Kelley Summer 2009 GM 105 Strategic Management1 Introduction “I hear and I forget. I see and I remember. I do and I understand.” Confucius

Kelley Summer 2009 GM 105 Strategic Management2 Decisions Your team makes decisions given competitor past, current and future decisions Your team is responsible for its decisions and performance measures Decisions should be an adventure, not a chore

Kelley Summer 2009 GM 105 Strategic Management3 Team Operation Each team will make decisions regarding sales forecasts, marketing, finance, human resources, production, and total quality management.

Kelley Summer 2009 GM 105 Strategic Management4 Team Operation Work out an arrangement to upload each round’s decisions. You may choose to meet in person initially, and then use as the game progresses and meet as needed. Specify how each member of the team will be evaluated.

Kelley Summer 2009 GM 105 Strategic Management5 Team Operation Keep a record of all discussions, decisions made and results (Companies keep minutes of meetings). A hardcover lab notebook works great for this purpose.

Kelley Summer 2009 GM 105 Strategic Management6 Team Operation Advice – Don’t let problems fester. Problems with team members need to be confronted quickly, honestly and forcefully. Ask the instructor if you have questions about decisions or output. You may want to see me in class since trying to answer detailed questions via isn’t the best method for this purpose.

Kelley Summer 2009 GM 105 Strategic Management7 Capstone Game The product is a sensor. 6 teams in each industry (2 students per team). Teams only compete with other firms in their industry. Start by marketing 5 brands each targeted toward a different market. May market 3 new brands.

Kelley Summer 2009 GM 105 Strategic Management8 Capstone Game Firms control positioning of products. Over time consumers want smaller, less expensive sensors. Market size and growth rates are different. Round decisions must be uploaded to the Capsim website by 2 p.m. for the 1:00 p.m. class and 8 p.m. for the 6:30 p.m. class.

Capstone Game When two decisions are due they must be uploaded by 2 p.m. and 3 p.m. for the 1 p.m. class, and 7:00 p.m. and 8:00 p.m. for the 6:30 p.m. class. Kelley Summer 2009 GM 105 Strategic Management9

10 Marketing Decisions Consumer awareness is important. Promotion expenses increase awareness. Sales expenses maintain awareness. Advanced marketing decisions begin in round 2.

Kelley Summer 2009 GM 105 Strategic Management11 Production Decisions You want to produce at 100% capacity when possible. You may sell excess capacity or add capacity. Generally it is better to utilize over 100% capacity (overtime) rather than sell capacity. Watch inventory stock in each market.

Kelley Summer 2009 GM 105 Strategic Management12 HR Decisions Hourly wage rate starts in Round 4. Labor negotiations occur in Round 6.

Kelley Summer 2009 GM 105 Strategic Management13 R&D Decisions Total Quality Management begins in Round 3. R&D revision times take longer if you put more than one product is being revised. You want repositioning projects to finish in less than one year. It takes 1 to 3 years to launch a new product.

Kelley Summer 2009 GM 105 Strategic Management14 Finance Decisions You may issue more stock or bonds to raise capital. You may choose to pay dividends. You may pay off existing debt. Watch your cash flow. Use the pro forma spreadsheet to analyze alternative decisions before uploading decisions.

Capstone Introduction Manuals Positioning and product attributes pp. 6-7; Marketing decisions pp Ideal spots pp. 13, 28 Demand analysis pp Basic forecasting method pp Six Strategies p. 35

Sequence of Decisions Sales forecast Marketing decisions (product pricing, R&D) Production decisions (amount to produce, level of automation, buy or sell capacity, labor complement) TQM decisions HR decisions Labor negotiation (only round 6 in first game) Check pro forma cash flow statement and then enter Finance decisions Kelley Summer 2009 GM 105 Strategic Management16

Capstone Introduction Choosing a strategy Match performance measures with the strategy Interpreting results after each round I look at each firm’s average contribution margin using the benchmark of 30%. Next, I look at the ROS After that look at the contribution margins of individual products What to learn from the practice rounds? Kelley Summer 2009 GM 105 Strategic Management17