1. Course Intro & Overview
University of Alaska-Anchorage * College of Business & Public Policy
* Marketing Management Simulation *
Course Intro & Overview

2. ejforrest@ uaa.alaska.edu
Professor Ed Forrest
Telephone:
(cell)
uaa.alaska.edu

3. THE CAPSTONE SIMULATION
Most widely used Business – Simulation Program in the World
Adopted by major Fortune 500 companies
..General Motors, General Electric, Honeywell, Dell, John Deere, Citibank, Alcoa, BP, Allstate, Samsung, Goldman Sachs, Microsoft…

4. Strategic Thinking the ten big ideas
Simulation proffers you opportunity to experience every key dimension of strategic thinking developed to date:
Strategic Thinking the ten big ideas

5. Today- Form Your Company
7. Corporate culture- corporate behavior, and in particular the resistance of the organization to change, is inevitably a function of its culture
(Prof Thomas/ Penn St. able to predict final standings w/in 1 place 90% of time –after observing initial group interaction)
8. Leadership craft- Leaders responsible for assuring strategy links values of firm with its vision & that firm can successfully implement strategy thru effective HR mgt.
Strategic Thinking- the ten big ideas

6. Strategic Thinking- the ten big ideas
Today – Begin Analysis of Your Situation
Long-range planning- considers the external factors that affect success & integrates the various functional strategies.
Strategic analysis
Market segmentation
The lifecycle.
SWOT analysis.
Industry structure
Strategic Thinking- the ten big ideas

7. Economic Environment No outside competitors or product substitutes
Moderate growth, Low inflation, Averaged interest rates
No outside competitors or product substitutes
No economic downturns or other surprises ...

8. Sim designed this way for one reason:
Whatever happens will be result of your-tactical execution of strategies… not by external factors!

9. Concepts & Processes Equally Applicable
If Simulation Service Based:
Instead of Sensors Sold--Units of Production=
Meals served
Seats sold
Rooms rented
Patients seen
Members joined
Lawns cut

10. Lecture-Learning

11. Foundations of Business Strategy
If you want Lectures:
Foundations of Business Strategy
Coursera

12. Learning & Retention
75+% 5%

14. Your “study” of business … piece-meal & in isolation!

15. Marketing
R&D HR
Production
Finance

16. You Da’ Boss
… run a $100M business ….

17. Your Product Line:
SENSORS:

18. YOUR JOB: Make every decision In every Functional Domain
to create, produce & successfully market your products…

19. …success contingent on strategic integration of decisions across all domains

20. You will Compete against other members of this class –running 5 other Corp’s ….
Andrews
Baldwin
Chester
Digby
Erie
Ferris

21. Plus…
your decisions & business performance will be compared against other teams competing at other universities… around the world

22. & How –to date-- have we fared in this World-Wide Competition??

23. 2001 Top Ten Teams, World-Wide, for Round 8
Top Ten Teams, World-Wide, for Round 8 by success measurement There are currently 940 active teams that have played Round 8. For a team to make this list: Cumulative Profits above 0 Overall Market Share (in dollars) greater then 5.0% Asset Turnover less then 8.0 Profit for Round 8            Round 8 - Mean - $ 25,324,003
Top Ten Active Teams   Professor School/Course Simid Team Value
1 Dr. Minu Afza College of Business - Bloomsburg University Business Policy & Strategy CAP1742 Digby $ 238,235, Mr. Bill Gardner Penn State University -Fayette Campus Contemporary Business Seminar CAP1513 Andrews $ 193,853, Dawn DeTienne University of Colorado at Boulder Senior Seminar CAP1656 Andrews $ 184,258, Prof. Howard Feldman University of Portland Managerial Decisions and Policy-Undergrad B CAP1787 Erie $ 181,422, Dr. Ed Forrest University of Alaska Marketing Management CAP1611 Baldwin $ 163,281, Dr. Eric Wiseman University of Colorado at Boulder Business Senior Seminar CAP1818 Chester $ 157,930, Dr. Murrow Drury College Strategy and Policy Formulation CAP1838 Erie $ 149,235, Dr. Pettus Millikin University Business Policy CAP1748 Baldwin $ 147,967, Doug Mayer Hartwick College Management VII-secA CAP1811 Digby $ 137,339, Dr. Bruce A. Schooling Point Loma Nazarene University Strategic Management CAP1794 Digby $ 121,289
5th

24. 2003 Top Ten Teams, World-Wide @Rnd 8
For a team to make this list: Cumulative Profits above 0 Overall Market Share (in dollars) greater than 6% Asset Turnover less then 8.0 Your class was ranked: with 711 Capstone ® teams completing round 8 by Apr 12, teams per game of 6 Category: All
URL:  Date/Time: 04/12/ :07:35 eNote:
Text: Cumulative Profit for Round 8 - Mean - $ 125,355,000 Top Ten Active Teams   Professor School/Course Simid Team Value 1 natalie marsh Strayer University Business Policy & Strategic Planning C4779 Baldwin $ 459,411, John Hall University of Florida Global Strategic Management I2MBA 2002 C4923 Baldwin $ 386,472, natalie marsh Strayer University Senior Seminar - Business Administration C4778 Erie $ 382,697, Peter Stanwick Auburn University Strategic Management C5095 Chester $ 353,185, John Pearce Villanova University Policy Administration C5033 Ferris $ 348,535, Gavin Fox Georgia Southern University BUSINESS SIMULATION C5041 Digby $ 343,761, Shirley Schooley Birmingham-Southern College Strategic Management Senior Project Course Sec B C5356 Digby $ 341,865, natalie marsh Strayer University Senior Seminar - Business Administration C4778 Ferris $ 339,568, Edward Forrest University of Alaska Marketing Management C4806 Chester $ 333,620, Donald Kreps Kutztown University mba capstone C4797 Digby $ 327,188,363
9th

25. #1

26. 2006-5th

27. and 8th

28. rd

29. Fall 2009
#1 in the world!

30. And Stock Price

31. Spring 2010

32. Spring 2010

33. Fall 2010

34. Spring 2011 v

35. Fall 2011

36. Fall13 UAA-CBPP students —out of 1,089 teams competing #4 in & # 10 in profit #5 in Stock Price #6 in ROE #3 & #7 in ROA #8 in Asset Turnover
Profit for Round 8 - Mean - $ 20,919,310
Top Ten Active Teams
Professor
School/Course
Simid
Team
Value 1
Robert Woodward
Capsim Management Simulations - Main Ethics
C58086
Andrews
$ 508,976,902 2
LaKami Baker
Auburn University - Main Strategic Management
C59204
Digby
$ 158,606,060 3
William Worthington
Baylor University - Main Strategic Management
C58893
Ferris
$ 139,469,157 4
Edward Forrest
University of Alaska - Main Marketing Management
C58879
Erie
$ 134,385,883
Your Industry C58880 was ranked:
· with 1089 Capstone teams
· completing round 8
· by Nov 22, 2013.

37. Your Industry C65757 was ranked: with 1057 Capstone teams completing round 8 - by Nov 21, 2014
ROE for Round 8 - Mean %
Top Ten Active Teams
Professor
School/Course
Simid
Team
Value 1
Peter Hosie
Curtin Business School - Main Bentley (Sem )
C64703
Baldwin
268.30% 2
Edward Forrest
University of Alaska- Anchorage - Main Marketing Management
C65757
Ferris
252.05% 3
James Belohlav
DePaul University - Main Management Strategy--Evening
C65729
Andrews
160.99% 4
Anne Woolstenhulme
Brigham Young University - Main Strategic Management - 002
C67336
156.23% 5
Craig Citron
Southern Connecticut State University - Main MG450
C66602
Erie
153.28% 6
Jason Harkins
University of Maine - Main Strategic Management
C66183
133.31%
Your Industry C65757 was ranked:
· with 1057 Capstone teams
· completing round 8
· by Nov 21, 2014.

38. #1 Fall 2014 Cumulative Profit for Round 8 - Mean - $ 57,143,445
Top Ten Active Teams
Professor
School/Course
Simid
Team
Value 1
Edward Forrest
University of Alaska-Anchorage - Main Management Simulation
C65883
Chester
$ 423,479,998 2
Montchai Pinitjitsamut
Kasetsart University - Main AgStrategy1
C63414
Erie
$ 379,323,878 3
Erin Nelson
DePaul University - Main GSB 599
C66845
$ 369,501,687 4
Vasant Sivaraman
S.P. Jain Institute of Management and Research - Main Decision Analysis (Business Simulation)- C
C65322
$ 332,453,310 5
S.P. Jain Institute of Management and Research - Main Decision Analysis (Business Simulation)- A
C65316
Baldwin
$ 317,334,112 6
C65324
$ 309,297,102 7
C65318
$ 290,130,349 8
Veer Mehta
SCMHRD ExEd - Main SCMHRD ExEd
C67080
$ 287,625,419 9
Ferris
$ 269,713,684 10
David Brokaw
UIndy - Carmel MBA Strategic Analysis - Wednesday
C66529
Digby
$ 265,975,495 13
$ 253,412,984

39. #1 Fall 2014 Profit for Round 8 - Mean - $ 16,856,185
Top Ten Active Teams
Professor
School/Course
Simid
Team
Value 1
Edward Forrest
University of Alaska-Anchorage - Main Management Simulation
C65883
Chester
$ 179,894,270 2
Montchai Pinitjitsamut
Kasetsart University - Main AgStrategy1
C63414
Erie
$ 150,718,034 3
Erin Nelson
DePaul University - Main GSB 599
C66845
$ 117,376,727 4
Veer Mehta
Great Lakes PGPM - Main Great Lakes PGPM
C66539
$ 102,062,415 5
Michael Stoica
Washburn University - Main Strategic Analysis
C66272
Baldwin
$ 100,603,573 6
Vasant Sivaraman
S.P. Jain Institute of Management and Research - Main Decision Analysis (Business Simulation)- C
C65322
$ 99,817,375 7
Igor Gvozdanovic
Zagreb School of Economics and Management - Main Maximizing and Measuring Corporate Value_CAPSTONE
C67613
Andrews
$ 97,578,131 8
IIM Shillong - Main IIM Shillong
C61259
$ 97,216,158 9
$ 96,520,602 10
Dharam Pal
BIMTECH India - Main BIMTECH India
C65546
$ 95,719,172

40. #1 Fall 2014 Stock Price for Round8 - Mean - $ 105.49
Top Ten Active Teams
Professor
School/Course
Simid
Team
Value 1
Edward Forrest
University of Alaska-Anchorage - Main Management Simulation
C65883
Chester $ 2
Vasant Sivaraman
S.P. Jain Institute of Management and Research - Main Decision Analysis (Business Simulation)- C
C65322 $ 3
Al Lovvorn
The Citadel - main BADM 740: Fall 2014
C65655
Andrews $ 4
Montchai Pinitjitsamut
Kasetsart University - Main AgStrategy1
C63413 $ 5
Jeffrey McGee
University of Texas - Main Strategic Management Fall 2014
C66078
Baldwin $ 6
Veer Mehta
Great Lakes PGPM - Main Great Lakes PGPM
C66540 $ 7 $ 8
Robyn Rodier
Melbourne Business School - Main Integrative Business Capstone - FT August 2014
C66127 $ 9
C65324 $ 10
S.P. Jain Institute of Management and Research - Main Decision Analysis (Business Simulation)- A
C65318 $ 13
Digby $

42. You are now the Captain…

43. Register @ www.capsim.com
1st Organize Companies
Register @

44. Today- we will begin analysis of “your situation…”
1st-Step back & take a look at the “Big Picture”

45. 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

46. BUSINESS PLAN GUIDELINE
Page 1: Mission & Vision Statements –
 SECTION I : SITUATION ANALYSIS
1.1: External Environment - Opportunities & Threats:
MARKET STRUCTURE
MARKET SEGMENT SIZE & GROWTH
MARKET SEGMENT VALUE
MARKET SEGMENT DYNAMICS
 1.2: Internal Environment- Analysis & Evaluation of Company's Strengths & Weaknesses
Marketing Management
Production & HR Management 
Financial Management 
1.3: Situational Analysis Results: SWOT Analysis
   SECTION II: STRATEGY, OBJECTIVES & TACTICS
2.1: Select one of the Six Basic Strategies delineated in your Online Guide – Describe your Company's Growth & Competitive Strategy; be specific regarding any plans for new product development (What products? Which segments? What years?)
2.2: Functional Domains- Objectives & Tactics
Marketing + R&D-
Production & HR
Financial-

47. BUSINESS PLAN Answers 3 Critical Q’s:
1.Where are we now?
2.Where do we want to go
3.How do we get there?
= Situation Analysis

48. 2. Where do we want to go?
Market positions to stake out?
Consumer needs & segments serve?
Outcomes to achieve?

49. 3.How do we get there? Final Question answered by Strategic Planning:
1.Where are we now?
2.Where do we want to go?
3.How do we get there?
*Growth, Competitive & Functional Strategies

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

51. YOUR 1st ASSIGNMENT Ascertain: Market Structure Consumer Demand
Opportunities & Threats:
Ascertain:
Market Structure
Consumer Demand

52. Business Plan Guideline:

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

54. Ascertain Financial Health of Your Company

55. The Capstone Courier

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

59. $20 to $100 M CUM PROFIT NET PROFITS $$ Year 1 $6 million
General Range:
$20 to $100 M

60. Main ratio of Profitability Return on Sales
net profit
net sales
Return on Sales =
“ROS indicates percentage of each sales dollar that results in net income.”

61. Return on Assets net profit Return on Assets = assets
“ROA measures company’s ability to use its assets to generate earnings.”

62. Profitability * Asset Mgt * Leverage
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

63. Du Pont Formula x x net profit equity Return on Equity = net profit
Value Chain
net profit
equity
Return on Equity =
net profit
sales
sales
assets
assets
equity x x

64. Du Pont Formula x Return on Equity = net profit equity sales assets
Value Chain
Return on Equity =
net profit
equity
sales
assets x

65. 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

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

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

68. 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…

69. 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 & $2 of Debt”…
1.8 to 2.8

70. Key Demand Consideration:
Key Capacity Consideration:
Overall market ~ 14%/yr
“Average” company should/could double - sales in 6 years

71. 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+

72. 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

73. Page 3

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

75. 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 =

76. Financial Guidelines: Profitability-SGA/sales & Margins

77. 7-17%

78. 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).

79. IF:
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).

80. Net Margin above 20%, but ROS (net profit) below 5%.. --
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).

81. Stock Price
Profit$

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

84. Questions?