Introduction
An overview of the Capstone® Simulation
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© 2012 Capsim Management Simulations, Inc.
School: Auburn University
Professor: Adams
Class: MNGT 4800
Sections: 7-12
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© 2012 Capsim Management Simulations, Inc.
Why Simulate?
Risk-Free
View
Alternative
Strategies
Compresses Time
Enjoyable
(1 Round=1Year)
Selectivity
vs
Integration
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© 2012 Capsim Management Simulations, Inc.
Objectives of the Capstone Simulation
Demonstrate
effectiveness of multidiscipline 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.
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Industry Overview
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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.
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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
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($),
The Start
When Sensor Inc. breaks up, each of the new companies
starts off with the following scenario:
$100 Million in
Sales
5 Market
Segments
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5 Product Lines
Closed
Marketplace
© 2012 Capsim Management Simulations, Inc.
Sensors: An Overview of Your Company’s
Product
Customers (OEMs) need sensors for
their products to function.
Used for diverse applications
Five clear market segments
• Low End
• Traditional
• High End
• Performance
• Size
Customer demands vary between
the five segments.
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The Marketplace: A Look Into The Segments
Round 1 Consumer Segment
Expectations
Perceptual map used
to track changing
consumer demands in
size and performance
Market segments
continue to diverge
over time
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Each year, consumers
will expect faster
(higher performance)
and smaller products
(lower size)
Round 8 Consumer Segment
Expectations
•This causes the segment
circles to drift to the lower
right constantly
*Note the drift
towards the lower
right(expectations of
faster and smaller
products). Also note
the divergence of the
segments.
© 2012 Capsim Management Simulations, Inc.
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
Able
2. Product must fall within
price guidelines.
Price
Performance
Able
Segments
Reliability
3. Product must fall
within reliability guidelines
Segments
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8.23.11
Two-Stage Purchase Decision
Stage 2 - Rank Best Product
Position
Reliability
1. Positioning
2. Age
Age
AB
0
Ideal
Spot
1
3. Reliability
Price
4. Price
20000
25000
HIGH END
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$30
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$40
8.23.11
Product Ranking Criteria by Market
Segment
Traditional
Segment
Low End
Segment
1 - Age
2 - Price
3 - Position
4 -Reliability
1 - Price
2 - Age
3 - Position
4 - Reliability
High End
Segment
1 - Position
2 - Age
3 - Reliability
4 - Price
Performance Size
Segment
Segment
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.
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© 2011 Capsim Management Simulations, Inc.
8.23.11
Low End Consumer Characteristics
What the customers say
•Price sensitive.
Prefer price to
be lowest
possible.
•Prefer less
cutting edge
products (Bigger
Size & Low
Performance)
Price
Reliability
I want them
to have been
around for a
while…no
beta testing!
Positioning
They have to
be
moderately
reliable…but
not enough
to drive up
the price!
Age
•Ideal MTBF:
12000-17000
•Ideal Age: 7
years
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I want to
spend as
little money
as possible!
The
technology
doesn’t have
to be cutting
edge.
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Traditional Consumer Characteristics
What the customers say
•Price sensitive,
but willing to
spend more
than Low End
consumers
• “Average”
Performance
and Size
Price
Reliability
I want them
to have been
around for a
while…no
beta testing!
Positioning
They have to
be
moderately
reliable…but
not enough
to drive up
the price!
Age
• Ideal MTBF:
14000-19000
I want these
sensors to be
moderately
cheap.
• Ideal Age: 2
years
I want good
sensors… not
cutting edge,
but reliable.
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High End Consumer Characteristics
What the customers say
•Not price
sensitive,
willing to pay
highest prices.
•High
Performance
and Small Size
Price
Reliability
I want the
newest
sensors you
have!
Positioning
We need the
total package.
High
performance and
miniaturized for
our products.
Age
•Ideal MTBF:
20000-25000
•Ideal Age: 0
years
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Price is not
an issue. I
want the
best sensors
in the
market!
Only the
most cutting
edge
products will
satisfy me!
© 2012 Capsim Management Simulations, Inc.
Performance Consumer Characteristics
What the customers say
•Not price
sensitive, willing
to pay
moderately high
prices
•Highest
Performance
and Less
important Size
Price
Reliability
I want them
to have been
around for a
while…no
beta testing!
Positioning
Reliability and
Performance
are very
important
and must be
high.
Age
•Ideal MTBF:
22000-27000
I am willing
to pay for
what I need.
•Ideal Age: 1
year
I prefer
newer
technology!
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Size Consumer Characteristics
What the customers say
•Not price
sensitive, willing
to pay
moderately high
prices
•Average
Performance
but Maximum
Miniaturization
Price
Positioning
Reliability
Age
•Ideal MTBF:
16000-21000
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
•Ideal Age: 1.5
years old
I prefer
newer
technology!
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Segment Growth
According to a Market
Analyst, there will be
continuous growth in the
sensor market.
Your goal: Prepare your
company’s products to
meet the needs of the
growing market.
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I see the entire
market growing at
around 14% or 15%
per year. The high
tech market alone
will be growing at
16%.
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The Decision
Making Process
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Decision Areas
Coordinate strategy and tactics across the following areas of the
company:
R&D
Marketing
Additional Modules
- HR
- TQM
- Labor Negotiations
- Advanced Marketing
Production
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Finance
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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
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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)
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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
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Finance
Acquire capital to fund
growth and operations
• Issue Stock
• Short-Term Debt
• Issue Long-Term
Bonds
Issue dividends to shareholders
Balance debt portfolio
Manage Proformas
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Proformas: A Look Into the Future
Proformas
use decisions
made in the
current year
to project
company
performance
for the next
year
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Analyzing
them is
critical for
company
success
© 2012 Capsim Management Simulations, Inc.
The
following
proformas
are available:
• Balance Sheet
• Income
Statement
• Cash Flow
Statement
• Financial Ratios
Scoring Methods
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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.
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Things to do each year (each round)
Establish business strategy
for your company
Begin the process again by
confirming alignment of
your results with your
company’s strategic goal.
Rejoice in your superior
business acumen
Await results when
Professor processes
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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
© 2012 Capsim Management Simulations, Inc.