WELCOME TO CAPSTONE BUSINESS SIMULATION

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 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

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

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!

Strategic Map Large Small Slow Fast Size Performance

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

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

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 Yrs $30 $40 HIGH END

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

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

Support Activities Primary Activities Value Chain Analysis Inbound Logistics

Support Activities Primary Activities Value Chain Analysis Inbound Logistics Manufacturing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 < < <

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 <

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

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

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

Capstone Scoring Report Andrews Baldwin Chester Digby Erie Ferris Winner !

Assignments & Grading

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

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.

Good Luck and Enjoy!