WELCOME TO CAPSTONE BUSINESS SIMULATION

1. WELCOME TO CAPSTONE BUSINESS SIMULATION Dr. Karl Knapp Assistant Professor of Business Administration School of Business University of Indianapolis Credit to Dr. Terry Shindler

2. Objectives • Demonstrate effectiveness of multi-discipline teams working together. • Use strategic thinking to an advantage. • Test your business acumen. • Understand overall interaction and impact of various parts of a business on one another. • Grow an awareness of competition. • Take away practical know-how to improve the effectiveness of your business.

3. Why Simulate • Risk-Free Learning in a Safe Environment • Develop and Test Alternative Strategies • Enjoyable Way to Experience Conquering the Competition • Compresses Time (1 Round=1Year) • Selectivity <> Integration

4. SENSOR INDUSTRY OVERVIEW

5. The Marketplace Customers (OEMs) need sensors for their products Initially one segment, now breaking into five Very different customer demands developing between the segments Diversification in the use and utility of the sensors

6. The Marketplace In our industry we track the changing customer demand on a perceptual map Low Tech Performance Traditional High Tech Size Over 7 years the customers will demand much faster and smaller sensors Market Segments will continue to diverge

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!” “They have to be moderately reliable.” “The technology doesn’t have to be cutting edge.”

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’ll pay more to get what I want.” “I like a pretty high reliability.”

9. SENSOR INDUSTRY ANALYST PROJECT ONGOING GROWTH Sees the next 8 years as consistent growth. All market segments increase at a nice “clip,” according to market analyst. “I see the entire market growing at around 14% or 15% per year. The high Tech market will be growing at a whopping 20%.” I hope those companies out there are ready for that kind of expansion!”

10. COMPANY OVERVIEW

11. SEC ANNOUNCES BREAKUP OF MONOPLOY FOR IMMEDIATE RELEASE William Donaldson, Chairman of the SEC, took dramatic action today by breaking up the monolithic corporation Sensors, Inc. In a statement to the press Chairman Donaldson outlined the reason and the outcome of this move. “We cannot allow monopolies of this sort to impact an entire industry!” stated Donaldson. “The OEMs that utilize these sensors are being held hostage. “Effective immediately Sensors, Inc will be dissolved into the Andrews, Baldwin, Chester, Digby, Erie and Ferris companies.”

12. The Competition ANDREWS DIGBY 6 Companies $100 Million in Sales BALDWIN ERIE 5 Product Lines Closed Marketplace CHESTER FERRIS

13. SHAKE UP IN SENSOR INDUSTRY 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 Knapp, “We need to hire a dynamic leadership group who will be able to take this company into the future!” “Due to this immediate need I have hired the Dream Team to start on January 1st. I fully expect this new group of Executives to lead us into the future!

14. WELCOME TO YOUR NEW COMPANY!

15. Functional Areas Production R&D Finance Marketing

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.”

17. 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 “Our products are not pricedoptimally. And many of our customers don’t even know our product exists.”

18. Production • Purchase machinery to automate our facilities • Buy or sell capacity of product lines • Schedule production for each line • Manage the majority of the companies fixed assets • Establish plant floor compliment “We are payingto much forlabor costs. Very soon we will run outof capacity to meet demand.”

19. Finance • Acquire capital to fund capital expansions • Issue Stock • Short Term Debt • Issue Long Term Bonds • Issue dividend to our shareholders • Balance our debt portfolio • Manage our proformas “We have poorcash flow and substandardfinancial ratios. We have nofinancial policystatement.”

20. Proformas A great management tool driven by forecasts and projections. Allows “What if Scenarios” by the company. • Balance Sheet • Profit & Loss • Cash Flow • Financial Ratios

21. Scoring the Game • Criteria you will be measured by: • ROE • ROS • ROA • CUM PROFIT • STOCK PRICE • MARKET CAPITALIZATION • ASSET TURNOVER • MARKET SHARE

22. Scoring the Game • Assigned percentages for four criteria you will be measured by: • ROE (10%) • ROS • ROA • CUMULATIVE PROFITS (15%) • STOCK PRICE • MARKET CAPITALIZATION (20%) • ASSET TURNOVER • MARKET SHARE BY VOLUME (15%) • Weight each remaining criteria or increase % of the selected criteria to comprise the remaining 40%.

23. RUNNING YOUR COMPANY THINGS TO DO ON AN ANNUAL BASIS

24. To Do List • Establish a vision and business strategy for your company • Analyze Capstone Courier to see industry results • Make tactical decisions across each functional area (aligned to strategy!) • Upload official results and confirm on the website • Await results when Professor processes • Rejoice in your superior capitalistic acumen • Begin the process again by confirming alignment of your results with your company’s strategic goals.

25. Questions?