Transcript Slide 1

WELCOME TO
CAPSTONE
BUSINESS
SIMULATION
®
Professor
Jeffrey E. McGee
The University of
Texas at Arlington
Objectives
• Demonstrate effectiveness of multi-discipline
teams working together.
• Use strategic thinking to an advantage.
• Test your business acumen.
• Understand overall interaction and impact of
various parts of a business on one another.
• Grow an awareness of competition.
• Take away practical know-how to improve the
effectiveness of your business.
Why Simulate
•
•
•
•
•
Risk Free
View Alternative Strategies
Enjoyable
Compresses Time (1 Round=1Year)
Selectivity <> Integration
SENSOR
INDUSTRY
OVERVIEW
The Marketplace
Customers (OEMs) need
sensors for their products
Initially one segment,
now breaking into five
Very different customer
demands developing
between the segments
Diversification in the use
and utility of the sensors
The Marketplace
Low
Tech
Performance
Traditional
Size
High
Tech
In our industry we track
the changing customer
demand on a perceptual
map
Over 8 years the
customers will demand
much faster and smaller
sensors
Market Segments will
continue to diverge
Low Tech & Traditional
Customers
“I want these sensors to be cheap”
“I want them to have been around
for a while – no Beta Testing!”
“They have to be moderately
reliable.”
“The technology doesn’t have to
be cutting edge.”
You’re
not giving
me what I
want
High Tech, Size &
Performance Customers
“These sensors have to be
small, like micro, and fast”
“I need them to be right out of
R&D, I’m talking ZERO years on
the market”
“I’ll pay more to get what I want.”
“I like a pretty high reliability.”
And I’m not
getting what I
want!
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
COMPANY
OVERVIEW
SEC ANNOUNCES BREAKUP OF MONOPLOY
FOR IMMEDIATE RELEASE
Mary L. Schapiro, Chair of the SEC, took dramatic action
today by breaking up the monolithic corporation Sensors,
Inc.
In a statement to the press Chairman Schapiro outlined
the reason and the outcome of this move.
“We cannot allow monopolies of this sort to impact an
entire industry!” stated Donaldson. “The customers that
utilize these sensors are being held hostage.
“Effective immediately Sensors, Inc will be dissolved into
the Andrews, Baldwin, Chester, Digby, Erie and Ferris
companies.”
The Competition
ANDREWS
DIGBY
6 Companies
$100 Million in Sales
BALDWIN
ERIE
5 Product Lines
Closed Marketplace
CHESTER
FERRIS
SHAKE UP IN SENSOR INDUSTRY
Company Fires Management Team
After poor results, lackluster sales and angry customer reports,
the Chairman of the Board of Directors has announced the
immediate termination of the Management Team.
“This is a black day for our company,” said Chairman Jeffrey E.
McGee, “We need to hire a dynamic leadership group who will
be able to take this company into the future!”
“Due to this immediate need I have hired the Dream Team to
start on January 1st. I expect to see great things from this
Executive Team!
WELCOME TO
YOUR NEW
COMPANY!
Functional Areas
R&D
Production
Finance
Marketing
Research & Development
• Establish the specification of the
products to meet customer
demand
• Build the quality and reliability
(MTBF) into the products
• Ensure the perceived age of the
product meets customer demands
• Create new products to meet the
changing marketplace
“Our products
are not well
positioned in
the marketplace.”
Marketing
• Set the price of our products
in the marketplace
• Build customer awareness
through promotion
“Our products
are not priced
optimally.
And many of our
customers don’t
even know our
product exists.”
• Establish a sales force and
distribution channels
• Set the sales forecast for our
products
• Set Credit Policies AR/AP
Production
• Purchase machinery to automate
our facilities
• Buy or sell capacity of product
lines
“We are paying
too much for
labor costs.
Very soon we
will run out
of capacity to
meet demand.”
• Schedule production for each line
• Manage the majority of the
company’s fixed assets
• Establish your workforce
complement
Finance
• Acquire capital to fund capital
expansions
– Issue Stock
– Short Term Debt
– Issue Long Term Bonds
• Issue dividend to our
shareholders
• Balance our debt portfolio
• Manage our proformas
“We have poor
cash flow and
substandard
financial ratios.
We have no
financial policy
statement.”
Proformas
A great management tool driven by
forecasts and projections. Allows
“What if” Scenarios by the company.
• Balance Sheet
• Profit & Loss
• Cash Flow
• Financial Ratios
Scoring the Game
• Performance criteria is measured by:
– ROE
– ROS
– ROA
– CUM PROFIT
– STOCK PRICE
– MARKET CAPITALIZATION
– ASSET TURNOVER
– MARKET SHARE
– Each reflects 12% except Market
Capitalization which reflects 16%
of overall performance
RUNNING YOUR
COMPANY
THINGS TO DO ON
AN ANNUAL BASIS
To Do List
• Establish business strategy for your company
• Analyze Capstone Courier to see industry results
• Make tactical decisions across each functional
area (aligned to strategy!)
• Upload official results and confirm on the website
• Await results when Professor processes
• Rejoice in your superior capitalistic acumen
• Begin the process again by confirming alignment
of your results with your company’s strategic
goal.
Types of Business-Level
Strategies
• Business-level strategies are intended to create
differences between the firm’s position relative to
those of its rivals
• To position itself, the firm must decide whether it
intends to perform activities differently or to
perform different activities as compared to its
rivals
Five Generic Strategies
Broad
target
Cost
Uniqueness
Cost
Leadership
Differentiation
Integrated Cost
Leadership/
Differentiation
Narrow
target
Competitive Scope
Competitive Advantage
Focused Cost
Leadership
Focused
Differentiation
No Clearly Defined
Strategy…
MY FIRM HAS
A COMPETITIVE
ADVANTAGE
MY FIRM HAS
A COMPETITIVE
ADVANTAGE
STUCK
IN THE
MIDDLE
CAPSTONE STRATEGIES
STRATEGY
Mission Statement
PERFORMANCE
ASSESSMENT
Success Measurements
Analyst Report
Round Analysis - Star
Summary
• Strategies are declared in
corporate mission
statements
• Capstone firms may develop
and execute any strategy (or
INDUSTRY AND MARKET
ANALYSIS
none at all - though that isn’t
S.W.O.T Analysis
advisable). Basic strategies
Competitor Analysis
Competitive Analysis
include:
– Overall Cost Leader
– Cost Leader with Focus
(Low Tech or Product
FUNCTIONAL PLANNING
Life-Cycle)
R&D
– Differentiator
Marketing
Production
– Differentiator with Focus
HR
Finance
(High-Tech or Product
TQM
Life-Cycle)
OVERALL COST LEADER
An overall cost leader will attempt to be the low-cost producer in
every segment of the market. They will have good profit margins
on all sales while keeping prices low for price-sensitive customers.
• Firm Profile:
– More likely to re-position products than introduce new ones to
the market
– Capacity improvements are unlikely to be undertaken (may run
overtime instead)
– Automation may be pursued to increase margins
– Investments will be financed with debt and/or stock issues
– Tend to spend less on promotion and sales
– Focus on Market Share, Profits, and Stock Price
COST LEADER WITH LOWTECH FOCUS
A low-tech focused cost leader seeks to dominate the price sensitive
market segments. Their aim is to set prices below all competitors and still be profitable.
•
Firm Profile:
– Multiple product lines in the low-tech segments (Low & Traditional)
– Invest heavily in automation
– Spend heavily on advertising to cost sensitive customers (sales
people have more than one product to pitch to prospects)
– Investments financed with debt and/or stock issues
– Focus on ROS, ROE, and Profits
COST LEADER WITH PRODUCT
LIFE-CYCLE FOCUS
A product life-cycle focused cost leader will seek to minimize costs
through efficiency and expertise. Products will be allowed to age and
change in appeal from high-tech, to traditional, and eventually low
end buyers.
• Firm Profile:





Minimum presence in “specialty” segments (Size & Performance)
Low R&D spending (very little re-positioning & new product every 2-3
years)
Invest in automation early in the product’s life-cycle
High spending on promotion and sales
Focus on ROE, ROS, and Profits
DIFFERENTIATOR
A Differentiator will seek to create maximum awareness and
brand equity. They want to be well known as makers of high
quality/highly desirable products.
• Firm Profile:
– High R&D spending to keep products fresh
– Maintain a presence in all market segments
– Spend heavily on advertising and sales to create maximum
awareness and accessibility
– Prices tend to be higher
– Focus on Market Share, Profits, and Stock Price
DIFFERENTIATOR WITH
HIGH-TECH FOCUS
A high-tech differentiator seeks to be known far and wide as the top
producer of the best performing state-of-the-art products.
• Firm Profile:
– Multiple product lines in high-tech segments (High, Performance,
and Size)
– Minimum focus in other segments
– High promotion and sales investments to create maximum
awareness and accessibility
– High R&D expenditures to continually introduce new product lines
and keep existing products fresh
– Unlikely to invest in increased automation or production capacity
– Focus on ROA, Asset Turnover, and ROE
DIFFERENTIATOR WITH
PRODUCT LIFE-CYCLE FOCUS
A product life-cycle differentiator seeks to be well-known as a top
producer of good performing products in each of the targeted
segments.
• Firm Profile:
– Multiple product lines in targeted segments (High, Traditional, and
Low)
– Minimum focus in other segments
– High promotion and sales investments to create maximum
awareness and accessibility
– High R&D expenditures to continually re-position product lines
and keep products fresh
– Unlikely to invest in increased automation or production capacity
– Focus on ROA, Stock Price, and Asset Turnover
SUMMARY
There is no "magic bullet," guaranteed winning
strategy. Each simulation has a unique
competitive dynamic.
 Successful firms will focus on planning,
strategic alignment, teamwork, competitor
analysis, and tactical adjustments.
Comp-XM ®
After competing in the Capstone® Business Simulation
game, each student will be required to complete CompXM® individually.
This exercise entails participating in an additional four
similar, yet different rounds (years) of another simulation.
After each simulated year, you will complete a short quiz,
called a “Board Query,” that contains questions tailored
to your specific situation.
Although every student in the course will use the same
software, the environment, rules and competitive
environment change. Consequently, each examination is
unique, because each student is tested on the decisions
and results in his/her own company — decisions and
results that will be different from those of any other
company.
Comp-XM ®
The Comp-XM® industry has four market segments. Each individual
participant is the sole decision maker for the Andrews company.
Andrews competes against three computer companies, Baldwin,
Chester and Digby.
The Comp-XM® simulation runs four rounds.
Simulation performance is judged using a Balanced Scorecard.
Each round, a score is generated based on performance measures
in these categories:
􀂃 Financial
􀂃 Internal Business Process
􀂃 Customer
􀂃 Learning and Growth
At the end of Round 4, a fifth score is generated using a different set
of measures that evaluate the cumulative performance for Rounds
1-4.
Good Luck
and Enjoy!