Capstone ComputerBasedSimulation

$100M electronic sensor$100M electronic sensor manufacturer. manufacturer. Market dominated by handful of firms.Market dominated by handful of firms. No outside competitors or substitutes.No outside competitors or substitutes. Benign environment.Benign environment. The Playing Field

Strategic Map Large Small Slow Fast Size Performance

Perceptual Map Large Small Slow Fast Size Performance Product Segments Low- End Traditional Size High-End Performance

Perceptual Map Large Small Slow Fast Size Performance Low Trad Size High Perf Sweet Spot Each Segment has a Sweet Spot

Perceptual Map Large Small Slow Fast Size Performance Segments drift over time Low Trad Size High Perf

Two Stage Purchase Decision Stage 1 - Match Product to Market. Product must plot within the segment. 1. Product must plot within the segment. Able Size Performance 2. Product must fall within price guidelines. price guidelines. Able Price Segments 3. Product must fall within quality guidelines within quality guidelines Able Quality Segments

Two Stage Purchase Decision Stage 2 - Rank Best Product Position Age Quality Price 1. Positioning 2. Age 3. Quality 4. Price 1. Positioning 2. Age 3. Quality 4. Price 3 Sweet Spot AB Yrs $30 $40 HIGH END

Segment Criteria Ranking TraditionalTraditionalSizeSizePfmnPfmn High End Low End Age Price Position Quality Age Price Position Quality Price Age Position Quality Price Age Position Quality Position Age Quality Price Position Age Quality Price Quality Position Price Age Quality Position Price Age Position Age Quality Price Position Age Quality Price

Functional Areas R&D Marketing Production HR Finance

Research & Development Set Product coordinates (Position)Set Product coordinates (Position) Set MTBF rating (Quality)Set MTBF rating (Quality) Drives Perceived age (Age)Drives Perceived age (Age) Drives breadth of product lineDrives breadth of product line Quality Age Breadth High High Eight Low Low One < < < AB

Cycle time affected by:Cycle time affected by: –Automation level of production line –Number of projects underway –Distance moved on perceptual map Cycle time affected by:Cycle time affected by: –Automation level of production line –Number of projects underway –Distance moved on perceptual map R & D Factors on Existing Products High Low AutomationLevel Number of Projects High Low High Low Distancemoved < < < Short Long Cycle Time <

Marketing PricePrice Promotion BudgetPromotion Budget Sales BudgetSales Budget Set Sales ForecastSet Sales Forecast Set Credit Policies AR/APSet Credit Policies AR/AP

Production Set automation levelSet automation level Buy or sell capacityBuy or sell capacity Schedule productionSchedule production One year lag to add capacity or automateOne year lag to add capacity or automate

Finance Acquire CapitalAcquire Capital –Issue Stock –Short Term Debt –Issue Long Term Bonds Set DividendSet Dividend Retire Long Term BondsRetire Long Term Bonds Retire StockRetire Stock Emergency LoanEmergency Loan

CAPSTONE STRATEGIES Business-level strategy: –Overall Cost Leader –Cost Leader with Focus (Low Tech or Product Life-Cycle) –Differentiator –Differentiator with Focus (High-Tech or Product Life-Cycle) STRATEGY Mission Statement Goals PERFORMANCEASSESSMENT Success Measurements RatiosStatistics ANALYSIS S.W.O.T Analysis Competitor Analysis Competitive Analysis FUNCTIONAL PLANNING MarketingProductionFinanceR&DHR

Success Measurements Choose at least TWO prior to Round 3Choose at least TWO prior to Round 3 Ending Stock Price must be weighted no less than 20%Ending Stock Price must be weighted no less than 20% Others:Others: –Cumulative Profit –Avg. Market Share –Asset Turnover –Avg. ROA –Avg. ROE –Avg. ROS Criteria and Weights will remain proprietary throughout the simulationCriteria and Weights will remain proprietary throughout the simulation

Situation Analysis Perceptual MapPerceptual Map Demand AnalysisDemand Analysis Capacity AnalysisCapacity Analysis Margin AnalysisMargin Analysis

Pre-Game Strategy Memo Intended StrategyIntended Strategy – Corporate: In which segments will you compete? – Business: How will you compete in each segment? Situation AnalysisSituation Analysis Specific GoalsSpecific Goals Strategies and TacticsStrategies and Tactics – R&D actions – Marketing actions – Production actions One (1) page of text; one (1) page of exhibitsOne (1) page of text; one (1) page of exhibits Due: Monday Nov. 2:00 p.m.Due: Monday Nov. 2:00 p.m.

Capstone Schedule Monday 11/4: Year 2000 Decisions 12:00 p.m. Wednesday 11/6: Year 2001 Decisions 9:00 p.m. Monday 11/11: Year 2002 Decisions 12:00 p.m. Thursday 11/14: Year 2003 Decisions 12:00 p.m. Monday 11/18: Year 2004 Decisions 12:00 p.m. Wednesday 11/6: Year 2005 Decisions 9:00 p.m. Monday 11/25: Year 2006 Decisions 12:00 p.m.