1. WELCOME TO CAPSTONE BUSINESS SIMULATION

2. The Marketplace Customers (OEMs) need sensors for their products Initially one segment, now breaking into five Very different customer demands developing between the segments Diversification in the use and utility of the sensors

3. The Marketplace In our industry we track the changing customer demand on a perceptual map Over the 7 years, the customers will demand much faster and smaller sensors Market Segments will continue to diverge Low Tech Traditional High Tech Performance Size

4. Low Tech & Traditional Segment Customers “I want these sensors to be cheap” “I want them to have been around for a while – no Beta Testing!” “The technology doesn’t have to be cutting edge.” “They have to be moderately reliable.” You’re not giving me what I want

5. High Tech, Size & Performance Segment 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.” And I’m not getting what I want!

6. Strategic Map Large Small Slow Fast Size Performance

7. Large Small Slow Fast Low Trad Size High Perf Sweet Spot Each Segment has a Sweet Spot

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

9. Two Stage Purchase Decision Stage 2 – Competitive Rankings of Best Products Position Age Quality Price 1. Positioning 2. Age 3. Quality 4. Price 1. Positioning 2. Age 3. Quality 4. Price Sweet Spot 0 0 1 1 Yrs 20000 25000 $30 $40 HIGH END

10. Segment Criteria Ranking Traditional Size Perf 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

11. Functional Areas and Value Creation R&DR&D MarketingMarketing ProductionProduction FinanceFinance HRMHRM

12. Support Activities Primary Activities Value Chain Analysis Inbound Logistics

13. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing

14. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics

15. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics Marketing

16. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics Marketing Service

17. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics Marketing Service Procurement

18. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics Marketing Service Procurement Technology Development

19. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics Marketing Service Procurement Technology Development Human Resource Management

20. Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing Outbound Logistics Marketing Service Procurement Technology Development Human Resource Management Headquarters Activities

21. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN Capstone Value Chain Activities

22. Inbound Logistics Raw materials and components receiving Warehousing Materials handling Raw materials and components receiving Warehousing Materials handling Inbound Logistics

23. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Service Relatively Few Management Layers to Reduce Overhead Effective Training Programs to Improve Worker Efficiency and Effectiveness Timing of Asset Purchases Efficient Plant Scale to Minimize Manufacturing Costs Selection of Low Cost Transport Carriers Delivery Schedule that Reduces Costs Products Priced to Generate Sales Volume Small, Highly Trained Sales Force Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes Frequent Evaluation Processes to Monitor Suppliers’ Performances Policy Choice of Plant Technology Organizational Learning Efficient Order Sizes Operations Capacity and production levels Production schedule Automation levels Labor force utilization levels Improve efficiency Capacity and production levels Production schedule Automation levels Labor force utilization levels Improve efficiency Production

24. Technological Development Human Resource Management Firm Infrastructure Procurement Outbound Logistics Marketing & Sales Service Selection of Low Cost Transport Carriers Delivery Schedule that Reduces Costs National Scale Advertising Products Priced to Generate Sales Volume Small, Highly Trained Sales Force Effective Product Installations to Reduce Frequency and Severity of Recalls Frequent Evaluation Processes to Monitor Suppliers’ Performances Efficient Order Sizes Interrelationships with Sister Units Outbound Logistics Packaging Warehousing Inventory management Shipping and distribution Packaging Warehousing Inventory management Shipping and distribution Outbound Logistics

25. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service MARGIN Marketing & Sales Sales forecasting Pricing strategy Marketing strategy and budget Sales force management Sales forecasting Pricing strategy Marketing strategy and budget Sales force management Marketing

26. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Customer relations Warrantees, guarantees Spare parts Tech help Repair Customer relations Warrantees, guarantees Spare parts Tech help Repair Service

27. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Procurement Purchasing Vendor relations Purchasing Vendor relations Business services outsourcing Procurement

28. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Technological Development Establish the specification of the products to meet customer demand Build the quality and reliability (MTBF) into the products Establish the specification of the products to meet customer demand Build the quality and reliability (MTBF) into the products Create new products to meet the changing marketplace Manage new product cycle times Create new products to meet the changing marketplace Manage new product cycle times R&D

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

30. Cycle time affected by : Automation level of production line Number of projects underway Distance moved on perceptual map 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 <

31. Technological Development Human Resource Management Firm Infrastructure Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Human Resource Management Production line staffing Recruiting and training of new employees Production line staffing Recruiting and training of new employees Wages and benefits for employees Negotiate with labor union Wages and benefits for employees Negotiate with labor union HRM

32. Support Activities Technological Development Human Resource Management Firm Infrastructure Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Firm Infrastructure Strategy and decision making Finance and Accounting Strategy and decision making Finance and Accounting Government relations Public relations General Counsel Government relations Public relations General Counsel HQ Activities

33. Success Measurements Practice Rounds: All criteria equally weighted Competitive Rounds: YOU choose at least TWO Ending Stock Price must be at least 20% Others – Your choice: – Cumulative Profit – Avg. Market Share – Asset Turnover – Avg. ROA – Avg. ROE – Avg. ROS Criteria and weights will remain proprietary throughout the simulation Practice Rounds: All criteria equally weighted Competitive Rounds: YOU choose at least TWO Ending Stock Price must be at least 20% Others – Your choice: – Cumulative Profit – Avg. Market Share – Asset Turnover – Avg. ROA – Avg. ROE – Avg. ROS Criteria and weights will remain proprietary throughout the simulation

34. Capstone Scoring Report Andrews Baldwin Chester Digby Erie Ferris Winner !

35. Assignments & Grading

36. Computers and Facilities 31 AUG Weds SIM: Round 2 Decisions DUE 11:00 Meet: Rounds 1-2 Debrief 1:00 SIM: Round 3 Decisions DUE 6:00 SIM: Round 2 Decisions DUE 11:00 Meet: Rounds 1-2 Debrief 2:00 SIM: Round 3 Decisions DUE 6:00 Industry 1 SimId: C12084 Industry 2 SimId: C12085 A typical “day” of Capstone

37. Assignments for This Week MONDAY-TUESDAY Subscribe to Capstone –See pg. 2 of syllabus Tutorials (esp. Spreadsheet Demonstrations) Solo Rehearsal WEDNESDAY Upload Practice Round 1 decisions by 11:00 a.m. Results available 12:00 p.m. Meet for Debriefing at 1:00 p.m. or 2:00 p.m. Round 1 (for real!) decisions due by 6:00 p.m. Submit Strategy eMemo by 7:00 p.m.

38. Good Luck and Enjoy!