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Capsim presentation
- 1. CAPSIM SIMULATION WINNERS! BY: MINHEE HUH, MOLLY MCGOWAN, AND KING TAN
- 2.
- 3. CHANGING STRATEGIES TOMAKE BETTER PRODUCTS • Original Strategy: • Cost Leadership • Differentiation Strategy • New Strategy • Focus Cost Leadership Strategy • Differentiation Strategy
- 4. SALES AND PROFITABILITY THROUGHOUT THE YEARS 300,000 250,000 200,000 150,000 Sales (Millions) 100,000 Profitability (Millions) 50,000 0 Year Year Year Year Year Year Year Year -50,000 1 2 3 4 5 6 7 8
- 5. MARKET SHARE ANDLOSS OF SHARES • Goal: • Obtain largest market share in all competing segments • Peak at Round 4 • Cut off Size Segment • Capacity loss shares
- 6.
- 7. 3 YEAR PLAN Strategy Expectations • Obtain more market • New product, same share - traditional and segments. low end. • High customer survey • Invest in new product ratings. development • Growth in performance • We have the monetary segment. funds to do so now. • Keep employees • Invest in production. happy!
- 8. 3 YEAR PLAN •Products • Create new product • Control production in “Bid” • Market Segments • Enter our new product into the performance segment. • Investments • Plant, Property, and Equipment • Employee • R&D • Finance • Keep investors happy.
- 9.
- 10. 7S MODEL: STRUCTURE AND STRATEGY • Structure • The Flat Organization – no hierarchy • The Decentralize System • Strategy • Our Value • The Balanced Scorecard
- 11. STRENGTHS AND WEAKNESSES Strengths Weaknesses • The Team Member • Research and Guide Development • Practice Rounds • New Product • Communication • Capacity • Independent work • Automation • The Competitions
- 12. WHAT WE’VE LEARNED • Research and Development • New Product • Competitions
- 13. WHY WE SHOULDRETAIN OUR JOBS… • We are winner!! 300000 250000 • Sales 200000 • Profitability 150000 • Net Income Series1 100000 • Stock Price and Mar Series2 ket Capital 50000 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
- 14. TO FUTURE CAPSIMTEAMS: • Read the Team Member Guide • Practice Rounds • Competitions • Be Responsible
- 15.
- 16. SALES 300000 250000 200000 150000 Series1 100000 Series2 50000 0 Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 17. NET INCOME Net Income 30,000 25,000 20,000 15,000 Net Income 10,000 5,000 0 -5,000 Series Series Series Series Series Series Series Series 1 2 3 4 5 6 7 8
- 18. STOCK PRICE ANDMARKET CAP 300 250 200 150 Market Cap (Millions) 100 Stock Price 50 0 Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 19. BALANCED SCORECARD: FINANCIALS 25 20 15 Stock Price Profits 10 Leverage Subtotal 5 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
- 20. BALANCED SCORECARD: OPERATIONS 25 Contribution Margin 20 Plant Utilization 15 Days of Working Capital 10 Stock Out Costs 5 Inventory Carrying Costs 0 Subtotal Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 21. BALANCED SCORECARD: CUSTOMER 25 Customer Buying 20 Criteria Customer Awareness 15 Customer Accessibility 10 Product Count 5 SG&A Expense 0 Subtotal Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 22. BALANCED SCORECARD: EMPLOYEE 30 Employee Turnover 25 Rate Employee 20 Productivity 15 TQM Material Reduction 10 TQM Material Reduction2 5 TQM Admin Cost Reduction 0 TQM Demand Year Year Year Year Year Year Year Year Increase 1 2 3 4 5 6 7 8
- 23. BALANCED SCORECARD: TOTAL Total Points 90 80 70 60 50 40 Total Points 30 20 10 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
- 24. REVENUE ANALYSIS: % REVENUE BY PRODUCT 40.00% 35.00% 30.00% 25.00% Baker Bead 20.00% Bid 15.00% Bold 10.00% Buddy 5.00% 0.00% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
- 25. REVENUE ANALYSIS % REVENUE BY SEGMENT 60.00% 50.00% 40.00% Traditional 30.00% Low End High End 20.00% Performance 10.00% Size 0.00% Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 26. CONTRIBUTION MARGIN ANALYSIS PERCENTAGE BY PRODUCT 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Baker Bead Bid Bold Buddy
- 27. CONTRIBUTION MARGIN ANALYSIS PERCENTAGE BY SEGMENT 60% 50% 40% Traditional 30% Low High 20% Performance 10% Size 0% Year Year Year Year Year Year Year Year Year 0 1 2 3 4 5 6 7 8
- 28. MARKET SHARE ANALYSIS: OVERALL 12% 10% 8% Baker 6% Bead Bid 4% Bold 2% Buddy 0% Year Year Year Year Year Year Year Year Year 0 1 2 3 4 5 6 7 8
- 29. MARKET SHARE ANALYSIS: SEGMENT 45.00% 40.00% 35.00% 30.00% Traditional 25.00% Low 20.00% High 15.00% Performance 10.00% Size 5.00% 0.00% Year Year Year Year Year Year Year Year Year 0 1 2 3 4 5 6 7 8
- 30. EMERGENCY LOANS •Year 1: $4,879,285 • Year 2: $0 • Year 3: $0 • Year 4: $0 • Year 5: $0 • Year 6: $0 • Year 7: $0 • Year 8: $0
- 31. FIXED COST ANALYSIS PROMOTIONS Promotions 18,000 16,000 14,000 12,000 10,000 8,000 6,000 Promotions 4,000 2,000 0 Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 32. FIXED COST ANALYSIS: ACCESSIBILITY SPENDING Accessibility Spending 20,000 18,000 16,000 14,000 12,000 10,000 8,000 Accessibility 6,000 Spending 4,000 2,000 0 Year Year Year Year Year Year Year Year 1 2 3 4 5 6 7 8
- 33. FIXED COST ANALYSIS: R&D R&D 4,000 3,500 3,000 2,500 2,000 R&D 1,500 1,000 500 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
- 34. PLANT AND EQUIPMENTCAPACITY 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Baker Bead Bid Bold Buddy
- 35. PLANT AND EQUIPMENTINVESTMENTS: AUTOMATION Baker Bead 16 18 14 16 12 14 12 10 10 8 Size 8 Size 6 6 4 4 2 2 0 0 0 5 10 15 0 5 10
- 36. PLANT AND EQUIPMENT INVESTMENTS: AUTOMATION Bid Bold 14 18 12 16 14 10 12 8 10 6 Size 8 Size 6 4 4 2 2 0 0 0 10 20 0 10 20
- 37. PLANT AND EQUIPMENT: AUTOMATION Buddy 14 12 10 8 6 Size 4 2 0 0 5 10 15 20
Editor's Notes
- #4 Slide 3Original:-Cost Leadership: Attempted to keep costs low through low end, traditional and size segments. Let products drift with little R&D to keep costs low and keep selling prices low (Thin Margins – High Volume). By keeping R&D low on these segments, we lost a lot of potential sales because our product wasn’t superior. -Differentiation Strategy through High end and Performance. Attempted to make the best high end and performance from round 1. Focused a lot of R&D toward segments in the beginning. Bad choice: Through the high end and performance, R&D took too long to implement which held us back when competitors were able to release their products in a timely manner and ended up keeping up with our high end and performance products (even surpassing our products)Failed: Over projected sales and had inventory left over in every segment which caused a $4M emergency loanNew Strategy:Focus Cost Leadership: In our 4th year, we decided to focus more attention to the Traditional and Low end. Moved Size to the traditional because it held the largest percentage of the entire industry and grew at the largest rate. Differentiation Strategy: Focused on these four segments and attempted to make all four the best products overall. Moved segments with the Perceptual R&D map by staying at the tip of the circle (resulted in the best products).Throughout, attempted to keep prices low and sell a lot to retain high profits (capacity wasn’t enough to match demand however). Low bottom line: did not cheap out on Automation or Labor which created very efficient workers, no strikes, and automation helped to keep labor cost down.
- #5 Slide 4Round 1, we hit started off bad because we did not properly finance our operations and we incurred more cost than profit earned ($4M Emergency Loan). Operations generated $15M bill, Plant improvements $6M bill then financing only provided $18M to fund which left us with a net cash position of ($-3.4M)From round 2 on, Operations generated profits from sales (rd2 = $26.5M). From this point forward, operations funded most activities and covered many costs from mistakes made through the initial years. Got act together and Round 4 Net Income of $20.7 M. From then on, operations continued to fund our company.Finance was lacking. Did not properly used our leverage. Sold too much stock too early (loss revenue from selling stocks at low price). Should have borrowed high in initial round. Prevent Emergency Loan, increase cash position, and funded everything (instead of only using operations money to fund everything)
- #6 Slide 5Our companies goal was to gain the largest market share throughout Traditional, Low, High, and Performance segments. As we produced and sold products, market share increased.At round 4, we peaked with the highest overall market share at 25.43%Traditional: 43%Low: 20%High: 17%Performance: 29%Size: 11%Realizing size segment had the lowest number of buyers, Size was not worth producing or competing in.Left size and added more to Traditional which had the highest number of buyers.By not increasing capacity, demand became greater than the number of products we produced. If we increased our capacity, we would have been able to keep up with the growing market and growing number of customers. Our products sold out too fast and loss potential profits
- #7 Bead: Competed in Low endBaker: Competed in TraditionalBuddy: Competed in TraditionalBold: Competed in PerformanceBid Competed in High End
- #8 The majority of our revenue came from the traditional and the low end markets. We want to improve our products in Traditional and Low and spend more money on marketing and promotions in order to obtain more market share.Throughout the 8 years, we did not invest in new product development. We only invested in existing products. For the next three years, because we have the financial means to do so now, we think that now is the time to bring in a new product.For production, we had some issues controlling the inventory of bid. We had a large carrying cost for bid in year 8. If we cut back on production for bid, we will be able to produce more in Baker and Bead obtaining more of the market share.With our new product, we feel that we can enter it in the performance segment because we are already controlling a good portion of the segment.We also will continue to monitor the employee demands, because this was one of our main advantages during the simulation. We were the only team who didn’t have their workers go on strike.
- #9 One of our main weaknesses that we had was that we didn’t invest enough in our production facility. This limited are capacity numbers. We wish to renovate our facility and hire more employees so that we can have a higher capacity considering we are under producing for our demand.Keeping employees happy is always a great investment.Keep updating the automation levels.For finance, we have achieved a AAA rating on our bond prices. We have been consistently in the AA ratings for roughly 5 years and in year 8 achieved AAA. This shows that our Financial projections are headed in the right direction.
- #11 Structure refers to the way in which an organization’s business units relate to each other.Business needs to be organized in a specific form of shape that is generally referred to as organizational structure. Organizations are structured in a variety of ways, dependent on their objectives and culture. Our organizational structure was increasingly towards a flat structure in an organizational composition in business, where there is virtually no hierarchy present. The flat organization structure made fast and clear communication between members. Through the flat organization structure, we have used the decentralized system which each member participated to make our decisions. Strategy refers to the plans an organization has for the allocation of its resources to achieve specific goals.Our strategy was a plan of the decisions in allocating resources to achieve the goal/value over time. Our value was not only just to take first place but also to develop steadily. We wanted to make greater sales, profits, and others in current year than in previous year. We know that the plan should be devised to maintain and build competitive advantage over the competition. In addition, we looked at the balanced scordcards after every decision. And through the balanced scordcard, we focused to compensate the defect and strive for improving our decisions. Although our earned points on the balanced socrecard were decreasing, we tried to analyze why we did get any points or got lower points and decide how we could perform for next rounds.
- #12 StrengthsThe team member guide is very important to make the decisions. We read the team member guide very carefully and took some notes and we took the practice rounds seriously. We had four individual rehearsal rounds and three more group practice rounds. For every practice rounds, we checked our decisions. If we found the problems, we checked the team member guide and followed the directions. We were in regular communication by e-mail; at least once a week. We discussed for the previous decision and found some problems. And then we had some suggestions for better decision in next round. And we updated our decision. Each member had independent work. Although we had independent work, if other had a better idea in other’s work, we discussed and then accepted. In addition, each member tried to examine other member’s work and we were the complement of each other. Therefore, each member managed and controlled our decisions and all the members were responsible for all decisions. In addition, we knew what our competitors were doing. There is a famous quote by Sun Tzu, the ancient Chinese warrior: “if you know the enemy and know yourself, you need not fear the outcome of a hundred battles.” Although we had an emergency loan from the first round, we knew our competitors so we could get great result at the end. WeaknessesIn the competitive world, research and development plays an important role in the success of any business and companies need to spend on research and development to stay competitive in the market. We did not spend enough in research and development and we did not invest in new products. R&D results in the technology that brings new products and services to the market place. Innovation results in high quality jobs, successful businesses, better goods and services and more efficient processes. In addition we did not spend money on improving our facilities so because of that we were limited in capacity. With capacity, we never utilized the buying/selling of our capacity which hurt us max out on profits. Because we did not increase capacity, we lost a lot of market share and potential profits. And with automation, we invested too much in trying to beat the perceptual map and because of that our customers were not ready to purchase our products yet because it was not in their comfort zone. We should have spent more on automation - only grew automation at a rate competitors were and did not increase automation much in beginning rounds.
- #13 We realized that research and development is very important. In the competitive world, research and development plays an important role in the success of any business and companies need to spend on research and development to stay competitive in the market. It is important to innovate new products. Innovation results in high quality jobs, successful businesses, better goods and services and more efficient processes. We should identify our competitors. The competitors play a decisive role in the analysis of the supply side of the market, as they can help us gain a better understanding about our position with regards to market competition.
- #14 Sales were little fluctuated. However, we expect that Sales were increased from Year 6.Although profitability was decreased on Year 8, the profitability would be increased for next year.Net income was also decreased on Year 8. However, net income was increased from Year 5 to Year7. Therefore, we expect that net income would be increased.Market Capital and Stock Price was increased continuously over eight years.
- #15 Each member should read the team member guide and be well-acquainted with the contents of the work. We had four individual rehearsal rounds and three more group practice rounds. Most people do not focus and work hard but the practice rounds are very important. They should focus and prepare from practice rounds. Each member should know what their competitors were doing.Each member should manage and control their decisions and each member should have responsibility for all decisions.
- #24 Round 1: Out of 82 PointsRound 2: Out of 89 PointsRound 3: Out of 89 PointsRound 4: Out of 100 PointsRound 5: Out of 100 PointsRound 6: Out of 100 PointsRound 7: Out of 100 PointsRound 8: Out of 100 Points
- #25 Year 1 Revenue: $121,879,929Year 2 Revenue: $133,411,656Year 3 Revenue: $177,222,897Year 4 Revenue: $250,620,095Year 5 Revenue: $256,379,644Year 6 Revenue: $232,064,514Year 7 Revenue: $254,668,311Year 8 Revenue: $266,470,922
- #26 Year 1 Revenue: $121,879,929Year 2 Revenue: $133,411,656Year 3 Revenue: $177,222,897Year 4 Revenue: $250,620,095Year 5 Revenue: $256,379,644Year 6 Revenue: $232,064,514Year 7 Revenue: $254,668,311Year 8 Revenue: $266,470,922
- #28 Appendix slide 26 – Incorrect>> corrections made on this slide
- #29 Appendix slide 27
- #30 Appendix slide 28