1. Strategic Analysis and Competitive Advantage
BUSI 7136
Strategic Analysis and Competitive Advantage

2. Introduction to CAPSIM
View Alternative Strategies
Risk-Free
Why a Simulation?
Compresses Time
(1 Round=1Year)
Enjoyable/
Competitive
Appreciate
Complexities

3. Key Objectives Use strategic thinking
Understand the interaction of various parts of the business
Appreciate team dynamics
Grow awareness of competition
Take away practical skills

4. The Story Sensor Industry has six companies
Andrews
Baldwin
Chester
Digby
Erie
Ferris
There are a variety of customers that need sensors for the products to function.
Your job: Operate one of the companies and make it successful.

5. To Begin You are a going concern Every company is equal.
$100 Million Sales
5 Market Segments
5 Product Lines
Every company is equal.
Closed Marketplace.
Two practice rounds, then reset for competition rounds.

6. The Market Space Round 1 Consumer Segment Expectations
Perceptual map used to track changing consumer demands in size and performance
Each year, consumers will expect faster (higher performance) and smaller products (lower size)
This causes the segment circles to drift to the lower right constantly
Market segments continue to diverge over time
*Note the drift towards the lower right(expectations of faster and smaller products). Also note the divergence of the segments.
Round 1 Consumer Segment Expectations
Round 8 Consumer Segment Expectations

7. Low End Segment Price Positioning Age Reliability Ideal Age: 7 years
Ideal MTBF:
Prefer less cutting edge products (Bigger Size & Low Performance)
Price sensitive. Prefer price to be lowest possible.
Price
Positioning
Age
Reliability

8. Traditional Segment Price Positioning Age Reliability
Ideal Age: 2 years
Ideal MTBF:
“Average” Performance and Size
Price sensitive, but willing to spend more than Low End consumers
Price
Positioning
Age
Reliability

9. High End Segment Price Positioning Age Reliability Ideal Age: 0 years
Ideal MTBF:
High Performance and Small Size
Not price sensitive, willing to pay highest prices.
Price
Positioning
Age
Reliability

10. Performance Segment Price Positioning Age Reliability
Ideal Age: 1 year
Ideal MTBF:
Highest Performance and Less important Size
Not price sensitive, willing to pay moderately high prices
Price
Positioning
Age
Reliability

11. Size Segment Price Positioning Age Reliability
Ideal Age: 1.5 years old
Ideal MTBF:
Average Performance but Maximum Miniaturization
Not price sensitive, willing to pay moderately high prices
Price
Positioning
Age
Reliability

12. Munificent Environment!
According to a Market Analyst, there will be continuous growth in the sensor market.
Your goal: Prepare your company’s products to meet the needs of the growing market.

13. Integrated Decision Map
R&D
Marketing
Production
Finance

14. R&D Ensure the perceived age of the product meets customer demands
Build the quality and reliability (MTBF) of the products
Invent new products to address the changing marketplace and take advantage of new opportunities
Determine the specifications of the products to meet customer expectations

15. Marketing Set the price for each product
Build customer awareness through investing in promotion
Establish a sales force and distribution channels
Set the sales forecast for each product
Set Credit Policies
(A/R and A/P)

16. Production Purchase machinery to automate production facilities
Buy or sell capacity on product lines
Set production schedule
Manage the majority of the company’s fixed assets
Staff your facility with workers

17. Finance Acquire capital to fund growth and operations
Issue Stock
Issue dividends to shareholders
Short-Term Debt
Issue Long-Term Bonds
Balance debt portfolio
Manage Proformas

18. Analyzing them is critical for company success
Pro-Formas
Proformas use decisions made in the current year to project company performance for the next year
Analyzing them is critical for company success
The following proformas are available:
Balance Sheet
Income Statement
Cash Flow Statement
Financial Ratios

19. Analyst Report Analyst Report
Evaluates your company in ten categories:
Margins
Profits
Emergency Loans
Working Capital
Market Share
Forecasting
Customer Satisfaction
Productivity
Financial Structure
Wealth Creation

20. Porter’s Strategies

21. Broad Cost Leader No-frill, Standardized goods
Profits come via market share
Affords Advantages
Force suppliers’ hand
Continuously improving levels of efficiency difficult to replicate
Barrier to entry
But Be Careful
Brand loyalty can be problematic
Can overlook customer preferences
Not good for fragmented markets
Not good for dynamic markets

22. Broad Differentiator Customers perceive product value
Customized products, differentiating in many ways
Affords Advantages
Large margins
Buyer loyalty
Few Customers
But Be Careful
Customers determine cost is too great
Means of differentiation loses value
Counterfeiting

23. Stuck in the Middle?