1. Acct 2220 - Capsim Simulation Teams will run their own companies and compete against one another. The focus is on “Business Integration” and using accounting information to develop good analysis & decision-making skills. Acct 2220 - Capsim Simulation Teams will run their own companies and compete against one another. The focus is on “Business Integration” and using accounting information to develop good analysis & decision-making skills.

2. Why use Simulation? An opportunity to take control of your learning.An opportunity to take control of your learning. An application of what we are discussing in class.An application of what we are discussing in class. Planning & making your own business decisions & understanding the implications of those decisions.Planning & making your own business decisions & understanding the implications of those decisions. Learning about the integration of multiple business disciplines (i.e. R&D, Mkt, Prod, Acct, Finance).Learning about the integration of multiple business disciplines (i.e. R&D, Mkt, Prod, Acct, Finance). Recognition that there are no “perfect” answers.Recognition that there are no “perfect” answers. Team-building opportunity to work with others.Team-building opportunity to work with others. A challenging, but engaging experience!A challenging, but engaging experience!

3. ELECTRONIC SENSORS: AN INDUSTRY OVERVIEW ELECTRONIC SENSORS: AN INDUSTRY OVERVIEW

4. The Marketplace Customers (OEMs) need sensors for their products Customers (OEMs) need sensors for their products Initially one segment, now breaking into two Initially one segment, now breaking into two Different customer demands developing between the segments Different customer demands developing between the segments Diversification in the use and utility of the sensors Diversification in the use and utility of the sensors Low Tech High Tech

5. The Marketplace In our industry we track the changing customer demand on a perceptual map. Over 8 years, customers will demand much faster and smaller sensors. Market Segments will continue to diverge. Low Tech High Tech

6. Low-Tech Customer Demands: You are not giving me what I want… “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.” Ex: Heat/Cooling sensors, Pressure switches, Security apps, generic needs.

7. High-Tech Customer Demands: I’m not getting what I want! “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’m willing to pay more to get what I want.” “I like a pretty high reliability.” Ex: Apple, Google, Dell, etc.

8. INDUSTRY ANALYSTS PROJECT HIGH GROWTH IN THE SENSOR INDUSTRY! Consistent growth is projected over the next 8 years. All market segments will increase at a “nice clip,” according to market analysts. “I see the entire market growing at around 14% or 15% per year. The High Tech market alone will be growing at a whopping 16-20%.” I hope those companies out there are ready for that kind of expansion!”

9. SEC ANNOUNCES BREAKUP OF MONOPOLY FOR IMMEDIATE RELEASE The SEC, took dramatic action today by breaking up the monolithic corporation, Sensors, Inc. In a statement to the press, the SEC outlined the reason and the outcome of this move. “We cannot allow monopolies of this sort to impact an entire industry! 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.”

10. The Competition 6 Companies $40 Million in Sales 1 Product Line 2 Segments Closed Marketplace ANDREWS DIGBY BALDWIN ERIE CHESTER FERRIS

11. SHAKE UP IN SENSOR INDUSTRY Company Board 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 terrible day for our company,” said Chairman Zeigler. “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 1 st. I expect to see great things from this new Executive Team!

12. WELCOME TO YOUR NEW COMPANY!

13. Functional Areas: R&D Production Acct/Finance Marketing Additional Modules - HR (added Rnd 2 thru 8) - TQM (added Rnd 4 thru 8) Companies will need to coordinate strategy and tactics across the following areas:

14. Research & Development “ “ Our products are not well positioned in the marketplace.” We need to establish the specification of the products to meet customer demand. What quality and reliability level should we choose for our products? Let’s ensure the perceived age of the product meets customer demands. Let’s create new products to meet the changing marketplace!

15. Marketing “ “ Our products are not optimally priced. And many of our customers don’t even know our product exists!” We need to set the price of our products in the marketplace. We need to build customer awareness through promotion. We need to establish a sales force and distribution channels. We must prepare a sales forecast for our products each year! We need to set Credit Policies (A/R & A/P)

16. Production How do our labor costs compare to the competition? Very soon, we may also run out of capacity to meet demand!” Should we purchase machinery to automate our facilities? Should we buy or sell “capacity”? We will need to schedule production for each product line! We must manage the companies’ fixed (long-term) assets We must determine & manage our workforce (i.e. # of workers)

17. Finance & Accounting We have poor cash flow and substandard financial ratios! We have no financial plan in place! How will we pay for all of this? How will we acquire “capital”? Should we issue Stock? Issue short-term Debt? Issue long-term Bonds (Debt)? Should we pay dividends to our shareholders? If so, how much? We must analyze financial stmts. We must evaluate our Proformas.

18. Proforma Financials A great management tool driven by forecasts and projections. Allows “What if” Scenarios by the company. Balance SheetBalance Sheet Profit & LossProfit & Loss Cash FlowCash Flow Financial RatiosFinancial Ratios

19. Performance Metrics Used 1) Success Measures (must commit by Round 2): How will your team be evaluated? Select the criteria & weighting factors. (Note: minimum 1% weighting for each of the 8 components below): ROS (Profitability) ROA (Profitability) ROE (Profitability) Cumulative Profit Stock Price (per share) Total Market Capitalization Asset Turnover (Mgmt Efficiency) Percentage of Market Share Note: From your dashboard, see upper left for Homework/Success Measures.

20. 2) The “Balanced Scorecard” (Results of Decisions):

21. RUNNING YOUR COMPANY… THINGS TO DO ON AN ANNUAL BASIS…

22. To Do List: First, establish a long-term Strategic Plan.First, establish a long-term Strategic Plan. Review Foundation FastTrack for industry conditions.Review Foundation FastTrack for industry conditions. Make tactical decisions across each functional area that is consistent with your overall company strategy.Make tactical decisions across each functional area that is consistent with your overall company strategy. Upload your decisions to Capsim site by due dates.Upload your decisions to Capsim site by due dates. Review each round’s results and analyze not only your results, but the competitors as well.Review each round’s results and analyze not only your results, but the competitors as well. Build your business and create shareholder wealth!Build your business and create shareholder wealth!

23. Groupwork Considerations:

24. Good Luck in Running Your Company! Next Steps: 1) Registration in lab. 2) Individually complete the “Getting Started” assigns by the due date (see class website). 3) Three Practice rounds (1 week). 4) Eight Competition rounds (6 weeks).