favor strengths.
Conditions in the external environment
that do not relate to existing strengths or
favor©South-Western
areas ofCollege
current
Publishingweakness.
M A N A G E M E N T
S I M U LA T I ON
Step#2-
…as delineated on syllabus
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Marketing
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
M A N A G E M E N T
Growth Strategies
S I M U LA T I ON
PRODUCT
Present
Present
Market
Penetration
New
Product
Development
MARKET
New
Market
Development
Diversification
Competitive
Strategies
M A N A G E M E N T
S I M U LA T I ON
M A N A G E M E N T
S I M U LA T I ON
Step#3-
…as delineated on syllabus
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Marketing
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
M A N A G E M E N T
S I M U LA T I ON
Need to Align Your
Functional Strategies
CrossFunctional
Integration
&
Alignment
M A N A G E M E N T
S I M U LA T I ON
Execute & Achieve your
Growth & Competitive
Strategy--
Only when—
All Decisions made
by & within all
functional areas
are in sync w/
one another…
FINANCE
PRODUCTION
MARKETING
M A N A G E M E N T
S I M U LA T I ON
Step#4-
…as delineated on syllabus
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Marketing
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
M A N A G E M E N T
S I M U LA T I ON
Capstone's Performance
Measures
1) Cumulative Profits
2) Market Share
3) ROA
4) ROS
5) ROE
6) Asset Turnover
7) Stock Price
8) Market Capitalization
M A N A G E M E N T
Moving on--S I M U LA T I ON
1. Step back & take a look
at the “Big Picture”
2. Overview simulation
logic, logistics,
proformas &
procedures..
3. Incorporate & Begin
situation analysis…
SHAKE UP IN SENSOR INDUSTRY
Management Teams Fired
“After poor results, lackluster sales
and angry customer reports………..
New dynamic leadership teams
needed to take industry into the
future!”
M A N A G E M E N T
S I M U LA T I O N
M A N A G E M E N T
You are responsible for:
S I M U LA T I O N
•Company
•Consumers
•Competitors
•Conditions
• PEST
Growth &
Competitive
Strategies
Functional
Integration
Marketing
 Profits
 Mrkt Share
 ROA
R&D
 ROS
Production  ROE
 Asset T/O
 Stock
HR
 Mrkt Cap
Finance
M A N A G E M E N T
S IM U L A T I O N
Your duties include
those of the CEO –
… as you set
the mission,
vision &
strategic
direction of
your company
M A N A G E M E N T
S IM U L A T I O N
…and
serve as
manager
of every
functional
domain
Production
R&D
Marketing
Finance
HR
M A N A G E M E N T
S IM U L A T I O N
Production
Set automation levels
Buy or sell capacity
Schedule production
Work overtime or automate
M A N A G E M E N T
R&D
S IM U L A T I O N
A
SIZE
B
Performance
Responsible for:
Product Position
Age & Quality
New product
development
High
High
Eight
<
<
<
Low
Quality
Low
Age
One
Prdt Line
M A R KE T I N G
Human Resource
Managers Responsible for:
M A N A G E M E N T
• Recruitment,
Hiring, Training &
Firing of all labor
• 2 groups:
– Assemblers
– Technicians
Wages
Benefits
FINANCIAL MANAGERS
M A N A G E M E N T
Acquire Capital
S IM U L A T I O N
–Issue Stock
–Short Term Debt
–Issue Long Term Bonds
Set Dividend
Retire Long Term Bonds
Retire Stock
• Responsible for Emergency
Loans
Big AL
The Loan Shark
MARKETING MANAGERS
M A N A G E M E N T
You are responsible for:
S IM U L A T I O N
Planning, implementing & controlling
your marketing strategy
Product
Place
Target
&
Position
Price
Promotion
Marketing Manager
must become onew/ Relationships betw





Price & demand
Price & margin
Promotion budget &
awareness
Sales budget &
accessibility
A/R policy & demand
MARKETING MANAGERS
SIMULATION SPREADSHEET

Set price of your products
in the marketplace



Set the sales forecast
for our products
Set Credit Policies AR/AP
Build customer awareness
through promotion

Establish a sales force and
distribution channels
•Marketing also
selects media
vehicles &
message weights
• AND
determines
composition of
sales/distribution
staff ..and
allocation of
their efforts by
segment & Brand
R&D MANAGERS
SIMULATION SPREADSHEET

Establish product positioning to meet customer demand



Build quality & reliability (MTBF)
into products
Create new products
Ensure age of product meets customer demands
PRODUCTION MANAGERS
SIMULATION SPREADSHEET


Schedule production for each line
Buy or sell capacity of product lines


Purchase machinery to automate our facilities
Establish your workforce complement
SIMULATION SPREADSHEET
FINANCIAL MANAGERS
SIMULATION SPREADSHEET
M A N A G E M E N T
Finally:
S I M U LA T I ON
1. Step back & take a look
at the “Big Picture”
2. Overview simulation
logic, logistics,
proformas &
procedures..
3. Incorporate & begin
situation analysis…
Situation Analysis
Team Member Guide- Chapter 4
Help > Managers Guide > Situation Analysis
SENSOR INDUSTRY ANALYST PROJECT
ONGOING GROWTH
Sees the next 8 years as consistent growth. All market
segments increase at a nice “clip,” according to market
analyst.
“I see the entire
market growing at
around 14% or 15%
per year. The High
Tech market alone will
be growing at a
whopping 16%.”
70000
60000
50000
40000
30000
20000
10000
I hope those
companies out there
are ready for that kind
of expansion!”
0
Year Year Year Year Year Year Year Year
1
2
3
4
5
6
7
8
M A N A G E M E N T
S I M U LA T I ON
Situation & SWOT Analysis
Company
Initial
Situation
Consumer
Competitors
Conditions
Specifically…determine
Company
Consumer
Competitors
Conditions




Strengths & weaknesses w/in & across all
functional areas; Profile of current product
portfolio…
How market is segmented; relevant factors
that influence consumer demand &
purchasing decisions
Your competitors relative market
positions..
Macro-E considerations especially
technological trends …
Portfolio Analysis
Which Brands should
receive more/ less/
no investment-Based
on:



Product Position/
Potential
Profitability/ Margins
MarketGrowth/MarketShare Matrix
Boston Consulting Group’s
Growth-Share Matrix
STARS
Product-Market
Growth (%)
High
Low
PROBLEM
CHILD
CASH COWS
10x
4x
High
DOGS
2x 1.5x 1x
Relative
Market Share
.5x
Low
.2x .1x
Situation Analysis
- Resources
Capstone
Exercises
Perceptual
Map
Demand &
Capacity
Analysis
Consumer
Report
Key Questions Answered
How technology will reshape
customer expectations over
next eight years
How demand will increase &
impact your investments in
Capacity
How customers perceive
you …and your competitors
Situation
Analysis Guides:
•Margins
•Working Capital
•Financial
Structure
•Wealth Creation
•Productivity
•Customer
Satisfaction
Capstone
Exercises
Key Questions
Answered
Perceptual
Map
How technology will
reshape customer
expectations over next
eight years
Demand &
Capacity
Analysis
How demand will increase
& impact your investments
in Capacity
Consumer
Report
How customers perceive
you …and your
competitors
P E R C E P T U A L
M A P
Size
19
18
2
17
4
16
15
1
14
13
3
5
12
11
10
9
8
7
Drift Demonstration
PERCEPTUAL
MAP
6
5
4
3
2
1
0
1
2
3
4
5
6
7
8
9
10
11
12
13 14
15
16
Performance
Cheaper too-$.50 drop
in price/year
Plot the drift of
each segment
MAP
circle as
simulation
proceeds thru 8
rounds
 ("Fine Cut"
circles have a
radius of 2.5
units,
 "Rough Cut"
circles have a
radius of 4 units)

PERCEPTUAL
Capstone
Exercises
Key Questions
Answered
Perceptual
Map
How technology will
reshape customer
expectations over next
eight years
Demand &
Capacity
Analysis
How demand will increase
& impact your investments
in Capacity
Consumer
Report
How customers perceive
you …and your
competitors
Key Demand
Consideration:


Overall market
growing @ ~
14%/yr
“Average” company
should/could double sales in 6 years
Key Capacity
Consideration:
DEMAND ANALYSIS
This analysis examines growth of customer
demand as simulation proceeds thru 8 rounds.
For this exercise you need the Market
Segment Analysis pages (pages 5 - 9) of
The Capstone Courier- Round 0
W/in Segment Statistics-Use the
Industry Unit Demand - top left corner
Traditional Statistics
Total Industry Unit Demand 7,387
Actual Industry Unit Sales 7,387
Segment % of Total Industry 32.4%
Growth Rate 9.2%
Page 5
capstone
Courier
7387 X 1.092=8067
7387
Demand Analysis
Page 30 TMG
CAPACITY ANALYSIS



This exercise requires the Production
Analysis (page 4) of The Capstone
Courier.
The analysis asks:
What Would it Cost to Double Capacity;
What Would it Cost to Maximize
Automation?
Production Analysis (page 4)
CAPACITY ANALYSIS
To successfully manage your company-need to know the cost of increasing the
number-of- units you can manufacture.
Need to decide how best to increase
output:
1. Increase manufacturing capacity; or
2. Increase automation (which allows you
to profitably run a line on overtime).
CAPACITY ANALYSIS
CostDC= (# unitsDC) * ($6
Floor
+ $4 autopt*Auto-level)
Capacity/Plant & Equipment Analysis (all capacities and dollars in 1000’s)
Segment
Trad
Low
High
Perf
Size
Product
Your Industry
Name
Capacity Capacity
1,800
(X 6)
Overtime
Capacity
Firm
3,600
Automation
Level
Cost to
Add
Capacity
New
Capacity
Level
4
3.0
$16,200
$39.6m
2,700
Cost to
Increase
Automation
Industry
(X 6)
$43.2m
$54,000
#units * ($4 *(10 - Current Auto-level)= Cost
INTERNAL
What are the S & W’s
w/ respect to your
company’s production
lines capacities &
efficiencies
•
S
W
O
T
EXTERNAL
•What are the O & T’s
w/ respect the nature,
direction and
magnitude of
consumer demand
Capstone
Exercises
Key Questions
Answered
Perceptual
Map
How technology will
reshape customer
expectations over next
eight years
Demand &
Capacity
Analysis
How demand will increase
& impact your investments
in Capacity
Consumer
Report
How customers perceive
you …and your
competitors
Your Consumers
Consumer Buying Criteria
Determinant Attributes
KEY
POINT
Strive to meet
customers
preferences on
top two criteria
Don’t spend
limited
resources
(time & $)
meeting
lesser
concerns
•Low End customers seek old, simple & cheap tech.
•Performance customers seek advanced
tech., w/ high reliability & performance
•Traditional customers seek proven
products using current technology
•Size customers seek
advanced sensors that
focus on small size
•High End customers seek
cutting-edge sensors in
both size & performance
INTERNAL
S
W
O
T
EXTERNAL
Customer Satisfaction
Evaluation Scheme:
Attribute
Poor
Price
Top1/3
Reliability Bttm1/3
Age
+1yr
Position
+1.5 units
Awarenes <50%
s
Access
<50%
Overall
How Rate
Fair
Mid1/3
Mid1/3
.6-1yr
.6-1.5
50-80%
Good
Bttm1/3
Top1/3
~.5yrs
w/in .5
80%+
50-80%
80%+
On Top 2
Attributes
INTERNAL
W
S
From results… can
determine Strengths &
Weaknesses of current
marketing mix:
Product - Positioning; age &
quality (reliability)--
O
T
EXTERNAL
Current levels of support w/
respect to:
• Promotion
• Distribution (accessibility)
• Pricing - policy/competitiveness
st
1 Reorganize
Company:
& Re-allocate
responsibilities:





Marketing
Production
R&D
Finance
HR
3 CoCEO’s
M A N A G E M E N T
This Week’s
S I M U LA T I ON
Incorporate- register w/ your
assigned Capstone:
SimID# --
C23258 or C23259
Begin Situation Analysis..
OK Now… Let’s
get to work…
M A N A G E M E N T
S I M U LA T I ON
M A N A G E M E N T
S I M U LA T I ON
Questions?