1. Where are we?

2. C ompanyC ompany C onsumersC onsumers C ompetitorsC ompetitors C onditionsC onditions PEST PEST Growth & Competitive Strategies Finance HR Production R&D Marketing Functional Integration  Profits  Mrkt Share  ROA  ROS  ROE  Asset T/O  Stock  Mrkt Cap Assignment # 1 Situation/SWOT Analysis Strategic Planning Functional Integration Performance Assessment

3. S I M U L A T I O N M A R K E T I N G M G T. C onsumer C ompany C ompetitors C onditions Begin Situation-Analysis EXTERNAL ENVIRONMENT Opportunities & Threats INTERNAL ENVIRONMENT Your Company's Strengths & Weaknesses:

4. You are finding answers re:  How the market is segmented & the relevant criteria that influence consumers use in their purchasing decisions  The nature & magnitude of the competition  Existing & emerging Economic & Technological trends that will impact demand, pricing, product design & positioning Consumers Competitors Conditions

5. Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas Strategic Thinking Strategic Thinking Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas Strategic Thinking Strategic Thinking 1.Long-range planning- considers the external factors that affect success & integrates the various functional strategies. 2.Strategic analysis Industry structure Market segmentation The lifecycle. SWOT analysis.

6. Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas Strategic Thinking Strategic Thinking Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas Strategic Thinking Strategic Thinking 4. Portfolio theory- GE- (three-by-three matrix, using business strength & market attractiveness as variables). The Boston Consulting Group (BCG) introduced its two-by-two matrix- (invest in the stars, divest the dogs, milk the cows, and solve the question marks)

7. Portfolio Analysis Which Brands should receive more/ less/ no investment-Based on:  Product Position/ Potential  Profitability/ Margins  Market-Growth/Market- Share Matrix  Competitive Strategy Which Brands should receive more/ less/ no investment-Based on:  Product Position/ Potential  Profitability/ Margins  Market-Growth/Market- Share Matrix  Competitive Strategy

8. G.E Strategic Planning Model Strong Average Weak Business Strength Business Strength IndustryAttractiveness High Low Business Strength Index Industry Attractiveness Index * Market Share * Market size * Price Competitiveness * Market Growth * Product Quality * Industry Profit Margin * Customer Knowledge * Amount of Competition * Sales Force and Effectiveness * Seasonality * Geographic Advantage * Cost Structure

9. Boston Consulting Group’s Growth-Share Matrix High Relative Market Share HighLow LowDOGS CASH COWS Product-Market Growth (%) STARS PROBLEMCHILD 10x 4x 2x 1.5x 1x.5x.2x.1x

10. C onsumer C ompany C ompetitors C onditions Complete Situation-Analysis EXTERNAL ENVIRONMENT Opportunities & Threats INTERNAL ENVIRONMENT Your Company's Strengths & Weaknesses: Finance Marketing & R&D Production & HR

11. M A N A G E M E N T S I M U L A T I O N Answered Key Financial Q’s: 1.Are You Making Enough Profit ? 2.Liquidity ? Enough Money on hand to run/grow your co. 3.Leverage? ideally proportioned betw. Debt & Equity? 4.How effectively are you utilizing your assets? A/T 5.R U providing your investors an Adequate Level of Return? 6.How close are you to Bankruptcy? 7.How’s those Bond Ratings ? 8.Do you have Adequate Levels of Investment in your Company's Plant, People & Processes ?

12. M A N A G E M E N T S I M U L A T I O N Acquire Capital Acquire Capital –Issue Stock –Short Term Debt –Issue Long Term Bonds Set Dividend Set Dividend Retire Long Term Bonds Retire Long Term Bonds Retire Stock Retire Stock Responsible for Emergency LoansResponsible for Emergency Loans Big AL The Loan Shark As FINANCIAL MANAGER

13. S I M U L A T I O N M A R K E T I N G M G T.

14. Next Big Q How good are your goods…

15. R U Meeting Consumers’ Expectations?

16. M A N A G E M E N T S I M U L A T I O N You’re will be responsible for: Planning, implementing & controlling your marketing strategy Target & Position ProductPlace Promotion Price As MARKETING MANAGER

17. M A N A G E M E N T S I M U L A T I O N Marketing Managers become one-w/ Relationships betw Price & demand Price & margin Promotion budget & awareness Sales budget & accessibility A/R policy & demand Price & demand Price & margin Promotion budget & awareness Sales budget & accessibility A/R policy & demand

18. M A N A G E M E N T S I M U L A T I O N Promotion budget & awareness … Sales budget & accessibility

20. Marketing also selects media vehicles & message weights AND determines composition of sales/distribution staff..and allocation of their efforts by segment & Brand

21. M A N A G E M E N T S I M U L A T I O N Responsible for: Product Position Product Position Age & Quality Age & Quality New product development New product development As R&D Mgr Quality Age Prdt Line High High Eight Low Low One < < < SIZE A B Performance

22. S I M U L A T I O N M A R K E T I N G M G T. Establish product positioning to meet customer demand Build quality & reliability (MTBF) into products Ensure age of product meets customer demands Create new products Drift

23. Evaluate Your Company’s Marketing Marketing

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

25. Next Big Q How good are you in making your goods…

26. 1) Assess your Production Efficiencies- Plant Utilization & Automation: 2) Assess your Company's HR & Labor Force Productivity: 3) Assess levels of automation on each of your production lines:

30. FAIR SHARE ESTIMATES: 3-4 Rnds out: ROW #1

31. ROW#2

32. Utilize 2 nd Shift? ROW#3

33. Why run 2 nd shift –when labor costs 50% higher?

34. Answer by using your proformas: 1- On production spreadsheet build at capacity- if have 1000 units – build 1000 units 2-On Marketing display- FORECAST 1000 UNITS 3.-ON Proforma Income statement- note NET MARGIN – Answer by using your proformas: 1- On production spreadsheet build at capacity- if have 1000 units – build 1000 units 2-On Marketing display- FORECAST 1000 UNITS 3.-ON Proforma Income statement- note NET MARGIN – THE BIQ Q: If we double sales will we double our net margin?– Will we make less because labor costs are 50% higher for 2nd shift?

35. Why run 2 nd shift –when labor costs 50% higher? Answer by using your proformas: 1- On production spreadsheet double output-run full 2 nd shift 2-On Marketing display- double forecast 3.-ON Proforma Income statement- NET MARGIN –will more than double Answer by using your proformas: 1- On production spreadsheet double output-run full 2 nd shift 2-On Marketing display- double forecast 3.-ON Proforma Income statement- NET MARGIN –will more than double THE BIQ Ar: When run 1 shift- must pay all fixed costs- 2 nd shift gets a free ride-only has to pay labor premium…

36. Optimum Automation Levels? ROW#4

37. A Historical Consideration… RE: Projected Share LOW END: 0-1 product killed.. 0-1 repositioned or introduced TRADITIONAL: 3-6 repositioned from High…0-1 killed…1-2 introduced SIZE: 0-1 killed, 0-1 repositioned to Traditional, 1-2 introduced PERFORMANCE: 1-2 killed, 0-1 repositioned to Traditional, 0-1 introduced HIGH: 1-3 killed or repositioned to Traditional, 1-3 new products arrive in rounds 2 or 3

38. FAIR SHARE ESTIMATES: 3-4 Rnds out: ROW #1

39. Round 3- Forecast Segment Competitive Density LOW END: 6 products=rivalry unchanged TRADITIONAL: 9 products, w/ 3 repositioned= increased competition SIZE: 7 products, w/ 2 new= increased competition PERFORMANCE: 4 products, w/ 1 new= reduced competition HIGH: 6 products, w/ 2 new= increased competition 6 9 7 4 6

40. -Given Round 3 Scenario- How should adjust your production capacities? Round 0- 1 st shift Capacity Round 3- Unit Demand Traditional18001068 Low End14002081 High End900668 Performance600823 Size600469

41. Capacity Adjustments one might make-- based on how much capacity you would need for the 1 st 4 roundsCapacity Adjustments

42. Evaluate Your Company’s Production & HR Production & HR

43. As soon as he said- “Money isn’t Everything” - I knew we were in trouble

44. It is important to focus on the means used to achieve the ends … …..not just on the ends themselves… To only focus on traditional financial accounting measures (such as ROI, ROE, EPS…) ….. does not give mgt the whole picture….

45. Performance needs to be judged thru mix of: f inancial f inancial measures…. non- financial & - non- financial measures drive …which drive financial outcomes Performance needs to be judged thru mix of: f inancial f inancial measures…. non- financial & - non- financial measures drive …which drive financial outcomes Will Make $$$ - if sell product Will sell product if: consumer get what wants.. knows about & can get product To achieve “above’ everyone must effectively do their job To effectively do job: must know what to do

47. Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas Strategic Thinking Strategic Thinking Strategic Thinking- the ten big ideas Strategic Thinking- the ten big ideas Strategic Thinking Strategic Thinking 9 9. Metrics that matter Balanced score card- a system that attempts to balance financial performance w/ consideration of: – customer's perspective – learning & growth perspective – & internal business processes perspective

48. What is measured gets noticed What is noticed gets acted on What is acted on gets improved Today … Balanced Scorecard Vast majority Fortune 1,000 Companies utilize a Balanced Scorecard to help manage performance— because ….. Today … Balanced Scorecard Vast majority Fortune 1,000 Companies utilize a Balanced Scorecard to help manage performance— because …..

49. For Each Perspective: F inancial… Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. C ustomer… B usiness P rocesses… L earning & G rowth Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. F inancial… Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3. C ustomer… B usiness P rocesses… L earning & G rowth Objectives Measures Targets Initiatives Responsibility Budget 1. 2. 3.

50. % Ground crew trained Balanced Scorecard: Southwest Airlines Example Objectives Measures # Customers FAA On Time Arrival Rating Market Survey On Ground Time On-Time Departure Strategic Theme: Operating Efficiency Initiatives Cycle time optimization Ground crew training Customer loyalty program Quality management Targets 30% +/yr 20% 5% 12% growth Ranked #1 30 Minutes 90% yr. 1 70% yr. 3 90% yr. 5 100% Profitability Grow Revenues Fewer planes More Customers Flight is on - time Lowest prices Fast ground turnaround Ground crew alignment Strategic Theme : Operations Excellence Profits and ROA Financial Learning Ground crew alignment Fewer planes Customer Internal Fast ground turnaround Attract & Retain More Customers Grow Revenues Lowest prices On-time Service Strategy Map

51. Capstone's B alanced S corecard Capstone's B alanced S corecard

55. S I M U L A T I O N M A R K E T I N G M G T. Can I be excused my brain is full..