WELCOME TO CAPSTONE BUSINESS SIMULATION

Professor Ted Clark Professor Ted Clark HK University of Science & Technology

Demonstrate effectiveness of multi- discipline teams working together.Demonstrate effectiveness of multi- discipline teams working together. Use strategic thinking to an advantage.Use strategic thinking to an advantage. Test your business acumen.Test your business acumen. Understand overall interaction and impact of various parts of a business on one another.Understand overall interaction and impact of various parts of a business on one another. Grow an awareness of competition.Grow an awareness of competition. Take away practical know-how to improve the effectiveness of your business.Take away practical know-how to improve the effectiveness of your business. Demonstrate effectiveness of multi- discipline teams working together.Demonstrate effectiveness of multi- discipline teams working together. Use strategic thinking to an advantage.Use strategic thinking to an advantage. Test your business acumen.Test your business acumen. Understand overall interaction and impact of various parts of a business on one another.Understand overall interaction and impact of various parts of a business on one another. Grow an awareness of competition.Grow an awareness of competition. Take away practical know-how to improve the effectiveness of your business.Take away practical know-how to improve the effectiveness of your business. Objectives

Why Simulate Risk Free View Alternative Strategies Enjoyable Compresses Time (1 Round=1Year) “Siloing” <> Integration Risk Free View Alternative Strategies Enjoyable Compresses Time (1 Round=1Year) “Siloing” <> Integration

SENSOR INDUSTRY OVERVIEW SENSOR INDUSTRY OVERVIEW

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

The Marketplace In our industry we track the changing customer demand on a perceptual map Over 8 years the customers will demand much faster and smaller sensors Market Segments will continue to diverge Low Tech Traditional High Tech Performance Size

Low Tech & Traditional 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

High Tech, Size & Performance 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!

SENSOR INDUSTRY ANALYST PROJECT ONGOING GROWTH Sees the next 8 years as consistent growth. All market segments increase at a nice “clip,” according to market analyst. “I see the entire market growing at around 14% or 15% per year. The High Tech market alone will be growing at a whopping 16%.” I hope those companies out there are ready for that kind of expansion!”

COMPANY OVERVIEW COMPANY OVERVIEW

The Competition 6 Companies $100 Million in Sales 5 Product Lines Closed Marketplace ANDREWS BALDWIN CHESTER DIGBY ERIE FERRIS

SHAKE UP IN SENSOR INDUSTRY Company Fires Management Team After poor results, lackluster sales and angry customer reports, the Chairman of the Board of Directors has announced the immediate termination of the Management Team. “This is a black day for our company,” said Chairman (Chainsaw Ted ) Clark, “We need to hire a dynamic leadership group who will be able to take this company into the future!” “Due to this immediate need I have hired the Dream Team to start on January 1 st. I expect to see great things from this Executive Team!

WELCOME TO YOUR NEW COMPANY!

Functional Areas R&DR&D MarketingMarketing ProductionProduction FinanceFinance

Research & Development Establish the specification of the products to meet customer demand Build the quality and reliability (MTBF) into the products Ensure the perceived age of the product meets customer demands Create new products to meet the changing marketplace Establish the specification of the products to meet customer demand Build the quality and reliability (MTBF) into the products Ensure the perceived age of the product meets customer demands Create new products to meet the changing marketplace “Our products are not well positioned in the marketplace.”

Marketing Set the price of our products in the marketplace Build customer awareness through promotion Establish a sales force and distribution channels Set the sales forecast for our products Set Credit Policies AR/AP Set the price of our products in the marketplace Build customer awareness through promotion Establish a sales force and distribution channels Set the sales forecast for our products Set Credit Policies AR/AP “Our products are not priced optimally. And many of our customers don’t even know our product exists.”

Purchase machinery to automate our facilities Buy or sell capacity of product lines Schedule production for each line Manage the majority of the company’s fixed assets Establish your workforce complement Purchase machinery to automate our facilities Buy or sell capacity of product lines Schedule production for each line Manage the majority of the company’s fixed assets Establish your workforce complement Production “We are paying too much for labor costs. Very soon we will run out of capacity to meet demand.”

Acquire capital to fund capital expansions –Issue Stock –Short Term Debt –Issue Long Term Bonds Issue dividend to our shareholders Balance our debt portfolio Manage our proformas Acquire capital to fund capital expansions –Issue Stock –Short Term Debt –Issue Long Term Bonds Issue dividend to our shareholders Balance our debt portfolio Manage our proformas Finance “We have poor cash flow and substandard financial ratios. We have no financial policy statement.”

Balance Sheet Profit & Loss Cash Flow Financial Ratios Balance Sheet Profit & Loss Cash Flow Financial Ratios Proformas A great management tool driven by forecasts and projections. Allows “What if” Scenarios by the company.

Scoring the Game Select a minimum of two criteria to be measured by: –ROE –ROS –ROA –CUM PROFIT –STOCK PRICE –MARKET CAPITALIZATION –ASSET TURNOVER –MARKET SHARE Weight each selection. Select a minimum of two criteria to be measured by: –ROE –ROS –ROA –CUM PROFIT –STOCK PRICE –MARKET CAPITALIZATION –ASSET TURNOVER –MARKET SHARE Weight each selection.

RUNNING YOUR COMPANY Some Suggestions

Do set up an organization (team) structure & agendaDo set up an organization (team) structure & agenda Don’t be rigid in that structureDon’t be rigid in that structure Do pick a strategy that is funDo pick a strategy that is fun Don’t try to pre-determine the other 5 strategies – You won’t!Don’t try to pre-determine the other 5 strategies – You won’t! Do rotate the keyboardDo rotate the keyboard Don’t forget to save often!Don’t forget to save often! Do use all the data in the reportsDo use all the data in the reports Don’t become a victim of “Analysis – Paralysis”Don’t become a victim of “Analysis – Paralysis” Do initiate your strategy in the first roundDo initiate your strategy in the first round Don’t over-commit and shut off all possibility of mid course correctionDon’t over-commit and shut off all possibility of mid course correction Do set up an organization (team) structure & agendaDo set up an organization (team) structure & agenda Don’t be rigid in that structureDon’t be rigid in that structure Do pick a strategy that is funDo pick a strategy that is fun Don’t try to pre-determine the other 5 strategies – You won’t!Don’t try to pre-determine the other 5 strategies – You won’t! Do rotate the keyboardDo rotate the keyboard Don’t forget to save often!Don’t forget to save often! Do use all the data in the reportsDo use all the data in the reports Don’t become a victim of “Analysis – Paralysis”Don’t become a victim of “Analysis – Paralysis” Do initiate your strategy in the first roundDo initiate your strategy in the first round Don’t over-commit and shut off all possibility of mid course correctionDon’t over-commit and shut off all possibility of mid course correction Some Suggestions

Good Luck and Enjoy!