1. Introduction An overview of the Capstone® Simulation
Unforgettable Business Learning
Unforgettable Business Learning
© 2012 Capsim Management Simulations, Inc.

2. School: Auburn University Professor: Adams Class: MNGT 4800
Sections: 7-12
Unforgettable Business Learning
Unforgettable Business Learning
© 2012 Capsim Management Simulations, Inc.

3. View Alternative Strategies
Why Simulate?
View Alternative Strategies
Risk-Free
Compresses Time
(1 Round=1Year)
Enjoyable
Selectivity vs
Integration
© 2012 Capsim Management Simulations, Inc.

4. Objectives of the Capstone Simulation
Demonstrate effectiveness of multi-discipline teams working together.
Use strategic thinking.
Test your business acumen.
Understand overall interaction and impact of various parts of a business on one another.
Grow the awareness of competition.
Take away practical skills in business management.
© 2012 Capsim Management Simulations, Inc.

5. Industry Overview Unforgettable Business Learning
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6. The Story: Background on Your Company
FTC required Sensors Inc. to be broken up into separate companies:
Andrews
Baldwin
Chester
Digby
Erie
Ferris
Started as a single corporation named Sensors, Inc.
Sold sensors as main product
Corporation was shut down by FTC due to monopolistic operations
Your job: Operate one of the companies and make it successful.
© 2012 Capsim Management Simulations, Inc.

7. Markets Defined By Segments
Performance – 8.4% to 11%
Low End – 39% to 37%
Traditional – 32% to 28%
Size – 8.7% to 11%
High End – 11.2% to 13%
Percentage in dollars ($), change over 5 years

8. The Start
When Sensor Inc. breaks up, each of the new companies starts off with the following scenario:
$100 Million in Sales
5 Product Lines
Closed Marketplace
5 Market Segments
© 2012 Capsim Management Simulations, Inc.

9. Sensors: An Overview of Your Company’s Product
Customers (OEMs) need sensors for their products to function.
Used for diverse applications
Low End
Traditional
High End
Performance
Size
Five clear market segments
Customer demands vary between the five segments.
© 2012 Capsim Management Simulations, Inc.

10. The Marketplace: A Look Into The Segments
Perceptual map used to track changing consumer demands in size and performance
Each year, consumers will expect faster (higher performance) and smaller products (lower size)
This causes the segment circles to drift to the lower right constantly
Market segments continue to diverge over time
*Note the drift towards the lower right(expectations of faster and smaller products). Also note the divergence of the segments.
Round 1 Consumer Segment Expectations
Round 8 Consumer Segment Expectations
© 2012 Capsim Management Simulations, Inc.

11. Customers Go Through a Two-Stage Purchase Decision Process
Stage 1 - Match Product to Market
1. Product must be positioned within the segment (performance & size).
Able
Size
Performance
2. Product must fall within
price guidelines.
Price
Segments
3. Product must fall
within reliability guidelines
Reli-ability
© 2011 Capsim Management Simulations, Inc.

12. Two-Stage Purchase Decision
Stage 2 - Rank Best Product
Reliability
1. Positioning
2. Age
3. Reliability
4. Price
Position
Ideal Spot AB 1
Age
Price
20000
25000
HIGH END
$30
$40
© 2011 Capsim Management Simulations, Inc.

13. Product Ranking Criteria by Market Segment
Traditional
Segment
Low End
Segment
High End Segment
Performance Segment
Size Segment
1 - Age
2 - Price
3 - Position
4 -Reliability
1 - Price
2 - Age
3 - Position
4 - Reliability
1 - Position
2 - Age
3 - Reliability
4 - Price
1 - Reliability
2 - Position
3 - Price
4 - Age
1 - Position
2 - Age
3 - Reliability
4 - Price
Listed in order of importance for each market segment.
© 2011 Capsim Management Simulations, Inc.

14. Low End Consumer Characteristics
What the customers say
Ideal Age: 7 years
Ideal MTBF:
Prefer less cutting edge products (Bigger Size & Low Performance)
Price sensitive. Prefer price to be lowest possible.
Price
Positioning
Age
Reliability
I want to spend as little money as possible!
I want them to have been around for a while…no beta testing!
They have to be moderately reliable…but not enough to drive up the price!
The technology doesn’t have to be cutting edge.
© 2012 Capsim Management Simulations, Inc.

15. Traditional Consumer Characteristics
What the customers say
Ideal Age: 2 years
Ideal MTBF:
“Average” Performance and Size
Price sensitive, but willing to spend more than Low End consumers
Price
Positioning
Age
Reliability
I want these sensors to be moderately cheap.
I want them to have been around for a while…no beta testing!
They have to be moderately reliable…but not enough to drive up the price!
I want good sensors… not cutting edge, but reliable.
© 2012 Capsim Management Simulations, Inc.

16. High End Consumer Characteristics
What the customers say
Ideal Age: 0 years
Ideal MTBF:
High Performance and Small Size
Not price sensitive, willing to pay highest prices.
Price
Positioning
Age
Reliability
Price is not an issue. I want the best sensors in the market!
I want the newest sensors you have!
Only the most cutting edge products will satisfy me!
We need the total package. High performance and miniaturized for our products.
© 2012 Capsim Management Simulations, Inc.

17. Performance Consumer Characteristics
What the customers say
Ideal Age: 1 year
Ideal MTBF:
Highest Performance and Less important Size
Not price sensitive, willing to pay moderately high prices
Price
Positioning
Age
Reliability
I am willing to pay for what I need.
I want them to have been around for a while…no beta testing!
Reliability and Performance are very important and must be high.
I prefer newer technology!
© 2012 Capsim Management Simulations, Inc.

18. Size Consumer Characteristics
What the customers say
Ideal Age: 1.5 years old
Ideal MTBF:
Average Performance but Maximum Miniaturization
Not price sensitive, willing to pay moderately high prices
Price
Positioning
Age
Reliability
I am willing to pay for what I need.
I want them to have been around for a while…no beta testing!
They must be miniature to fit our technology
I prefer newer technology!
© 2012 Capsim Management Simulations, Inc.

19. Segment Growth
According to a Market Analyst, there will be continuous growth in the sensor market.
I see the entire market growing at around 14% or 15% per year. The high tech market alone will be growing at 16%.
Your goal: Prepare your company’s products to meet the needs of the growing market.
Unforgettable Business Learning
© 2012 Capsim Management Simulations, Inc.

20. The Decision Making Process
Unforgettable Business Learning
Unforgettable Business Learning
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21. R&D Decision Areas Marketing Production Finance
Coordinate strategy and tactics across the following areas of the company:
R&D
Marketing
Production
Finance
Additional Modules HR
TQM
Labor Negotiations
Advanced Marketing
© 2012 Capsim Management Simulations, Inc.

22. R&D Ensure the perceived age of the product meets customer demands
Build the quality and reliability (MTBF) of the products
Invent new products to address the changing marketplace and take advantage of new opportunities
Determine the specifications of the products to meet customer expectations
© 2012 Capsim Management Simulations, Inc.

23. Marketing Set the price for each product
Build customer awareness through investing in promotion
Establish a sales force and distribution channels
Set the sales forecast for each product
Set Credit Policies
(A/R and A/P)
© 2012 Capsim Management Simulations, Inc.

24. Production Purchase machinery to automate production facilities
Buy or sell capacity on product lines
Set production schedule
Manage the majority of the company’s fixed assets
Staff your facility with workers
© 2012 Capsim Management Simulations, Inc.

25. Finance Acquire capital to fund growth and operations
Issue Stock
Issue dividends to shareholders
Short-Term Debt
Issue Long-Term Bonds
Balance debt portfolio
Manage Proformas
© 2012 Capsim Management Simulations, Inc.

26. Proformas: A Look Into the Future
Proformas use decisions made in the current year to project company performance for the next year
Analyzing them is critical for company success
The following proformas are available:
Balance Sheet
Income Statement
Cash Flow Statement
Financial Ratios
Unforgettable Business Learning
© 2012 Capsim Management Simulations, Inc.

27. Scoring Methods Unforgettable Business Learning
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28. Success Measures Success Measures
In the real world, companies have different goals. Using the same success measures, YOU get to choose the parameters on which your company is measured.
Some of the Criteria that are used:
Cumulative Profits
Average Market Share
Average ROS (Return on Sales)
Average Asset Turnover
Average ROA (Return on Assets)
Average ROE (Return on Equity)
Ending Stock Price
Ending Market Cap
You or the professor choose the percentage weighting for each selection.
© 2012 Capsim Management Simulations, Inc.

29. Things to do each year (each round)
Establish business strategy for your company
Analyze Capstone Courier to see industry results
Make tactical decisions across each functional area (aligned to strategy!)
Upload official decisions and confirm on the website
Await results when Professor processes
Rejoice in your superior business acumen
Begin the process again by confirming alignment of your results with your company’s strategic goal.
Unforgettable Business Learning
Unforgettable Business Learning
© 2012 Capsim Management Simulations, Inc.