welcome to the capstone business...
TRANSCRIPT
©2014 KEAW
J411 - Analysis of Business Decisions
Kenneth EA Wendeln
Welcome to the Capstone®
Business Simulation
Kelley Undergraduate Capstone Classes
J401 & J402 Business Strategy
Case Method
J411 Business
Decision Making Capstone® Simula@on Comp-‐XM ® Assessment
2
Critical Thinking
Written
Communication
Collaboration & Communication
Management & Leadership
Professional Competencies
PRIMARY PRINCIPLES
‘PBLs’
✚
Capstone Business Simulation 3
Simulation Overview
History of Sensor Industry
Industry Direction
Taking Over Your Company
Functional Areas
Measuring Success
Suggestions and Schedule
Electronic Sensor Industry
Capstone Business Simulation 4
History of the Sensor Industry
Electronic Sensors – Light Industrial
Medium/High Technology • Patented technological advances
• Extraordinary value propositions
One Company Dominated the Marketplace • Forced out the competition
• Lost strategic focus and direction
• Allowed past strengths to deteriorate
• Courts responded to complaints
Industry Break Up into 6 equal & similar companies
Capstone Business Simulation 5
Customers (OEMs) need sensors for their products
Initially one market segment, now breaking into five
Very different demands developing between the market segments
The Sensors’ Marketplace
http://www.ctscorp.com
Capstone Business Simulation 6
In our industry we track the change in customer demands on a perceptual map
Over 8 years the customers will demand much faster and smaller sensors
Market segments will continue to diverge with less overlap between segments
Perceptual Map of Sensor Customer Demands
High End
Perform- ance
Size
Traditional
Low End
Capstone Business Simulation 7
Low Tech & Traditional Customers
“I want these sensors to be cheap.”
“I want them to have been around for a while – no Beta Testing!”
“The technology doesn’t have to be cutting edge.”
“They have to be moderately reliable.”
Capstone Business Simulation 8
High Tech, Size & Performance Customers
“These sensors have to be small, like micro, and fast.”
“I need them to be right out of R&D, I’m talking ZERO years on the market.”
“I like a pretty high reliability.”
“I’ll pay more to get what I want.”
Capstone Business Simulation 9
Sensor Industry Projected Ongoing Growth
Sees the next 8 years as consistent growth. All market segments increase at a nice ‘clip’, according to market analysts.
“I see the entire market growing at around 14% or 15% per year. The High End market alone will be growing at a whopping 19.8%.” I hope those companies out there are ready for that kind of expansion!”
010000200003000040000500006000070000
Year1
Year2
Year3
Year4
Year5
Year6
Year7
Year8
Capstone Business Simulation 10
Sensor Customer Segment Demands & Characteristics
High End
Perform- ance
Size
Traditional
Low End
Initial ‘Ideal Position’ & Importance Differences for Each Segment
Ideal
Perfor-mance
Position
Size
MARKET
SEGMENT
Price
$
Age
Years
Relia-bility
MTBF
1.7 2.5-0.8
18.3 17.5+1.8
LOW $15-$25
7 yrs 12k-17k
16% END 53% 24% 7%
5.0 15.0 TRADI- $20-$30
2 yrs 14k-19k
21% TIONAL 23% 47% 9%
9.4 8.0+1.4
16.0 17.0-1.0
PERFOR- $25-$35
1 yr 22k-27k
29% MANCE 19% 9% 43%
4.0 3.0+1.0
10.6 12.0-1.4
SIZE $25-$35
1.5 yr 16k-21k
43% SEGMENT 9% 29% 19%
8.9 7.5+1.4
11.1 12.5-1.4
HIGH $30-$40
0 yr 20k-25k
43% END 9% 29% 19%
Remain the SAME Over Time • Age • Reliability
CHANGE or drift Over Time • Circle Center Size & Performance
• Price (-$.50/yr)
Size & Performance
are only 2 of 5 criteria needed to
meet customer segment
requirements
‘Ideal Position’ = Circle Center + Ideal Spot Offset
Capstone Business Simulation 11
Competition after the Break-Up
SIX COMPANIES
$100 million in Sales
5 Product Lines
Closed Marketplace
ANDREWS
BALDWIN
CHESTER
DIGBY
ERIE
FERRIS
Capstone Business Simulation 12
Sensor Industry Company Shake-up
Company Fires Management Team
After poor results, lackluster sales and angry customer reports, the Chairman of the Board of Directors has announced the immediate termination of the Management Team. “This is a black day for our company,” said Chairman ‘Killer Ken’ Wendeln, “We need to hire dynamic and strategic thinking leadership who will be able to take this company into the future and keel the competition!” “Due to this urgent and challenging opportunity, I have hired the Kelley ‘Dream Team’ to start immediately. I expect to see great things from this Executive Team!”
Capstone Business Simulation 13
Company Overview Last management team left the company
in poor shape:
No clear strategy or direction
Products are not meeting customers buying criteria
Most of your customers do not even know your products exist
Sales force and distribution channels deteriorate
Misallocation of assets
Under investment in automation and training
No financial policy or structure
Capstone Business Simulation 14
WELCOME TO YOUR NEW COMPANY!
Marketing
Production
Finance
R&D
Capstone Business Simulation 15
Marketing
Set the price of our products in the marketplace
Build customer awareness through promotion
Establish a sales force and distribution channels
Set the sales forecast for our products
Set Credit Policies AR/AP
And many of our customers don’t even know our product exists.”
“Our products are not priced
optimally.
Capstone Business Simulation 16
Research & Development Establish the specification
of the products to meet customer demand
Build the quality and reliability (MTBF) into the products
Ensure the perceived age of the product meets customer demands
Create new products to meet the changing marketplace
“Our products are not well positioned in
the marketplace.”
Capstone Business Simulation 17
Schedule production for each line
Purchase machinery to automate our facilities
Buy or sell capacity of product lines
Manage the majority of the company’s fixed assets
Establish and train your workforce complement
Production
Our capacity to produce is far greater than the demand.”
“We are paying too much for labor costs.
Capstone Business Simulation 18
Acquire capital to fund capital expansions
$ Stock
$ Long Term Bonds
$ Short Term Debt
$ ‘Emergency’ Loans
Issue dividend to our shareholders
Balance our debt portfolio
Manage your proformas – Financials & Balanced Scorecard
Finance
“We have no financial policy
statement.
We have poor cash flow and substandard
financial ratios.”
Capstone Business Simulation 19
Balance Sheet
Profit & Loss
Cash Flow
Financial Ratios
Balanced Scorecard
Proforma Financials A management tool to compare ‘WHAT-IF’ scenarios by the company.
WARNING: use your judgment, does NOT take into account the competitors’ decisions.
Capstone Business Simulation 20
Industry Conditions Report
Capstone Business Simulation 21
Low End Buying Criteria
Industry Conditions Report
Capstone Business Simulation 22
High End Buying Criteria
Industry Conditions Report
Capstone Business Simulation 23
“I skate to where the puck is going to be …
not where it has been.”
- Wayne Gretzky
Capstone Business Simulation 24
DEMAND ANALYSIS Market Segment
Round 0
Annual Growth
Rate Round
1 Round
2 Round
3 Round
4 Round
5 Round
6 Round
7 Round
8
Traditional 9.2%
Low End 11.7%
High End 16.2%
Pfmn 19.8%
Size 18.3%
Proforma Tools
Market Segments have different but constant annual growth rates
Capstone Business Simulation 25
CAPACITY ANALYSIS
Market Segment
Product Name
First Shift Capacity(000)
Second Shift Capacity(000)
Auto-mation Level
Cost to Double
Capacity
Cost to Raise
Automation to 10.0
Firm Industry Firm Industry
Traditional 1,800 3,600 4.0 $39.6M $43.2M
Low End
High End
Pfmn
Size
Proforma Tools
Capstone Business Simulation 26
MARGIN ANALYSIS Market
Segment Product Name Price Material
Cost Labor Cost
Second Shift (Y/
N)
Product Margin
$ %
Traditional N
Low End Y
High End N
Performance N
Size N
Product Margin Potential
Traditional $30.00 $8.00 $3.36 N $18.64 62%
Low End N
High End N
Performance N
Size N
Proforma Tools
Capstone Business Simulation 27
CONSUMER REPORT
Traditional Low End High End Performance Size
Price Price Price Price Price
Reliability Reliability Reliability Reliability Reliability
Age Age Age Age Age
Positioning Positioning Positioning Positioning Positioning
Awareness Awareness Awareness Awareness Awareness
Accessibility Accessibility Accessibility Accessibility Accessibility
Overall Overall Overall Overall Overall
Proforma Tools
R&D Marketing
Production 28
Finance
Stockholders Debt
29
Capstone Business Simulation 30
Scoring the Simulation I
1. You determine & submit your strategy.
2. Select the criteria & relative weighting to measure the success of your strategy at the END of each of CR#5 thru CR#8 :
ROE STOCK PRICE ROS CUMULATIVE PROFIT ROA ASSET TURNOVER MARKET CAPITALIZATION MARKET SHARE
3. Presentation of your strategy, results, and ‘lessons learned’ during last class session.
BUSINESS STRATEGY and SUCCESS MEASURES
Capstone Business Simulation 31
Scoring the Simulation II
ANALYST REPORT Externally evaluates your company in ten categories of management performance:
1 2 3 4 5 6 7 8 9 10 1000
Capstone Business Simulation 32
Scoring the Simulation III THE BALANCED SCORECARD (BS)
Internal evaluation of management’s performance across 4 categories with up to 19 criteria
✔ ✔ ✔ ✔
Capstone Business Simulation 33
Scoring the Simulation III THE BALANCED SCORECARD Recap
Recap of: Average Cumulative Ending Results
✔ ✔
Capstone Business Simulation 34
Scoring the Simulation IV SUCCESS MEASURES YOU determine the weighting of your Success Measures prior to CR #5 with your Strategy
Capstone Business Simulation 35
Some Suggestions
Determine and select the skills needed for the executive team
Setup a flexible structure Assign responsibilities Rotate roles & responsibilities
ORGANIZATION
Set time aside for face-to-face meetings, initially 2 to 3 hours
Have an agenda & stick to it Be respectful of others’ time Record your board minutes
starting with competitive rounds
MEETINGS
Do a Situation Analysis for the market and for your company
Create a purpose & direction for your company (vision/mission)
Determine viable strategic options
Do initiate the strategy you want to try during the 1st or 2nd round
Don’t try to pre-determine the other 5 strategies – you won’t
STRATEGY
Read the Student Guide and use the Capsim on-line tutorials
Do use ALL of the data in the reports and Capstone Courier
Don’t become a victim of ‘Analysis – Paralysis’
Use the proforma tools - and save often
Allow for midcourse corrections, don’t over-react/over-commit
DECISION MAKING
J411 Capstone - Schedule of Events
36
Individual Rehearsals Intro Lesson + Quiz, Rehearsal Tutoral + Quiz SituaAon Analysis, Advanced: Mkt, HR, TQM
CAPSTONE® SimulaAon
COMP-‐XM® Self-‐Competency Review Available aQer CR#8 – Complete by final examinaAon date/Ame Allow 6-‐8 hours total in up to 5 separate sittings
AACSB Accredita@on Requirement
Team Decisions Due by Scheduled
Date & Time
Team CompeAAve Rounds IniAal Strategy Final Strategy
Team PresentaAons Last Class Periods
#CR1 – with Advanced Marke9ng #CR2 – adds HR #CR3 – adds TQM #CR4 – with AM, HR & TQM #CR5 – #CR6 – #CR7 – #CR8 –
Individual Ar@cles & Readings
for Class Discussion
Team PracAce Rounds
#PR1 – with Advanced Marke9ng #PR2 – adds HR #PR3 – adds TQM #PR4 – with AM, HR & TQM
Capstone Business Simulation 37
Accessing Your Company
http://www.capsim.com
Your Industry Number
You must register (and pay the Capsim fee) to participate in the J411 required Capstone Business Simulation and Comp-XM Self-Competency Review
See Syllabus
Capstone Business Simulation 38
Getting Started Intro, Rehearsal Tutorial & Situation Analysis
✔
✔ ✔
✔
Capstone Business Simulation 39
Getting Started Intro, Rehearsal Tutorial & Situation Analysis
✔
✔
✔
✔
Capstone Business Simulation 40
Getting Started Additional Modules – Marketing, HR & TQM
✔ ✔ ✔
Capstone Business Simulation 41
“If you don’t have a strategy you will be . . . part of somebody else’s strategy.”
- Alvin Toffler