Transcript Capstone Introduction

Simulation Introduction
Why Simulate?
• Risk Free. Innovate and explore alternative strategies
and tactics.
• Big Picture. Decisions and their impacts will be
examined within the context of overall business operations across functional boundaries.
• Develop Critical Thinking Skills.
You will analyze, assess, plan, make decisions, evaluate, and
adjust.
• Compresses Time. Several years worth of
decision-making will play out during the term.
• Comprehensive Strategy. Demonstrates
the importance of developing linked functional, businesslevel, and corporate strategies.
The Business
• $100M electronic sensor manufacturing firms. All
teams begin with an identical profile.
• Oligopoly - market dominated by handful of firms.
• No outside competitors or product substitutes.
• Relatively benign environment – no disruptive new
technologies or new competitors. Focus on existing
competition in an even playing field.
Markets Defined By
Segments
Low End – 39% to
37%
Performance – 8.4% to
11%
Traditional – 32% to
28%
Size – 8.7% to
11%
($),
change over 5 years
Percentage in dollars
High End – 11.2% to
13%
Introduction To Perceptual Maps
Marketing tool used to depict product positioning. Illustrates how customers
distinguish between products that are similar in nature.
Electronic Sensors
Large
Size
(how big is
the sensor?)
Small
Slow
Fast
Performance
(how sensitive is the sensor, and how fast does
it process data?)
Defines five market segments
There are five
distinct segments of
the market:
•Traditional
•Low End
•High End
•Performance
•Size
The customers in
each segment have
different priorities
and evaluate the
product according to
their own needs.
Large
Low End
Performance
Traditional
Size
Size
High End
Small
Slow
Fast
Performance
Perceptual Map
Segments Differentiated By Name
Large
Low
Pfmn
Trad
Size
Size
High
For example, Low End Segment
customers look for large, slow
sensors, representing nearly
obsolete technology. Their
primary concern is price.
While High End Segment
customers want the latest &
greatest technology. They’re
willing to pay more to get very
small, high performance sensors.
Small
Slow
Fast
Performance
Perceptual Map
Segments drift over time
Large
Low
Trad
Size
Size
Pfmn
High
Customer expectations are
constantly changing. They
expect the sensors to become
smaller in size and better in
performance.
Small
Fast
Slow
Performance
Perceptual Map
Segments drift over time
Large
Low
Trad
Pfmn
Size
Size
High
Small
Fast
Slow
Performance
Perceptual Map
Segments drift over time
Large
Low
Trad
Size
Size
Pfmn
High
Small
Fast
Slow
Performance
Perceptual Map
Customers Go Through a Two-Stage Purchase
Decision Process
Stage 1 - Match Product to Market
1. Product must be positioned within the
segment (performance & size).
Able
Size
Able
2. Product must fall within
Price
price guidelines.
Performance
Able
Segments
3. Product must fall
Reliability
within reliability guidelines
Segments
Two-Stage Purchase Decision
Stage 2 - Rank Best Product
Position
Reliability
1. Positioning
AB
2. Age
Age
0
Yrs
Ideal
Spot
1
3. Reliability
Price
HIGH END
20000
25000
4. Price
$30
$40
Product Ranking Criteria by Market Segment
Traditional
Segment
Low End
Segment
High End
Segment
Performance Size
Segment
Segment
1 - Age
1 - Price
1 - Position
1 - Reliability
1 - Position
2 - Price
2 - Age
2 - Age
2 - Position
2 - Age
3 - Position
3 - Position
3 - Reliability 3 - Price
3 - Reliability
4 -Reliability
4 - Reliability
4 - Price
4 - Price
4 - Age
Listed in order of importance for each market segment.
Decision Screens Info in Team Member Guides
R&D – Pg. 10-11
Production
– Pg. 13-14
Finance – Pg. 15-17
Marketing – Pg. 11-13
Research & Development
• Establish the specification of the
products to meet customer demand
– Plan ahead for product position in
future years!
• R&D can take anywhere from 3
months to 3 years. They cost
$100,000 per month.
• Build the quality and reliability
(MTBF) into the products
• Sometimes a long project needs to
be two shorter projects.
• 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 – Do they know about the
product? (Promotion & Sales Budgets,
pgs. 12-13)
“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 – Is the product accessible?
• Set Credit Policies AR/AP
• Set the sales forecast for our products
• SALES FORCASTING IS A KEY ELEMENT
TO COMPANY SUCCESS! (See pgs. 13 &
22)
Production
“We are paying
too much for
labor costs.
Very soon we
will run out
of capacity to
meet demand.”
• Think about the long-term, and
consider market growth early on.
• AUTOMATION: Purchase
machinery to automate our
facilities
• CAPACITY: Buy or sell capacity of
product lines
• Think about products stuck in R&D
- They are not being produced
• Maximize your fixed assets
• Consider TQM Initiatives
Finance
• Acquire capital to fund capital expansions
– Short Term Debt – A/P, inventory expansion,
more lax A/R policy
– Issue Stock – Use for funding long-term
investments (capacity, automation)
– Issue Long Term Bonds – Use for funding longterm investments (capacity, automation)
• Issue dividend to our shareholders (They do not
respond to dividends greater than EPS)
• Balance our debt portfolio - debt & equity
• Manage our proformas – Financial information
measures your success, always track ratios (Also
used for success measures, understand these are
optimistic estimates)
• AVOID EMERGENCY LOANS AT ALL COST! THEY
USUALLY OCCUR DUE TO BAD SALES
FORECASTING
“We have poor
cash flow and
substandard
financial ratios.
We have no
financial policy
statement.”
Other Modules
Labor Negotiations
TQM
Human Resources
Decision Making
•Each firm begins with identical profile.
•Decisions are made January 1st each year.
•Tactical plan should align with chosen success
measurements (Profit, Stock Price, ROE, ROS, ROA,
Asset Turnover, Market Share, Market Capitalization).
•Responsibilities may be divided up by Product
Manager, Functional Manager, or Market Segment
Manager roles/also Intelligence Officer & Record
Keeper.
•Every member of the firm is able to create and
upload decisions - communication and teamwork is
vital!
Simulation Vs. Real World Differences
•Finite time span to re-coop investments.
•Segment growth rate & demand given for each year.
•Demand grows for most years of the simulation.
•Domestic market only.
•Price ceilings given as part of simulation structure,
no sales once the ceiling is passed.
•Customer preferences are homogeneous and given
within all segments.
Recommendations
•Build a spreadsheet to calculate industry demand for
each year & sweet spot location over the course of
the simulation.
•Build & offer a new product in Practice Round 1, it
serves as good practice.
•Divide responsibilities among your group members,
but meet as a group to enter & make final decisions.
•Don’t wait until the last minute to make decisions.
•Develop a consistent strategy and stick with it.
•Focus on both internal strategies and behaviors of
competitors, avoid tunnel vision.