The Big Picture Company Consumers Competitors Conditions Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment Company Consumers Competitors Conditions PEST Growth & Competitive Strategies Finance HR Production R&D Marketing Functional Integration Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

Begin Situation-Analysis INTERNAL ENVIRONMENT Your Company's Strengths & Weaknesses: Consumer Company Competitors Conditions EXTERNAL ENVIRONMENT Opportunities & Threats

Need to find answers re: How the market is segmented. The criteria that influence consumers purchasing decisions & How much willing buy/pay… The nature & magnitude of the competition Existing & emerging Economic & Technological trends that are/will impact company future Consumers Competitors Conditions

Market Structure & Dynamics Analyses

Sensor Market Analysis Market Size, Structure & Trends Key & New --Applications Sales Forecasts– Global Market & Key Segments Investment Opportunities

Market Structure & Dynamics Analyses Simulation’s sensor market is

Consumer Segments: Big, old & cheap high-reliability & performance proven sensors w/ current tech advanced sensors w/ focus on small size cutting-edge in both size & performance

Consumer Buying Criteria

Determinant Attribute Weightings SEGMENT Profiles: Determinant Attribute Weightings

Market Structure & Dynamics Analyses Simulation’s sensor market is

DEMAND ANALYSIS: How Many Sensors / Segment want to buy across next 8 years: Multiply the Round 0 demand by the growth rate and add the result to the Round 0 demand. This will give you a close approximation of Round 1 demand. Copy this number into the Demand cell for Round 1. If you prefer, you can use the following shortcut. For example, assume the Traditional growth rate is 9.2%. Convert the percentage to a decimal (9.2% = 0.092) and add 1 to it (1.092). Multiply the Round 0 Traditional demand by 1.092 then round to the nearest whole number. This will give you a close approximation of Total Industry Demand for Round 1.

SENSOR INDUSTRY ONGOING GROWTH ..the entire market growing at around 14 - 15% per year.

Complete Demand Analysis @ CapSim Intro |  Perceptual Map 1 |  Perceptual Map 2 |  Demand Analysis |  Capacity Analysis |  Margin Analysis |  Consumer Report

MARKET SEGMENT DYNAMICS Intro |  Perceptual Map 1 |  Perceptual Map 2 |  Demand Analysis |  Capacity Analysis |  Margin Analysis |  Consumer Report Calculate each Segment's IDEAL SPOT LOCATION -- rounds 1 thru 8 ( @ Getting Started/ Complete Online Situation Analysis/ Perceptual Map 2)

Market Structure & Dynamics Analyses

Drift Demo Cheaper too-$.50 drop in price/year Cheaper too-$.50 drop

Market Structure & Dynamics Analyses

Estimating Sensor Segment MARGIN Values What Are Your Most Profitable Segments?

You are now the Captain… ... How’s your Company doing?

Ascertain Financial Health of Your Company

Key Financial Q’s: Are You Making Enough Profit? Liquidity? Enough Money on hand to run/grow your co. Leverage? ideally proportioned betw. Debt & Equity? How effectively are you utilizing your assets? A/T R U providing your investors an Adequate Level of Return? How close are you to Bankruptcy? How’s those Bond Ratings? Do you have Adequate Levels of Investment in your Company's Plant, People & Processes?

Various Measures of Your PROFITABILITY Profitability Ratios: ROS--- Profit/ Sales ROA— Profit/ Assets ROE– Profit/ Equity Net Profits Cum Profits

NET PROFITS $$ Year 1 $6 million Year 2 $8 million Year 3 $10 million Year 4 $12 million Year 5 $16 million Year 6 $21 million Year 7 $27 million Year 8 $35 million

Profitability * Asset Mgt * Leverage As measured by ROE Return on Equity = net profit equity Encompasses the 3 main levers used by mgt to generate return on investors equity Profitability * Asset Mgt * Leverage

x x Du Pont Formula net profit equity Return on Equity = net profit sales sales assets assets equity x x

Du Pont Formula Return on Equity = net profit equity sales assets x

Ratio World Class   Top 10 cut Mean Poor  ROE* 600%+ 100%+ ~20% <15%

Profitability * Asset Mgt * Leverage As measured by ROE Return on Equity = net profit equity Encompasses the 3 main levers used by mgt to generate return on investors equity Profitability * Asset Mgt * Leverage

Profitability * Asset Mgt * Leverage Improve ROE by: Value Chain Profitability * Asset Mgt * Leverage net profit sales assets equity x Increase sales &/or reduce &/or eff. work assets Improving Margins Increasing Leverage

IF: Contribution Margin (Sales- variable costs) / sales ……. below 30%, Problem = Marketing (customers hate your products) Production (your labor & material costs too high), &or Pricing (you cut price too much).

Contribution Margin is above 30%… but Net Margin is below 20% …Net Margin = Sales - (Variable Costs + Period (Fixed) Costs)  / Sales Problem= heavy expenditures on Depreciation (perhaps you have idle plant) & or heavy expenditures on SGA (perhaps you’re pushing into diminishing returns on Promo & Sales Budgets).

7-17%

IF: Net Margin above 20%, but ROS (net profit) below 5%.. -- you either experienced some extraordinary "Other" expense like a write-off on plant you sold or you are paying too much Interest (…you may also have spent heavily on TQM initiatives).

Profitability * Asset Mgt * Leverage Improve ROE by: Value Chain Profitability * Asset Mgt * Leverage net profit sales assets equity x Increase sales &/or reduce &/or eff. work assets Improving Margins Increasing Leverage

“Generically, profits are driven by the company’s asset base and by its efficiency working those assets”

The higher the better = more efficient use of assets Asset Turnover Reveals how effective assets are at generating sales revenue. The higher the better = more efficient use of assets Currently you are generating $1.05 in sales for every $1 assets sales assets Asset Turnover =

Profitability * Asset Mgt * Leverage Improve ROE by: Value Chain Profitability * Asset Mgt * Leverage net profit sales assets equity x Increase sales &/or reduce &/or eff. work assets Improving Margins Increasing Leverage

Assets/Equity – simulation takes owner's perspective. LEVERAGE: Assets/Equity – simulation takes owner's perspective. Corp assets fin.w/ debt Optimal Leverage     Assets Debt Equity 1.0   $1 $0 2.0 $2 3.0 $3 4.0 $4 A Leverage of 3.0 says, "For every $3 of Assets there is $1 of Equity 1.8 to 2.8

How effective/aggressive R-U in building your Co’s asset base… It takes $$ to Make $$ &-why not make it using somebody else's…. To help you make even more…

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How effective will you be in building your Co’s asset base? At outset should be spending ~$10-25M / round on plant improvement By end should expand asset base to min $140M to $160M+

For each additional .5% increase in interest -You drop one category The More Assets you have the better your Bond Ratings AAA/AA/A/BBB/… BB & beyond is Junk… B/CCC /CC/C/D = default As your debt-to-assets ratio increases… Your short term interest rate increases… For each additional .5% increase in interest -You drop one category

Stock Price Profit$

STOCK PRICE Function of: Earnings per Share Net Profit / # Shares Book Value Equity / # Shares Dividend Policy Good Dividend Policy STOCK PRICE Function of:

Evaluate Your Company’s Financial Situation & Formulate Financial Strategy & Set Objectives...