1. 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

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

3. 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

4. Market Structure & Dynamics Analyses

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

6. Market Structure & Dynamics Analyses
Simulation’s sensor market is

7. 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

8. Consumer Buying Criteria

9. Determinant Attribute Weightings
SEGMENT Profiles:
Determinant Attribute Weightings

10. Market Structure & Dynamics Analyses
Simulation’s sensor market is

11. 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 then round to the nearest whole number. This will give you a close approximation of Total Industry Demand for Round 1.

12. SENSOR INDUSTRY ONGOING GROWTH
..the entire market growing at around % per year.

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

14. 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)

15. Market Structure & Dynamics Analyses

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

17. Market Structure & Dynamics Analyses

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

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

21. Ascertain Financial Health of Your Company

22. 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?

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

25. 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

26. 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

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

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

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

30. 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

31. 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

32. 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).

33. 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).

34. 7-17%

35. 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).

36. 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

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

39. 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 =

40. 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

42. 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

43. 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…

44. Page 3

45. 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+

46. 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

47. Stock Price
Profit$

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

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