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TRAX

Story of a Hungarian venture & the life cycle of its product...

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Contents:

Introduction .................................................................... 3Sketch: ........................................................................................................ 4

The Firm .......................................................................... 5GAME-TECH ............................................................................................ 5DEEPWORKS ........................................................................................... 6SIMULATION ........................................................................................... 7PROVISION ............................................................................................ 10

The Product Line .......................................................... 12TRAX ....................................................................................................... 12Product portfolio ...................................................................................... 14Value Chain ............................................................................................. 17

Development & Production Management ................. 21Decision making ...................................................................................... 21Planning ................................................................................................... 25Costing ..................................................................................................... 26Prototyping ............................................................................................... 27Development control ................................................................................ 28Job shop ................................................................................................... 29Capacity Planning - Scheduling ............................................................... 33Product-Process matrix ............................................................................ 36

Marketing Issues .......................................................... 40Life cycle & sales ..................................................................................... 42The target market ..................................................................................... 45The role of the product ............................................................................. 48Pricing policies ......................................................................................... 49Distribution plans (placing) ..................................................................... 53Ad ............................................................................................................. 54Competitors .............................................................................................. 55

Summary ....................................................................... 56 Figures: Fig. 1 Value Chain ....................................................................................... 18Fig. 2 Development Control ........................................................................ 23Fig. 3 Planning ............................................................................................. 25Fig. 4. Facility Layout (Metal Electronics parts Plastic Assembly) ........... 31Fig. 5 Gozinto Chart ................................................................................... 32Fig. 6 Decision Tree ..................................................................................... 35Fig. 7 Robot Investment Calculation ........................................................... 38

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Introduction

This is the third time in my life when I get my pen, put it on the

paper and start to write a thesis. We might think, that I’ve got a

certain experience in this field. Unfortunately it is not true. My

experiences show that preparing an appropriate-level essay be

it a thesis or simply an article, more and more difficult problem.

The reason for this is not only the declination of my intellectual

capacity but the increasing requirements in all disciplines of

both technical & economical sciences as well. This influence is

so heavy, that you could feel you are not competent even in

your profession. That’s why I don’t try to provide a deep & high-

level analysis of any special issues. Instead of that, I give a

short survey of my activity in the last years.

My primary goal is to introduce “TRAX”, the product developed

mainly by my team. (Technically) Think this essay as a case

report in which the scale of the efficiency is that, how could you,

the reader understand the story. Because this is a true story… I

think it is a considerable advantage. I prefer the “life-smelling”

stories even if those make the readers -- being accustomed to

ten-digit numbers of dollars – smile on it. That was the thing we

(the students) mostly missed during the course. We always

read studies about huge companies and their problems but

barely about smaller European/Hungarian enterprises, which

were more useful. Of course I know the stories about great

firms are essential on an MBA course but we would listen such

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interesting ones as this one. I don’t say it is a hit-story but could

be even that anyway…

The great benefit I’ve gained from the MBA course is that I was

able to utilize my recently got knowledge permanently, day by

day. I would say: the theories went to the practice. Continuous

development of methods could be realized. If I heard

something, I could trial it in practice immediately. Certain things,

be those out of my profession could be very useful. Finally I feel

it was a big deal for me!

Sketch:

At first I introduce the environment we work in: the

companies and the relationship among them.

Then I show the products and the possible context

among them. (Product portfolio)

Some word about my job: planning the jobs

Finally the most important element of the product’s

life cycle: the sales and the thing facilitate it – the

marketing of the product.

The attachment, are to help in the best understanding the

problem.

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The Firm

GAME-TECH

The company, named GAME-TECH LTD was founded in the

beginning of the nineties. The core activity of it was operating

different game & slot machines. The first gaming-hall opened in

the (former) Eötvös – club, which was an amusement arcade.

Later, in the next few years the company also made 20 further

clubs in the country. Furthermore, GAME-TECH sold

simulators, which were bought from other producers and video

games, so the company needed a warehouse, where the

machines were stocked until they were sold on.

Later, competitors appeared and the tax – law regulations have

changed, so the firm -- if it wanted to stay on the market -- had

to consider its position and develop a new middle- & long-term

strategy overlapping the new market conditions. So the

company has changed its game-machine portfolio and started

to operate relatively expensive motion simulators. At those

times the registered trademark of the company was Wizard’s,

which was then the name of the imported simulators as well.

The machines, and their components, the necessary animation

software were imported mainly from Italy. The first machine cost

DEM 120.000 and it was a two-seat model. This was later the

main income resource for the company, the machines were

placed in the Polus Center, Lurdy House, Duna Plaza, and on

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the Coca – Cola Beach House in Siófok City. For the usage of

the first PC animations GAME-TECH had to pay royalty, which

gave the idea that the company could be able to make films in

its own studio by its own employees.

DEEPWORKS

On the world – market, there are approximately 100 different

animation films, but only about the half of them are really

useable. For preparing the new task the company had to

employ graphic artists, who made the animations in a separated

firm, established in 1997 under the name of DEEPWORKS

LTD. Production time of such films are about 4-5 man-years.

Completing the first film took one year for five graphic artists.

The second one has been finished in 9 months and the firm is

just on the way completing the third one. From 1999, we sell

these films on the world – market for royalty. In these cases the

payable royalty depends on the number of seats installed in the

given movement theatre / machine. The company also makes

advertisement films and animations after orders.

GAME-TECH had a previous experience in the marketing, and

selling (& reselling) products in the given field. They were able

to sell the animations separated from the machines and as the

program of it as well, but –of course— in bundling the

conditions were more constructive. They were really successful,

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so the DEEPWORKS made a separated department for the

software – planning.

SIMULATION

The holding company (GAME-TECH) sells these animations

worldwide and from leasing & selling its old and out-of-operation

machines into Ukraine and Israel, has got extra incomes.

Managers have to think about the opportunities: investing the

money in another branch, or begin a new development in the

game-machine field. (The importance of those certain “another

branches” is in giving the basic data for an opportunity-cost

calculation. We apply more stringent control as firms usually do:

in such calculations we use our -- not in the least risk-free --

operations instead of a non-hazard state-bond investments.) As

it will be described clearly in the latter sections, the company

chose the second chance, decided to develop a custom

designed motion ride simulator. This machine could become a

prototype of a latter serial production. The decision itself was

made on Christmas ‘98 and the development began in autumn

of 1999.

If the company is able to produce the machine, it won’t need to

buy the simulator from other suppliers any longer. The company

could be able to produce machines not only for satisfaction of

its own demand, but for the market as well. This strategic

decision was very hard and important: starting the R&D,

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prototyping and the production itself without experiences in this

field. Finally the company bought the “know-how” from an Italian

partner, in the form of a license, which cost $30.000. Of course

this activity requires a separated budget & management. The

name of the new company, founded especially for

manufacturing motion ride simulators, was SIMULATION LTD.

So investors had three companies: GAME-TECH for operating

game-machines, -- mainly motion ride simulators --

DEEPWORKS for creating animations (motion ride films) &

SIMULATION for producing the machine. With this, they

created a complete product-line, involving all elements of this

field: software, hardware & operation.

The first six months were spent with planning. This procedure

included both the technical designing & marketing research and

last but not least the financial calculations. Of course, the

production technology couldn’t be evaluated at that time, only at

a latter stage, after finishing the first few units, which were the

prototypes. Those were made only one by one & handled as

individual projects.

(As the technical & development manager of the company I’d

like to give a more detailed view about this issue in a separated

chapter. In that, I will touch such important problems as

produce-or-buy, prototype handling by CPM models, parallel

development of marketing & production line, etc.)

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The company started to make the prototype according to the

estimations this held 18 months. Since managers haven’t got

experience, they could lean only on estimations be it cost or

time issue. Production of the components, even more the tools,

necessary for the latter serial production is a long journey into

the deep & dark unknown. There were not accessible data

about manufacturing such product neither in the country but nor

even in Europe. To protect the company from these

insufficiencies they tried to use data gathered from related

fields, -- such as sport-boat & automobile / trailer industry -- and

of course from the purchased know-how. Unfortunately, it

became clear very soon, that the so-called “know-how”, in most

part didn’t contain sufficient data about the technology. In fact –-

since the company decided to produce a four-seat simulator

instead of the original two-seat model (this change is based on

certain marketing considerations) -- the whole documentation

could be used on a very low level. (Finally the company found

that most of the parts had to be completely redesigned.)

Furthermore, correct estimation techniques (based on a cyclic

check & and reset of the actual CPM model) are very important

not only for handling the actually running prototyping procedure,

but for collecting useful observation data for the latter serial

production. Duration time of manufacturing of the elements, the

optimal number of staff, etc. was found at that time. Since the

prototype is the most expensive piece, data have to be

interpolated & projected to the case of latter serial production.

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Up to the end of the year 2000 the company has reached a

“steady state”: the first machine has been completed. Managers

expectations materialized, the dreams came true. Although, the

first simulator has been working properly for several months, we

couldn’t say the company is ready for the serial production. For

getting ready, the company has to produce further two-three

units. This is for acquiring a certain routine in different

technologies & making the time-table & other calculations more

precise. After this, SIMULATION LTD. is able to start the serial

production.

PROVISION

In the end of 2000, in the same time when the first unit had

been completed an American company from Los Angeles made

a bid for a certain share of SIMULATION LTD & DEEPWORKS

LTD. Contact with the managers of that company, called

PROVOSION ENTERTAINMENT INC. was rooted from the

previous exhibition, held in the US. PROVISION was involved in

the field of entertainment electronics as well & has some

products, almost ready for serial production. (For further details

of them & the possible relationships with our product portfolio

see in the next section.)

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Opportunities rooted from the possible merger:

for PROVISION: cheap but well-organized production capacity

for products would be sold in European

markets.

for SIMULATION:

(See Annex 1)

opening to the overseas markets & possible

increasing of working capital necessary for

developing of manufacturing capacity.

Today, both Hungarian companies are owned in the majority by

PROVISION -- only 14% (SIMULATION) & 10%

(DEEPWORKS) of the firms remained in Hungarian ownership.

(GAMETECH, the original holder of them was out of this

operation.) Balancing the above transaction the former

Hungarian owner acquired a certain percentage in the American

company.

This was the second strategic decision, in which the Hungarian

management was involved. Until now the abilities of

SIMULATION would be strong enough to work on the East –

European and the Russian market, but from now, the company

could enter/trial also the American and Canadian market.

Further to this, the firm could get help in production-

development, and distribution from the new owners.

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The Product Line

TRAX

The machine, the so-called motion ride simulator with the brand

name of TRAX

Motion base

, is equipment with closed cabin (capsule), in

which the “passengers” sit while the program running.

The program is a few minute long computer-animation. While

watching the film on a big screen, inside the cabin, the whole

machine moves in synch with the events of the film. These

events may be a roller coaster, a car race, a space flight, etc.

The main parts of the simulator:

Mechanic elements

Moving hydraulics

The capsule with the seats

Electronic elements

PC for playing films

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Movement controller

Video projector

Hi-fi audio system

The animations are on the computer as simple graphic files.

Each animation file has a pair of movement file. When the film

begins, this means the animation file & the movement file will

run at the same time.

The machine is made of ready components in majority, bought

from other producers / suppliers. In spite of this fact, the

development of the prototype needs a lot of planning; the

capsule has to be redesigned, because of the four seats.

Hydraulics also must be re-considered, because of the

increased weight of the moving elements. Caused by the things

above, the motion base (completely made of steel elements)

must be adjusted. During the development of the first simulator

a further serious problem occurred: the motion controller

originally made in Italy & all of the attached electronics no

longer would be available. In fact the company was faced a

brand new, previously not expected & considered problem: the

complete electronic system had to be developed, include the

hardware elements & the driving software as well. Of course, it

was a really time consuming & high-cost action.

The dominant factor of the machine’s image is the shape of the

cabin, by which designers could determine the appearance of

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the simulator. Main considerations of planning the other

(mechanical-, electronic, etc.) elements were: simplicity,

reliability & durability.

Product portfolio

Now, survey the product portfolio of the merged companies.

The simulator & animation films made by the Hungarian

divisions have been described already. Look at the product line

of PROVISION. The two most important products of them are:

HOLOBOX is a box, measured like a three-door closet with a

25 “ screen on the front side. This big box contains a relatively

simple mirror system by which HOLOBOX projects a 3D image

into the air, in about 1 meter distance from the front side of the

unit. The projected image sources from a special high contrast,

super bright TFT screen, built in the bottom of the box & driven

by a simple PC. If you are standing in front of the unit, you see

a 3D-animation floating in the air so true to life, if you would be

temped to touch it. In expectations HOLOBOX could became a

brand new medium in advertisement & marketing.

Personal Simulator is an armchair, which built on a small

motion-base, so it moves you around two perpendicular axis.

The movements are relatively smooth, and limited, so you can

use this unit even at home for PC gaming. The chair is supplied

with a control panel, which contains a joystick as well. Suppose,

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that the unit is not else, than a special hardware for

sophisticated PC games. Of course the PC software has to be

supported by a motion control engine (an embedded routine) for

driving the chair. The product would be introduced in the

consumers’ market, so it could rely on a higher volume of sales.

For solving the above problem, there are two different choices:

first one is pushing software producers to build this special

engine into their games, the second one is developing a

software independent motion controller system, including both

electronics (hardware) and movement files (software). The

solution described as the second choice, is very similar to the

motion control system of the four-seat simulator. With this, we

attain the question, how the elements of the product portfolio

could be related to each other. To survey this problem, first

summarize the products made by the syndicate:

Software products

Future City Ride (animation/ride film for simulators)

Star Warriors (similarly..)

Many different kinds of short ad films, without

naming them

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Hardware products

TRAX simulator

HOLOBOX

PERSONAL SIMULATOR (motion armchair)

Without any further explanation it is clear, if all of the

software components could be prepared in the same

studio, by the same personnel & infrastructure. The

conditions in the case of hardware profile a little bit differ

from the above situation. Despite of that, the production

technology of most elements of the three hardware

products are identical, there are some special ones,

which require so sophisticated technology, if those could

be prepared only in high-tech factories. (Of course, these

ones needn’t pass in a P.O.B. test, described in the next

chapter…) Such parts are:

Hydraulic system

Audio-video system (projector & sound)

PC

Mirrors & other special optical elements

Miscellaneous

Summarizing the above, we could say, that all three hardware

product could be assembled on the same line. Finally we could

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declare, that all software & hardware product are in direct or

indirect relationship to each other. Consider, that an ad film

could be played in a simulator in its idle time, or inversely demo

of a motion ride film could be presented in the HOLOBOX. A

complete animation made for the usage in TRAX could be used

in the PERSONAL SIMULATOR. So the corporation has a

complete, continuously developing product line, with strong

correlation between its elements. Furthermore, latter

developments planned in the near future, also will possess the

ability of multi purpose. In the next section we survey the value

chain within which the company struggles to be a strong

piece…

Value Chain

The main goal of the previously described merger is to get a

competitive advantage by cooperation of the three companies,

working in the same industry. All of them had an own value

chain, within which the primary & support activities are different

in each company. There is a good chance to realize a new,

definitely better value chain for all participants by coordinating

the relevant activities and by reorganization of the overall tasks

of the three partner. This is more, than a simple coalition,

because the individual companies are no longer independent.

For better understanding the above let’s see the simplified chart

of each company’s value chain.

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DEEPWORKS SIMULATION PROVISION

Input PC hardware, developer software

PC hardware, developer software,

animation films, steel mat. audio & video, hydraulics

PC hardware, developer software,

animation films, ad films, steel mat. audio &

video, hydraulics, optical system

Primary activities

Logistics Not significant JIT, few spare parts, no end

product inventory

Bigger amount of spare parts &

ready-to-deliver inv.

Operations Software & animation

development

Manufacturing: steel construction, plastic elements, electronic parts. Assembling:

mechanical parts, electronic parts,

wiring

Software & animation

development Manufacturing: steel & plastic

elements, wooden boxes, electronic parts. Assembling: mechanical-, electronic-,

optical parts, wiring

Marketing

Exhibitions, elements of direct marketing (mail,

web)

Exhibitions, elements of direct marketing (mail,

web)

Exhibitions, elements of direct marketing (mail, web), traditional ad formulas for

consumers

Service Software &

animation updating, upgrading

Warranty service including

mechanical, electronic &

software support

Warranty service including

mechanical, electronic, optical

& software support

Output Business to business

Business to business

Business to business,

consumer's market

Fig. 1 Value Chain

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The goal of this essay is surveying the life cycle of the

simulator, rather, than giving very detailed view of any particular

issues. So, at this point I don’t give deeper analysis of the

internal activities of each firm, although those are important

elements of the value chain. From the above sheet it’s obvious,

that the three companies use almost the same methods in their

job and by the coordination of them a considerable advantage

could be got. Neither the support activities, such as HR or firm-

infrastructure are explored, because the given companies are

relatively small and those issues are easily understandable. Of

course, the product & technology development is the most

important support activity in my opinion, so the next chapter will

be about that.

The advantage gained from the optimization & coordination of

the participants’ operations, could be recognized on the

organization charts. (Annex 1) This process affects mainly the

development & the manufacturing activities rather, than the

inventory control. In the geographic scope the greatest benefit

for both the American & European divisions is widening the

market.

Last, but not least, one more very important factor for

enhancing the competitive advantage: the vertical integration. It

is really useful both on the input (suppliers) & the output

(buyers) side. The most important element of this conception is

a long-term cooperation agreement with the Bosch-Rexroth

Group, which is our hydraulics supplier. The hydraulics not only

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the most expensive part of the machine but the key element of

the operation. Proper functioning of it is essential. In choice the

appropriate supplier of hydraulics the main argument was the

reliability, and the worldwide service network, rather than the

price. Maybe the company could find cheaper products suitable

for this task, but the background of Bosch was preferred.

Worldwide service & spare part supply of Bosch makes

SIMULATION LTD able to provide high-tech warranty &

beyond-warranty service, which was unimaginable in case of

such a small company as this. Furthermore, Bosch &

SIMULATION agreed, that they take part on different exhibitions

in cooperation, be it industrial or game-machine one. This

means, that the most interesting thing on the stand of Bosch is

the simulator & our company could have an extra benefit by

exhibiting its own product at the prestigious stand of Bosch.

Crowds assemble for trying to enter to the machine on these

events. Of course, this is a “free ad” for SIMULATION.

Inversely, on a game-machine exhibition there is a huge label

on our machine: Powered by Bosch-Rexroth. In frame of this

cooperation the company gets the necessary parts from Bosch

significantly cheaper. Although, they are the main supplier of

the company, very similar cooperation agreements are signed

with others as well. 3M as the supplier of video projectors,

SONY as of audio system are good partners in vertical

integration. The output side of this process is not least important

for the company. This issue is in strong correlation with the

marketing activities, I will describe it in a latter chapter.

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Development & Production Management

In this chapter I attend to give an abstract of the activities &

procedures the company passed on, until it’s product reached

the present stage. As I previously described, I work at the

company – given this is a relatively small one -- as the

development & production manager in one. According to this

fact I try to emphasize the technical issues appeared during the

process, rather than other (financial or accounting) viewpoints.

Of course I don’t forget the importance of these disciplines. I

notice the financial issues at least on the level of cash-flow

analysis. Marketing issues will be discussed in the next chapter.

In the first part I highlight some general considerations must be

done before a company starts the development. Then, I

introduce some special techniques the firm used, supplemented

by some charts.

Decision making

To decide, whether the firm starts the given project or not,

managers could use some scientific methods, such as decision

trees or something like that but finally they rejected these ones.

It was, because these calculations depend on the accuracy of

the – very few – data accessible at the first period. So, decision

makers considered some basic questions instead.

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Whom is the product made for?

What does the product mean for the consumers?

Properties of the product

These issues seem general & very simple, but the first problem

is that, the company targets a derived market. The goal is not

simply to sell products to the operator companies, but satisfy

the real demand of consumers. (They are not else, than the

“passengers” who trial the machine.) After all, they stand at the

end of the value chain. The manufacturer has to emphasize the

consumers’ claim rather than the technical properties of the

product and design experiences (pleasure), not simply a

product. The ergonomic, esthetical properties are not less

important than the technical ones. Universal design &

modularity are foundation stones of the further cost-effective

product line widening.

Involving some leading consumers (operator companies) could

be very useful in this “business to business” field. The

experiences of these users are very important things support

the further development. A further consideration is the

estimated lifecycle of the product. At the millennium the

lifecycles are often shorter, than the development period. This

faces the developers with very heavy requirements. In our case

the conditions are (perhaps) a little bit easier. These machines

could be understood as means of production, so the operation

time of them are relatively long (around / over 5 years).

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In many cases the R+D is involved only at the stage of technical

development. We are faced with the problem of parallel

executing of the technical and the marketing tasks. The

engineers have to recognize that the R+D is disabled without

the support of the marketing department, but this statement is

true vice versa. We focus on it all the time, while the project ran.

The company tries to follow the method below:

TODAY Fig. 2 Development Control

Opportunities of R+D Market environment Technical conditions Sources

Idea making

Screening

Development Marketing planning

Product conception

Prototyping

Pilot plant

Series production

Test of conception

Product tests

Market tests

Marketing conception

Marketing plan (brand, price)

Marketing strategy

Refined strategy

Commercialization

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(The firm’s actual position is marked with the red arrow on the

chart.) 1

1 Ref: Rekettye G.: Értékteremtés a Marketingben 132.

SIMULATION produces the special steel structure for the

motion base and the components of it, the plastic parts,

included the cabin & all of its elements, such as the seats etc.

From now, the company makes almost all elements of the

motion controller system. Many other mechanical & electronic

parts are custom made. All of the machine’s elements are

passed in a produce-or-buy test (P.O.B.). Finally managers

considered, that all of the parts could be manufactured by the

company, must be done. Not only, because it’s more economic,

but getting experiences & ability in the basic steps of the

production are very important factors to avoid dependency on

the suppliers. Otherwise, employment of subcontractors

increases the elasticity of the production. I think, the process

goes ahead in the very best environment for the innovation: in a

small venture-style company.

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Planning

Some words about the planning: first of all I present my favorite

figure about the importance of a thorough work.

Fig. 3 Planning

Which building is more stable? The answer is obvious. The

more energy spent on planning, the less failure in the latter

phases. Analyzing the competitors’ products & gathering

information from end users (both operators & passengers) could

be very helpful in the first stage of the planning. Further to these

thoughts we bought that certain – earlier mentioned – know-

how. It was very useful for starting the planning despite of that it

contained insufficient information for continuing it.

During the development process we forced the computer aided

design methods all the time. Fortunately these techniques are

more and more recognized in our country as well. I mean not

only the drawing of mechanical & electronic charts by CAD

programs – such as AUTACAD, ORCAD etc. – but some

elements of CAM as well. For example, the complete workout of

a PCB (Printed Circuit Board) up to six layers could be

Long term observation

Test

Implementation

Planning Planning

Implementation

Test

Observation

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evaluated on the way that you send the completed ORCAD files

to the manufacturer in e-mail format and the panel will be ready

in few days, without drawing any charts. Their NC machines are

compatible with our programs, and needn’t any further

documentation for completing the desired product. The similar

methods are used also in manufacturing of the control panel

(front side of the controller, assembled the buttons on it…) or

many metal elements made of steel or aluminum, such as the

boxes of the electronic parts etc. Of course these opportunities

don’t mean, that the traditional (on-paper) charts are ignored.

Further advantages such methods provide are the absolute

compatibility with each other & with other applications – data

base manager programs, EXCEL, CIM programs. (We could

generally say, that all three companies are on very high level of

computer employment.) These compatibilities make the

company able to handle such problems as inventory control,

scheduling, accounting very easily. The latter discussed CPM

evaluations are also made by software. The preliminary costing

is also based on data provided by these programs.

Costing

The company applied the target costing technique. The

production cost was determined at the early stage of the

project. At this point I don’t give a deep cost analysis, cash flow

diagram presented instead. It would be too fine if managers

could have estimated the cost correctly in that very early point.

That’s life! The almost 20 % overspending rooted mainly from

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some time-slacking problems…but fortunately it could be

handled…

(See Annex 2 – Cash Flow Chart)

Prototyping

For keeping the requirements of the target costing, it is very

useful to prepare a development protocol, within which all steps

(elements) of the production are declared. Prototyping is an

essential factor of the new product development. It provides a

full-scale testing possibility by its physical existence. After

accepting this prototype as a matured product the next step is

developing the series production. Parallel to this some product-

usage tests must be performed.

In-house testing =alpha

At the point of use =beta

Further to the above in my opinion the continuous negotiation

among disciplines (in-house-departments) was a very useful

factor for getting the actual stage.

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Development control

Now some words about the methods we applied for controlling

the flow of the development. The very most important one is the

CPM model. Since I’ve good experiences in usage of the CPM,

I preferred it all the time during the project. In our application it

was a combined model with the PERT & the so-called Gantt

charts rather than a simple CPM. The cornerstone of the

model’s efficiency is the correct estimating of the duration time

of the individual activities. We found, that the order of the

elements & the relationship among them are easier predictable,

than the timetables. That’s why we repeated the same steps in

the different phases and got closer and closer to the final

solution. For enhancing the effectiveness such calculations I

made a small computer program. This is a Visual Basic Macro

useful in the MS Excel application. The programming was to

take a few days, but with the help of it a 50-item calculation

could be evaluated in seconds (!). Without deeper explanation

of the CPM itself, I give a short description about the program.

(See Annex 3)

On the first sheet, called “Calculation” you can list the activities

you think important. No matter the order of them at this stage. In

the middle columns you can type the estimated duration times

directly, or with the usage of the 3-element average calculation.

After completing this list, you switch to the next sheet, named

“Order”. On it you declare the relationships among them. Then

go ahead to the third sheet called “Gantt”. On that one you will

29

see the completed timetable. The colored stripes represent the

possible interval, within which the given activity could be

performed. The darkened part of each stripe represents the

optimal scheduling of the event. The darkened stripes are

always shorter, than the colored ones, which mean the possible

slack of the activities. You just put it onto the wall and… try to

keep it! If you are able to handle the critical path correctly, you

could be surely ahead of schedule. Systematic cash flow

analysis and CPM review in association with the “milestones”

make managers able to handle the prototyping process. In

general we followed the way of “waterfall” method.

Job shop

How did we plant the above to the practice? In this section we

will survey the most important elements were used on the way

preparing the steps of manufacturing. Of course everything

starts with finding an appropriate room for the job shop.

Because of the relatively small sizes, the job shop or workshop

are the corresponding names rather than the plant. Anyway,

sometimes I’ll call it that.

The park in which our lab takes place, great enough for the

trucks deliver the machines. Given the rather big mass (over 2

tons) a crane system is required for lifting the machine to the

trailer. Gates of the workshop are formed to suit these

requirements. The complete area is quite small, below the 1000

30

square meter limit. Despite of this, all necessary departments

are represented in separated rooms. Those are:

Cutting-

Chip removing- (boring, milling, turning, drilling)

Welding-

Painting-

Plastic-

Electronics-

Assembling-

Offices

Social rooms

There is no similar pattern of jobs (parts) go from one machine

to another one. So, we could call it a randomly routed shop-floor

system. Job sequencing is very important factor in

manufacturing. The FCFS2

2 Ref: Chase-Aquilano: Operations & Production Management 6th Ed. 151.

-method (first-come, first-served) is

not satisfactory for all tasks. In our system the STR (slack-time

remaining method, in which the first task served is that has the

shortest slack – se also the CPM) and the CR (critical ratio – it

helps to keep the critical path best) were the two most useful

ones.

31

We used the group-technology for the assembly, because of the

great size of the machine – it’s like a microbus. This means the

machines will place in the factory in the order of the assembly,

and we will try to find the shortest way for the components

inside the factory. Parts move on he shop floor as below:

Assembly

Ready

Fig. 4. Facility Layout (Metal Electronics parts Plastic Assembly)

We have to work also inside of the machines, so every

employee could do his work in a relatively big place and so they

Electronics Chip Removing Office, dressing-room, dining-room, bathroom, WC

Welding

Cutting Plastic Parts

32

XAB

X3

can comply with all safety regulations. That’s why in the given

area the company is able to assemble only four units in the

same time. This layout could be transformed easily with the

removable walls. With employing subcontractors – mainly in

manufacturing of the plastic elements – we obtain more room

for assembly. Although the subcontractors increase the

flexibility of the capacity we will never give up any of the basic

elements of the production technology.

Assembly charts are not presented at this moment, because the

exact technology is just under construction. We plan to apply

the simple Gozinto3

-chart for this. As a sample see the

assembly chart of group “X”: (see also: Annex 4)

Assembling Part A

+ + + = = Assembling Part B + + + = Assembling the complete X + + + = Fig. 5 Gozinto Chart

3 Ref: Chase-Aquilano: Operations & Production Management 6th Ed. 80.

1

2

3

X8 X9

X1 XAB X5

X11 X2

XA

X6 X10

X4 X

X7

33

The above charts are in correlation with the so-called route

sheet, on which the real duration time of each step is specified.

(See Annex 5)

Capacity Planning - Scheduling

Timetables derived from the above time values could be

compared to the data got from CPM. The comparison is that I

previously mentioned: cyclic refining is very important to

transfer process from the prototyping to the series production.

This is a machine-limited system, so the precise allocation of

facilities is essential. Routine necessary for evaluating it has

been got during the prototyping process. Importance of job

arrival patterns could be observed mainly in the chip-removing

tasks. Actually we use the batch-method for grouping them.

Expedition of critical orders is very important in enhancing

effectiveness.

Scheduling has to meet dates of delivery. We have to minimize

the duration time of:

Each job

Idle time

& the number of jobs

34

Sophisticated control of these events based on further

calculations such as Scheduling n Jobs on m Machines

evaluated by more difficult formulas. Discussing them exceeds

the framework of this essay. Basic shop-floor control factors in

our lab are:

Assigning priority for each step

Maintaining quantity info

Checking shop order status

Actualization of inventory

Providing efficiency, utilization

I/O control

The final goal is to reach an optimized production technology.

The milestones on the way there:

Finding the best operating level that means to

work at the minimized unit cost level. Of course this

level differs in each plant, depending on the

capacity & dimension of it. (Think of the

economies-of-scale charts can be found in any

economics book…)

Keeping capacity flexibility & low average cost in

the same time. Flexibility could be increased mainly

with employing subcontractors but this contribution

usually (not always) increases average costs as

35

well. Finding the optimum not too easy indeed. In

our case a sudden demand-increase might

happen. Then we must be able to satisfy that, or

we loose… Some other factors of the flexibility

such as processes, workers, planning, are given

because of the relative small size of the plant.

In general, we could say that capacity planning starts at the

forecast of sales of the product. Based on this prediction we try

to set the lab & equipment requirements.

At this point a decision tree analysis could be helpful. A

simplified chart shown below:

Strong Growth Rev: $5,400,000 P: 0,4 30/Y 3 Years

A ERA= $3,240,000-$500,000=

Cost: $ 500,000 P: 0,6 10U/Y 3 Years

$2,740,000 Expand Capacity Weak Growth Rev: $1,800,000

Strong Growth Rev: $2,700,000

Do Nothing P: 0,4 15U/Y 3 Years Cost: 0 B ERB=

Weak Growth Rev: $1,800,000 P: 0,6 10U/Y3 Years

$2,160,000

Fig. 6 Decision Tree

36

The accuracy of the above calculation is questionable.

Probability-data are based on calculations of my colleagues.

Anyway, we should step on the way of growth, but this is a hard

decision. All of these methods are very spectacular but

reliability of them depends mainly on the accuracy of the data

used for the calculations. Given these are predictive methods

data are mostly based on estimations. Shortly: be careful!

Capacity increasing involves not only the shop floor activities

but engineering as well. Tasks shift from the planning thru

manufacturing engineering to industrial engineering. Today the

company struggles between the first to steps. Most important

properties of each stage:

Process flow

Spec. tools &

equipment

BOM

Work methods

Plant layout

Effectiveness,

productivity

Product-Process matrix

Look at the simulator with the eyes of the plant manager.

Imagine a chart on which the abscissa is the complexity of the

product and the ordinate is the required quantity of it. On that

chart4

4 Ref: Chase-Aquilano: Operations & Production Management 6th Ed. 67.

our product would be – in difficulty & quantity as well –

37

between the automobile assembly & the individually produced

heavy equipment. For that purpose a small plant equipped for

small series is the adequate solution. Too far increasing of

capacity is unjustified.

As I earlier mentioned the simulator’s life cycle is relatively long.

It gives us a little advantage in the planning-development period

but in the same time it means that the turnover of the product is

slow. After “filling” the market a very slow rising (or even more:

falling) predictable. We have to be very careful with big

investments. Without continuous development of brand new

products the production could “burn out” quickly.

Because of that the “numbers” suggest to step on the growth’s

path, managers would make some calculations. We tried to

make breakeven analysis for choosing among the imagined

possibilities. Finally we found that – because of the earlier

mentioned data accuracy problems – it isn’t time to evaluate. (I

mean: we are not able to calculate the exact unit cost & the

differences among technologies at the moment.) Even though

we couldn’t make decisions in general questions we have to do

so in some special cases. It is clear that the higher volume of

production requires the higher technology. So we are faced with

some unavoidable problems about the equipment selection.

One of them is current:

38

We have to decide if we purchase a relatively expensive

machine, or not. This is for facilitate the plastic element’s

manufacturing. A formula5

Fig. 7 Robot Investment Calculation

to estimate the usefulness of it:

I P= _______________________________________ where, L – E + q ( L + Z ) P= Payback period in years I= Investment L= Annual labor costs saving by the equipment E= Annual maintenance cost for the equipment q= Speedup factor Z= Annual depreciation

In our case:

5,000,000 P= _______________________________________________________________ = 0,29 Year (!) 2,000,000– 100,000 + 5 ( 2,000,000 + 1,000,000 )

Maybe it seems too nice, but it’s real. The machine is very

effective & very simple in the same time. This simplicity is so

obvious, that the price of it could be questionable. But if you

have seen how it works… The only problem is that, if this

feature could be exploited in full utilization. This condition would

be given if the company starts the production of the HOLOBOX

as well. Until that, it’s a trap only!

5 Ref: Chase-Aquilano: Operations & Production Management 6th Ed. 72.

39

With the above issue we arrived to next problem: most obvious

method of raising the productivity is initiate two shifts. Managers

haven’t decided in this question until now.

Finally, see another problem the technical personnel are faced

to. For entering to the international markets both the product &

the company itself have to pass on an ISO (and other)

certification. This is planned to be solved in the first quarter of

the next year, so I cant give any further info about it at the

moment.

Well, I tried to give a little survey about the lab works. In my

opinion the very most important factor is the manufacturing in

the products life (cycle) but others not always agree with me.

The CEO of our company used to say: everything starts at the

sales… and he might (must) be right. In the next chapter I try to

recognize it.

40

Marketing Issues

First of all survey Annex 6 about our own & the competitors’

products. The simulator called UNO/U2 Mirage is the original

Italian one.

As a new product on the capsule motion ride simulator market

our model has certain advantages compared to those of our

competitors’ models. Most of these advantages may be derived

from the size of our model. As already described above the

TRAX Motion Ride Simulator is a 4 seat model. Its external

dimensions when idle are 4.30 X 2.30 X 2.50 meters and it

weights two tons. Our competitors are manufacturing 2, 6, 8,14

and 25 seats or even bigger models. The 2 seats model is

relatively small and its revenue creation is usually limited by its

capacity. While the larger models are not limited by their

capacity, they are extremely awkward to move from location to

location and require much more preparation for any kind of

mobilization (e.g.: craning). As optional equipment and in order

to increase the mobility of the units our customers may elect to

order a specialized trailer for transportation purposes.

A further advantage of our simulator lies in the fact that as the

capsule itself has two doors (one on each side) and the public

may enter on one and exit thru the other door, hence shortening

idle time between two rides. This way the nominal capacity of

our model is app. 44 passengers/hour. Yet another advantage

41

of the TRAX model lies in its easy programming. As from time

to time the capsule operators change the ride films within their

machine in order to keep the novelty of the machine it is an

important factor how long it takes to create the motion software

file for the newly purchased ride film. In the case of TRAX, upon

receiving a request by a customer this programming could be

carried out by our personnel on site within approximately 15-30

minutes per ride film. This programming work is carried out by

creating new EEPROM cards for the controller unit through

writing the ride film’s motion software file on to the EEPROM

with a joystick. The procedure itself could be accomplished in

the lab or on the scene. This is a major advantage as in other

manufacturers’ models this task could be a very long lasting

programming process. Finally a major advantage is our low

production costs that resulted in a relatively low and very

competitive sales price.

The TRAX Motion Ride Simulator is especially compatible with

the ride films that DEEPWORKS Ltd. is producing from time to

time, or that DEEPWORKS Ltd. is distributing. In addition to the

above bundling of our Group’s products, during the latter R+D

works of the Personal Simulator, we think that lots of

compatibilities could be established between especially the

electronics of the controllers of the two products.

As the TRAX capsule simulator is a new product on the capsule

market that has been developed and manufactured by a new

and yet unknown firm we have always emphasized to our

42

potential customers that they are welcome to test our product.

For this reason we have two showroom models, one in Los

Angeles and one in our Budapest showroom. SIMULATION Ltd.

considers that it is extremely important during the introductory

lifecycle of the product to participate at exhibition specialized for

the attraction business.

Life cycle & sales

Introduction: This period can be generalized by

the slow rising of sales.

Growth: The growth of the sales is rapid or number

of orders could rise suddenly.

Maturity: The longest period of the life cycle. The

dominating factor is the competition of the product

policies. Market segmentation. Ad = positioning

Brand (name): TRAX Motion Ride Simulator

Additional services: As supplier, Simulation Ltd. offer the

following additional services when supplying the units:

One year full guarantee,

Operations and Basic Maintenance Training for

maximum one week in Budapest before

commissioning for maximum two persons,

43

Initial installation and startup at first operation site

by SIMULATION Ltd. mechanics

Our additional services include that SIMULATION is currently

developing the possibility to offer the sale of the units with a

leasing based financing. This may look problem free but due to

the lack of sufficient independent data on revenues of the

gaming industry it is not so easy to convince creditors,

especially when talking about cross-border leasing. In order to

over come the lack of independent operational data we have

disclosed GAME-TECH’s past P&L statements to the creditors

and additionally collected certain information from USA

operators like Disney that are used for convincing the creditors.

In order to secure the risk of non-payment of the leasing fees

we have talked with the Hungarian Export Credit Insurer

(MEHIB Rt.) who is ready and willing to insure the non-payment

risk as per its general terms and conditions against a bank

guarantee issued by an acceptable bank within the customers’

country.

A further additional service that we are considering to develop is

the Manufacture – Operate – Transfer (M-O-T) system (See

Annex 7) that we offer to financial investors that would like to

enter the attraction business with little or no operational

experiences. In this system the customer orders one or more

units from SIMULATION as per the usual contractual terms and

conditions. Following the delivery SIMULATION undertakes for

a pre-agreed monthly retainer fee to organize the operation of

44

the units, and to slowly transfer the operational know-how to the

customer. This way SIMULATION may penetrate market

segments that are “virgin” to the attraction business, and

virtually anyone may become our customer.

Since this is a business-to-business operation, SIMULATION

could sell the machines cheaper to the customers by the way of

direct marketing (mail). Within the attraction business world

there are several specialized magazines that are mailed to

amusement parks and attraction operators. These magazines

are usually issued quarterly, and by placing advertisements in

well-chosen magazines, we can benefit from a nearly direct

mailing campaign at the decreased cost of printed media. We

combine the above printed advertisement campaigns with

reduced direct mailing campaign that rely on exhibitors’ lists

from attraction exhibitions.

However, we cannot totally ignore agents in our marketing

especially in the Eastern European or Eastern Mediterranean

zones where in contradiction to the developed market

economies of the west personal contacts are decisive. This is

due to their knowledge of the local attraction market, which is

not too transparent and is inherent of high commercial and

financial risks.

The theory of parallel executing requires the development of the

marketing strategy at the same time as the development of the

45

product. The first task is to define the position of the new

product by the consideration of things below:

The target market

Size of the market segment: We estimated our target market by

geographical areas as follows. Hungary max.15 units, Western

Europe (incl. Eastern Mediterranean) app. 100 units, former

COMECON countries including CIS and former Yugoslavia

app.50 units, the Americas app. 200 units. All in all we estimate

the market to be between 300 and 400 units.

Consumers’ profile: Our market is based on a derived

demand, as our customers are the operators who are the ones,

which are actually in contact with the consumers. The

consumers themselves are form a very wide target group that

starts from the age of app. 10-12 years old and could go as high

as 40-45 years old, without calculating the “grandparents effect”

those take a ride with their grandchild. Our main customers are

however the amusement parks or attraction operators that can

be widened by the usage of the M-O-T system as described

above. Due to our know-how in operating attraction machines

we have certain first hand experiences for what the primary

demand customer is looking for, we should not forget this in the

future and we plan to develop a continuous discussion with our

client to be updated on these primary demands.

46

Competitors: There are about a handful of capsule simulator

manufacturers in the world. Most of these and the most well

known are located in the UK and the USA. Among others our

competitors are:

DORON USA

CAMBER USA

Flight Avionics UK

A.I. Group UK (earlier known as Thomson

Entertainment)

UNO Italy

Luckily all our major competitors are located in countries where

the production costs are usually much higher, than in ours’.

Distribution channels: In developed market economies of the

EU we shall use distributors. The distributors shall have a

territorial distribution agreement with SIMULATION. In the

emerging markets of Eastern Europe and the Eastern

Mediterranean where we shall utilize agents on a case per case

basis dependent on the customer. In N. America we shall use

PROVISION as a natural distributor.

Market-influencing activities: As our company is a relative

newcomer in the capsule manufacturers’ branch and we are

small in size to our competitors we consider that we shall need

47

to follow the market rather than trying to influence that.

However, by applying the synergies of our companies’

hardware manufacturing and 3D visualization we might be able

to influence the market in a manner that is profitable to our

group.

Legal & certification issues: As I previously mentioned,

obtaining an internationally acceptable quality certificate for the

product like TUV or Bureau Veritas is unavoidable in order to

be in a position to sell the simulator on the international market.

In international commercial transaction the prevailing law of the

contract is an important issue even if the chances of a lawsuit

are very slim. For SIMULATION being a Hungarian corporate

entity the best solution would be to stick to the Hungarian law

with Hungarian arbitration, but this is the ideal option that is

already included in our General Conditions of Sales. Usually in

an international supply contract the parties agree in a neutral

law and ICC arbitration tribunal seated in a third country. As

most of our sales shall be materialized through individualized

contracts with each customer the legal issues shall be settled

on a case per case basis. At the same time we shall need to

develop the sanctions related to the breach of contract by our

customer or us. The sanctions for the two cases of breach

needs to be balanced and further more usually the liquidated

damages for supplier’s delay of performance needs to be

maximized in line with usual business practice app. Max.5% -

10% of the contract value.

48

The role of the product

Overlapping of the product to the general product policy of the

company. I think its obvious from the previous chapters.

Positioning of the new product: Segmentation of the

simulator market is based mainly on the number of seats of the

unit. Within these segments a certain sub-segmentation could

be detected due to the quality of the product or appreciation of

the producer. The company plans to position its simulator to

the “premium” quality segment due to the sophisticated workout

of it.

Estimated life cycle of the product: Initially we estimated the

lifecycle of the product to reach maturity between 3 – 5 years

long. We shall than need to add certain features to it to prolong

this cycle period. Such features are: interactivity of the motion

or 3D projection of the ride films. By introducing such “minor”

features to the products that are being developed by the

synergies present in our group of companies we can prolong

the lifecycle of our product, and hence increase the potential

return of the original R+D costs.

Price: Although as you will see below we are using the “mark

up cost” techniques we cannot ignore the general trends of the

49

attraction market. The new capsule simulators on the world

market with 6 or 8 seats are within the range of USD 120,000 –

150,000. Our list price for the export market is USD 75,000 the

calculation of which is detailed below.

Distribution of the TRAX product shall be carried out by

SIMULATION for the European and Mediterranean zones and

by our mother company for the Americas. While our sister

company in Australia shall cover the Asian and Pacific markets

if any.

Pricing policies

We approached the pricing of TRAX by using the “Markup on

cost” method:

Our costs are as follows

Material costs:

Hydraulics HUF 2’800’000

Projector HUF 800’000

Capsule HUF 1’300’000

Steel HUF 400’000

Electronics HUF 250’000

50

Controller HUF 120’000

Computer HUF 150’000

SUBTOTAL HUF 5’820’000

Labor and Production Facility costs:

(Production lead-time = 2 months therefore two months’ costs

are considered)

Workshop HUF 600’000

Wages HUF 2’600’000

Energy HUF 250’000

SUBTOTAL HUF 3’450’000

Production Costs HUF 9’270’000

General Overheads (+20%) HUF 1’855’000

COSTS HUF 11’125’000

MARGIN (50%) HUF 5’562’500

Sales Price HUF 16’687’500 or currently

App. USD 60’000

51

The production often “goes” below the breakeven point at the

first stage of introduction. The scientific calculation of the prices

could be based on the costs or on the demand. The

manufacturer could build this promotional price policy by

considering the so-called learning curves. In this case the

company calculates the later declination of production costs

when sets the introduction prices.

On the other hand we cannot disregard the fact that a higher

price psychologically also reflects a higher/better quality.

However, as our product is not a consumer good the above

statement is not fully true or not always regarded as a general

thumb rule by investors in the attraction business, but in anyway

we cannot position our sales price much lower than market

expectations. This might or would scare potential buyers away

from choosing our product, as they would consider it too

“cheap”. Therefore our list prices are as follows:

For domestic sales within Hungary: The HUF

equivalent of USD 60,000 + VAT

For export sales word wide: USD 75,000

For transfer pricing: USD 42,000

In the case of both sales the above prices are to be understood

Free On Carrier (FCA) Budapest basis as per INCOTERMS.

52

Our standard payment conditions are 50% advance payment

and balance by wire transfer prior to delivery or secured through

letter of credit or bank guarantee and settled against a set of

shipping documents and invoice.

The reasons for increasing our margin for the export markets

are various. These are among others the utilization of agents or

distributors that increase our costs, the increased installation

and marketing costs. However we definitely utilize a progressive

rebate on quantity ordered.

As SIMULATION Ltd is an affiliate of a USA based corporation,

we are requested to set our list prices in US Dollars, however

on the other hand, as our costs are linked to EURO we shall

have to carefully monitor the evolution of EURO/US Dollar rate

and enter into foreign exchange hedging operation in case we

find this necessary.

In such a specialized Business-To-Business market we shall

also rely on a long term discount systems that would provide

our “good” customers with incentives so that we honor them to

place their consecutive orders with us instead of going to our

competitors. This will still needs to be developed.

Although we are in fact utilizing the “bundling” method for

various products of our group (simulator + ride films) we cannot

really provide great discounts due to this, because they are

53

produced by two distinct entities that have their own

responsibility towards the shareholders, i.e.: they both have to

show a required return on equity each year.

In our case as most of the attraction business operators are

private companies the role of finding the competent decision

maker usually means to meet the owner. Therefore to offer the

person certain additional personal benefits beyond the best deal

for our products would most likely go against his approach even

in Eastern Europe or in the Eastern Mediterranean. In our case

we consider that such amounts are much better spent on either

media and/or exhibitions or on a good local agent.

Distribution plans (placing)

Everyone knows how important the communication with the

market is.

As the attraction machine market is a highly competitive market

we need to push our product into the market through aggressive

sales policy.

In the Eastern European and Eastern Mediterranean

geographical zones we shall rely on a handful of carefully

selected agents with specialized market knowledge and good

personal contacts. As per our agreements with these agents

they received exclusivity for the given area for a certain time

54

with a minimum turnover requirement. Should they fail to

perform the minimum turnover within the agreed time limit we

carry on our cooperation with them, but on a non-exclusive

basis.

In Western Europe we shall rely on one or two distributors who

are well introduced to the attraction industry. Most likely such

distributors shall come from either Italy or Spain and especially

the companies from the latter country are also active in South

America. In North America we shall rely on our company

Provision Entertainment Inc.

Ad

As most of the specialized equipment manufacturing industries

the attraction machine industry is also a closed circle of

operators (our customers) and manufacturers. Therefore most

of our marketing shall need to be done thru either specialized

exhibitions and specialized magazines and printed press that

are circulated among and only among our customers’ base. We

shall have to focus our advertisement campaigns prior to the

exhibitions so that most of the industry shall be familiar with our

names on these shows. Advertising activity must support the

marketing plan. Selecting the corresponding media or

advertising channel requires good experiences.

Correspondence means that all of the factors -- e.g. timing,

55

geographic considerations -- have to overlap to the profile of the

given product.

Competitors

We expect our competitors to react very rapidly to our entry into

the market mainly because of two reasons. The major reason is

that SIMULATION’s TRAX is a relatively high quality product

on the market with an extremely good, affordable price. Second

effect is our synergies with our sister company DEEPWORKS

that has already proven its ability to produce ride films that are

recognized worldwide and furthermore DEEPWORKS currently

has arrangements with other producers to distribute their ride

films too. The combined reciprocal complementarities of the

above two facts might result in the rapid growth of the turnover

of both companies that will be painful to our competitors. It

might even result in the end in a hostile bid for acquiring the

ownership and markets of both SIMULATION and

DEEPWORKS from PROVISION.

56

Summary

More and more difficult to find a good product: everything has

been invented already. After all you find something seems to a

good one, the way from the idea to the shelves is horrible. As

we could see in this essay there are many-many way to make

mistakes. One of my colleagues used to say: it’s never too late

to fault. Unfortunately we’ve experienced it many times. In my

opinion the key factors of avoiding failure are:

Thoroughness

Precise documentation of every step

Well-organized team

Continuous learning

Recording all data during the development is essential in later

analysis of faults. So, thoroughness is the base element of

controlling the process. Well-organized team means that

everyone knows his job & the limits as well. Proper men in

required positions. Learning means not only the “learning

curves” but the continuous development of every members of

the team as well. I always try to transmit at least the essence of

the knowledge to my employees I got during the course. With

help of the above things, the company perhaps will step on the

way of growth. Of course the intention itself is not sufficient for

the success.

57

The other element, the luck couldn’t be influenced. The

circumstances probably will help us on the way. The relatively

low number of competitors even in the region gives us a chance

at the stage of beginning. The merger widened our

opportunities. Hopefully we gain from it, not only because of

increasing the working capital but aiming new markets as well.

Some elements I cannot emphasize strongly enough:

Computerization: in my opinion the rapid industrial

growth recognized in the last two decades could be

thankful mainly the development of the computer

technology. I observe this process for many years

& could surely say that the unbelievable increasing

of productivity of the huge (& small) enterprises

could be traced back to the more and more

effective utilization of the computers. I mean not

only the hardware but – mainly – the IT. Informatics

– enhancing the accuracy such factors as R & D or

inventory control etc. – leads to more quick &

stable data management systems.

Up to date strategy: following, observing,

evaluating all data available at the given period,

independently of the fact those seem useful or not.

Making a suitable decision is very hard & never

unambiguous enough. You never know, whether

you are on the good path or not. Scientific

calculations rarely give you certainty. As I’ve

58

mentioned before, data used for such method are

not always accurate.

Communication: unfortunately there was no room

to display in grater detail this basic factor of

success. Nevertheless, I must highlight it at least

now. Communication means the connection to the

upstream & downstream participants of the chain

value and the in-firm communication as well.

Regularly held forums, lead by well-trained

managers are very important in-house methods for

developing the team spirit. Given the company is

involved in the business-to-business market,

communication with the individual purchasers is

very important. These contacts established in

traditional communication channels rather then

media.

Finally I return back to the declaration made in the Introduction.

The form of this essay is being a case report. If the situation, --

the SIMULATION LTD & its product the TRAX are faced --

came to light, the workout achieved its goal.

In a thesis written by a regular student, the main factor is to

show, how he/she can employ the ability of gathering /

processing data found in the bibliography. The goal is to

synthesize available scientific knowledge and develop it. On the

MBA course – in my opinion – the situation a little bit differs

from it. All of the students are leaders of companies and

59

possess a certain experience in their own field. This experience

prevents the theory. I think in our case the thesis must show,

how we can settle this knowledge into the practice. So I avoided

deeper analysis of any scientific issue, even more any

explanation of them. Both the reader and the author know the

theory beyond the problems occurred in the essay. Anyway, it

must be clear that I’m able (at least try) to use the knowledge

got in the MBA course.

60

Bibliography:

Richard B Chase – Nicholas J Aquilano: Operations and

Production Management Ed. 6th IRWIN

Jeremy Main: Manufacturing the Right way. Fortune, May 1990

p: 54-64.

Francis, R.L. and J.A. White: Facilities Layout & Location: An

Analytical Approach. Prentice Hall 1987

Thompkins, James A. & James M. Moore: Computer Aided

Layout: A User’s Guide. Ed 1st American Institute of Industrial

Engineers 1987

Cleland, David & William R. King: Project Management

Handbook. New York: Van Nostrand Reinhold 1983

O’Neal, Kim: Project Management Computer Software Buyer’s

Guide. Industrial engineering Jan 1987

Wild, Ray: International Handbook of Prod. & Operations

Management. London, Cassel Educational LTD. 1989

61

Rekettye Gábor: Értékteremtés a Marketingben. Közgazd &

Jogi Könyvkiadó 1999

Crawford, C. Merle: New Products Management. IRWIN

Homewood 1991

Charles T. Horngren: Introducing to Management Accounting.

Prentice Hall 9th Ed.

Törőcsik Mária: Ipari Marketing. Nemzeti Tankönyvkiadó 1996

Philip Kotler: Marketing Management. Prentice Hall 8th Ed.

Czakó Erzsébet: Vállalati Stratégia, Vállalati Menedzsment.

Vezetéstudomány, 1994/3

N.E. Porter: Competitive Advantage. Creating & Sustaining

Superior Performance. The Free Press New York 1985

62

Appendix

63

Annex 1: Organizational Charts

64

Annex 2: Cash Flow

65

Annex 3: CPM

66

Annex 4: CAD drawing of group “X”

67

Annex 5: Route Sheet of Mechanical Jobs

68

Annex 6: Advertisements of TRAX & its competitors

69

Annex 7: Joint Operation