GLO-BUS Simulation Introduction Built by Stambaugh/2009 The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill Mr Jeff Stambaugh Dillard College of Business/Rm 257A

Introduction to Glo-Bus Simulation Built by Stambaugh/2009 ■ You have been selected to take over management of a digital camera manufacturer with its factory in Taiwan and worldwide sales ■ Major part of your effort / grade in this course ■ This will be fun! The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Objectives Built by Stambaugh/2009 ■ Employ strategic concepts of course (theory into practice) ■ Practice technical skills acquired in previous courses ■ Hands-on implementation ■ Attention to detail (or details) ■ Performance improvement / measurement The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Big Picture  Profitable business with sales in North America, Latin America, Asia-Pacific, and Europe-Africa  Two major camera lines (entry level and multi- featured) and your company has 3 models of each  Your company has 7 major competitors (the other people in this room)  Simulation is real play—actions of your competitors DO make a huge difference in your performance Built by Stambaugh/2009 The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Starting Position Built by Stambaugh/2009 The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill ■ Profitable, well-regarded company with sales in all 4 regions ■ Sold 800,000 entry-level and 200,000 multi-featured cameras last year ■ Prior year revenues: $202M ■ Net earnings: $20M ■ EPS: $2.00 ■ Credit Rating: B+ ■ P/Q: 2.5 ■ $100M line of credit ($25M currently in use)

Your Objective Built by Stambaugh/2009 ■ Manage / grow your firm to maximize several measures over 7 rounds ■ First, build a product customers will buy at a price that makes money for you ■ Then, refine the market offering to maximize profits ■ While always being smart about corporate management (dividends, loans, stock purchase / buyback plans) ■ Grades will mirror actual performance The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Investor Expectations / Scoring Standards Built by Stambaugh/2009 The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill ■ Grow EPS 8% annually first 4 years, then 4% ■ ROE of 15% or better (17% last year) ■ B+ or higher credit rating (B+ last year) (Not included in scoring) ■ Stock price gains of 8% annually first 4 years, then 4% (Opening stock price is 30) (40% of score) ■ Image rating of 70 or higher (70 last year) ■ Two equally-weighted standards: how well did you meet investor expectations and how do you compare to your competitors?

Strategy Built by Stambaugh/2009 ■ There is no “correct” strategy to succeed ■ Your performance depends on: ■ A well-crafted strategy ■ The expertise of you execution ■ Actions of your competitors (region by region) ■ Cost-leadership, differentiation, combo, and focus strategies ALL viable The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Basic Simulation Principles Built by Stambaugh/2009 ■ Everything is done via the web ( ■ You submit decisions for each round ■ Each round represents 1 year (starts in Year 6) ■ Computer “competes” your decisions against other corporations ■ You receive detailed results for each round ■ Seven total rounds in this class (plus one scheduled practice round) The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Mechanics Built by Stambaugh/2009 ■ Your team inputs decisions from your corporate lobby page ■ EXCEL-based … doesn’t run on Mac version ■ Last set of saved decisions is what computer will run ■ Run occurs automatically at deadline ■ Results are available within an hour of deadline ■ Getting started … register at ■ Have your company registration code and credit card handy ($35) The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

What Kinds of Decisions Are Involved? Built by Stambaugh/2009 ■ Product design / features (10 decisions) ■ Pricing and marketing (15 decisions) ■ Manufacturing ops and HR practices (15 decisions) ■ Corporate finance (4 decisions) ■ CSR (6 decisions—influences image rating) ■ Special order bids (100,000 EL cameras—price only) ■ Lots of on-screen help to help with the decisions ■ NO quarterly adjustments ■ Key Notes: ■ Your factory is all JIT ■ You build camera’s one quarter before they’re sold ■ Production percentage by quarter: The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Where To Begin? Built by Stambaugh/2009 ■ Learn the simulation ■ Read the student guide ■ Practice run 19 Feb (computer lab 335) ■ On-line quiz must be taken before class on Feb 26th ■ Form a vision and strategy for your company ■ Your BHAG and goals ■ What will be your basic strategy (Chap 5 stuff) The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Where To Begin (2) ? Built by Stambaugh/2009 ■ Recognize Key Tasks ■ Admin: keep copies of everything ■ Competitor Intel / Strategy: quarterly snapshots, study for trends, strategic adjustments ■ Product design: features, R&D, # of models ■ Marketing: retailer mgt, tech support, advertising, warranties, pricing, promotions ■ Production: how many to produce, worker compensation, training, hiring / firing (# of PATs), # of workstations, overtime, outsourcing ■ Financial: performance targets, loans, dividends, stock sales / buybacks The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Big Picture Words of Wisdom Built by Stambaugh/2009 ■ Many successful paths (if done right) Have a coherent strategy and competitive approach You can’t be the premium AND lowest cost product ■ Know what you are changing (this is not an exercise in EXCEL … it’s strategy)—you may just strive for industry average (+ / -) in some areas ■ This is a competition … know what your competitors are doing and react accordingly! ■ Keep trying … turn-arounds happen frequently The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Biggest Words of Wisdom Built by Stambaugh/2009 ■ If you make money, the stats will take care of themselves ■ Build cheapest camera possible for your target P/Q ■ Strive for low labor costs / camera ■ Be careful of intentionally cutting number of retailers ■ Know how to measure your strategy’s effectiveness and be ready to adapt ■ Ignorance of competitors = defeat (probably)! The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

Biggest Words of Wisdom Built by Stambaugh/2009 ■ Learn from your performance ■ Stop what isn’t working … do more of what is! ■ Don’t change too many things at once ■ Making money is the main course (sales / costs) -- corporate decisions are the dessert! ■ You will feel uncomfortable and unprepared … just like real life! The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill

How I Will Help You Learn Built by Stambaugh/2009 ■ You can ask me questions at any time … more than anything I will try to focus your thinking ■ Practice round and out-brief (19 & 24 Feb) ■ You can ask me questions at any time … more than anything I will try to focus your thinking ■ Interim Board of Directors meeting ■ Informal ■ You can ask me questions at any time ■ Board of Directors presentation at end of semester ■ Demonstrate that you learned … hard to do if you don’t know how you “learned” The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity... Churchill