Welcome to the Capstone® Business Simulation

J411 - Analysis of
Business Decisions
Welcome to the
®
Capstone
Business Simulation
Kenneth EA Wendeln
©2014 KEAW
Kelley Undergraduate Capstone Classes
J401 & J402 J411 Business Strategy Business Decision Making Capstone® Simula@on Comp-­‐XM ® Assessment Case Method PRIMARY
PRINCIPLES
‘PBLs’
Collaboration & Communication
Critical
Thinking
Written
Communication
✚
Management & Leadership
Professional Competencies
2
Simulation Overview
Electronic Sensor Industry
  History of Sensor Industry
  Industry Direction
  Taking Over Your Company
  Functional Areas
  Measuring Success
  Suggestions and Schedule
Capstone Business Simulation
3
History of the Sensor Industry
  Electronic Sensors – Light Industrial
  Medium/High Technology
•  Patented technological advances
•  Extraordinary value propositions
  One Company Dominated the Marketplace
• 
Forced out the competition
• 
Lost strategic focus and direction
• 
Allowed past strengths to deteriorate
• 
Courts responded to complaints
 Industry Break Up
into 6 equal & similar companies
Capstone Business Simulation
4
The Sensors’ Marketplace
  Customers (OEMs)
need sensors for
their products
http://www.ctscorp.com
  Initially one
market segment,
now breaking into
five
  Very different
demands
developing
between the
market segments
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Perceptual Map of
Sensor Customer Demands
Low
End
Performance
Traditional
Size
High
End
  In our industry we
track the change in
customer demands
on a perceptual map
  Over 8 years the
customers will
demand much faster
and smaller sensors
  Market segments
will continue to
diverge with less
overlap between
segments
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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.”
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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 like a pretty high
reliability.”
“I’ll pay more to get what I want.”
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Sensor Industry
Projected Ongoing Growth
Sees the next 8 years as consistent growth.
All market segments increase at a nice ‘clip’,
according to market analysts.
“I see the entire
market growing at
around 14% or 15%
per year. The High
End market alone will
be growing at a
whopping 19.8%.”
70000
I hope those
companies out there
are ready for that
kind of expansion!”
10000
60000
50000
40000
30000
20000
0
Year Year Year Year Year Year Year Year
1
2
3
4
5
6
7
8
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Sensor Customer Segment
Demands & Characteristics
Initial ‘Ideal Position’ & Importance
Differences for Each Segment
Size &
Performance
Low
End
Performance
Traditional
Size
High
End
are only 2 of 5
criteria needed to
meet customer
segment
requirements
‘Ideal Position’ =
Circle Center +
Ideal Spot Offset
Ideal
Position
MARKET
Performance
Size
SEGMENT
18.3
LOW
$15$25
7 yrs
12k-17k
END
53%
24%
7%
TRADI-
$20$30
2 yrs
14k-19k
TIONAL
23%
47%
9%
PERFOR-
$25$35
1 yr
22k-27k
MANCE
19%
9%
43%
SIZE
$25$35
1.5 yr
16k-21k
9%
29%
19%
$30$40
0 yr
20k-25k
9%
29%
19%
1.7
2.5-0.8
17.5+1.8
16%
5.0
15.0
21%
9.4
8.0+1.4
16.0
17.0-1.0
29%
4.0
Remain the
SAME
Over Time
•  Age
•  Reliability
CHANGE or drift
Over Time
•  Circle Center
Size & Performance
•  Price (-$.50/yr)
3.0+1.0
10.6
12.0-1.4
43%
8.9
7.5+1.4
SEGMENT
11.1
12.5-1.4
43%
Capstone Business Simulation
HIGH
END
Price
Age
Reliability
$
Years
MTBF
10
Competition
after the Break-Up
ANDREWS
BALDWIN
CHESTER
SIX
COMPANIES
$100 million
in Sales
5 Product
Lines
Closed
Marketplace
Capstone Business Simulation
DIGBY
ERIE
FERRIS
11
Sensor Industry
Company Shake-up
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
‘Killer Ken’ Wendeln, “We need to hire dynamic and
strategic thinking leadership who will be able to take this
company into the future and keel the competition!”
“Due to this urgent and challenging opportunity, I have
hired the Kelley ‘Dream Team’ to start immediately. I
expect to see great things from this Executive Team!”
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Company Overview
Last management team left the company
in poor shape:
  No clear strategy or direction
  Products are not meeting
customers buying criteria
  Most of your customers do
not even know your
products exist
  Sales force and distribution
channels deteriorate
  Misallocation of assets
  Under investment in automation and training
  No financial policy or structure
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WELCOME TO YOUR NEW
COMPANY!
Production
R&D
Finance
Marketing
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Marketing
“Our products
are not priced
optimally.
And many of our
customers don’t
even know our
product exists.”
  Set the price of our
products in the
marketplace
  Build customer
awareness through
promotion
  Establish a sales force
and distribution
channels
  Set the sales forecast
for our products
  Set Credit Policies AR/AP
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Research & Development
  Establish the specification
of the products to meet
customer demand
  Build the quality and
reliability (MTBF) into
the products
“Our products
are not well
positioned in
the marketplace.”
  Ensure the perceived age
of the product meets
customer demands
  Create new products to
meet the changing
marketplace
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Production
“We are paying
too much for
labor costs.
 Schedule production for
each line
 Purchase machinery to
automate our facilities
 Buy or sell capacity of
product lines
Our capacity to
produce is far
greater than
the demand.”
 Manage the majority of
the company’s fixed
assets
 Establish and train your
workforce complement
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Finance
  Acquire capital to fund
capital expansions
$ 
$ 
$ 
$ 
Stock
“We have no
financial policy
statement.
Long Term Bonds
Short Term Debt
‘Emergency’ Loans
  Issue dividend to our
shareholders
  Balance our debt portfolio
  Manage your proformas –
We have poor
cash flow and
substandard
financial ratios.”
Financials & Balanced Scorecard
Capstone Business Simulation
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Proforma Financials
A management tool to compare
‘WHAT-IF’ scenarios by the company.
  Balance Sheet
  Profit & Loss
  Cash Flow
  Financial Ratios
  Balanced Scorecard
WARNING: use your judgment, does NOT
take into account the competitors’ decisions.
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Industry Conditions Report
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Industry Conditions Report
Low End Buying Criteria
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Industry Conditions Report
High End Buying Criteria
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“I skate to where the
puck is going to be …
not where it has
been.”
- Wayne Gretzky
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Proforma Tools
DEMAND ANALYSIS
Market
Segment
Traditional
Round
0
Annual
Growth
Rate
Round
1
Round
2
Round
3
Round
4
Round
5
Round
6
Round
7
Round
8
9.2%
Low End
11.7%
High End
16.2%
Pfmn
19.8%
Size
18.3%
Market Segments have
different but constant
annual growth rates
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Proforma Tools
CAPACITY ANALYSIS
Market
Segment
Product
Name
First Shift
Capacity(000)
Firm
Traditional
1,800
Industry
Second Shift
Capacity(000)
Firm
Automation
Level
Cost to
Double
Capacity
Cost to
Raise
Automation
to 10.0
4.0
$39.6M
$43.2M
Industry
3,600
Low End
High End
Pfmn
Size
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Proforma Tools
MARGIN ANALYSIS
Market
Segment
Product
Name
Material
Cost
Price
Labor
Cost
Second
Shift (Y/
N)
Traditional
N
Low End
Y
High End
N
Performance
N
Size
N
Product Margin
$
%
Product Margin
Potential
Traditional
$30.00
$8.00
$3.36
N
Low End
N
High End
N
Performance
N
Size
N
Capstone Business Simulation
$18.64
62%
26
Proforma Tools
CONSUMER REPORT
Traditional
Low End
High End
Performance
Size
Price
Price
Price
Price
Price
Reliability
Reliability
Reliability
Reliability
Reliability
Age
Age
Age
Age
Age
Positioning
Positioning
Positioning
Positioning
Positioning
Awareness
Awareness
Awareness
Awareness
Awareness
Accessibility
Accessibility
Accessibility
Accessibility
Accessibility
Overall
Overall
Overall
Overall
Overall
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Marketing R&D Production 28
Finance Debt Stockholders 29
Scoring the Simulation I
BUSINESS STRATEGY and
SUCCESS MEASURES
1.  You determine & submit your strategy.
2.  Select the criteria & relative weighting
to measure the success of your strategy
at the END of each of CR#5 thru CR#8 :
  ROE
 
 
 
 
 STOCK PRICE
ROS
 CUMULATIVE PROFIT
ROA
 ASSET TURNOVER
MARKET CAPITALIZATION
MARKET SHARE
3.  Presentation of your strategy, results, and ‘lessons
learned’ during last class session.
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Scoring the Simulation II
ANALYST REPORT
Externally evaluates your company in ten
categories of management performance:
1
2
3
4
5
6
7
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9
10
1000
31
Scoring the Simulation III
THE BALANCED
SCORECARD (BS)
✔
✔
✔
Capstone Business Simulation
✔
Internal
evaluation of
management’s
performance
across 4
categories
with up to 19
criteria
32
Scoring the Simulation III
THE BALANCED
SCORECARD Recap
✔✔
Recap of:
Average
Cumulative
Ending
Results
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Scoring the Simulation IV
SUCCESS MEASURES
YOU determine the weighting of your Success
Measures prior to CR #5 with your Strategy
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Some Suggestions
ORGANIZATION
 
 
 
 
Determine and select the skills
needed for the executive team
Setup a flexible structure
Assign responsibilities
Rotate roles & responsibilities
MEETINGS
 
 
 
 
STRATEGY
Set time aside for face-to-face
meetings, initially 2 to 3 hours
Have an agenda & stick to it
Be respectful of others’ time
Record your board minutes
starting with competitive rounds
DECISION MAKING
Do a Situation Analysis for the
market and for your company
Create a purpose & direction for
your company (vision/mission)
 
 
Determine viable strategic
options
 
Don’t become a victim of
‘Analysis – Paralysis’
 
Do initiate the strategy you want
to try during the 1st or 2nd round
Don’t try to pre-determine the
other 5 strategies – you won’t
 
Use the proforma tools - and
save often
Allow for midcourse corrections,
don’t over-react/over-commit
 
 
 
 
 
Read the Student Guide and use
the Capsim on-line tutorials
Do use ALL of the data in the
reports and Capstone Courier
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J411 Capstone - Schedule of Events
CAPSTONE® SimulaAon Individual Rehearsals Intro Lesson + Quiz, Rehearsal Tutoral + Quiz SituaAon Analysis, Advanced: Mkt, HR, TQM Team PracAce Rounds Individual Ar@cles & Readings for Class Discussion #PR1 – with Advanced Marke9ng #PR2 – adds HR #PR3 – adds TQM #PR4 – with AM, HR & TQM Team CompeAAve Rounds #CR1 – with Advanced Marke9ng IniAal Strategy #CR2 – adds HR – adds TQM #CR3 – with AM, HR & TQM #CR4 Final Strategy #CR5 – #CR6 – Team Decisions #CR7 – Due by Scheduled #CR8 – Team PresentaAons Date & Time Last Class Periods COMP-­‐XM® Self-­‐Competency Review Available aQer CR#8 – Complete by final examinaAon date/Ame Allow 6-­‐8 hours total in up to 5 separate sittings
AACSB Accredita@on Requirement
36
Accessing Your Company
You must register (and pay the Capsim fee) to participate in the J411 required
Capstone Business Simulation and Comp-XM Self-Competency Review
http://www.capsim.com
Your Industry Number
See Syllabus
Capstone Business Simulation
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Getting Started
Intro, Rehearsal Tutorial & Situation Analysis
✔
✔
✔
✔
Capstone Business Simulation
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Getting Started
Intro, Rehearsal Tutorial & Situation Analysis
✔
✔
✔
✔
Capstone Business Simulation
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Getting Started
Additional Modules – Marketing, HR & TQM
✔
✔
✔
Capstone Business Simulation
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“If you don’t have a strategy
you will be . . . part of
somebody else’s strategy.”
- Alvin Toffler
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