WELCOME TO CAPSTONE BUSINESS SIMULATION

1. WELCOME TO CAPSTONE BUSINESS SIMULATION

2. 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

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

4. Low Tech & Traditional Segment Customers You’re not giving me what I want “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.”

5. High Tech, Size & Performance Segment Customers And I’m not getting what I want! “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.”

6. Strategic Map Large Size Small Fast Slow Performance

7. Each Segment has a Sweet Spot Low Large Perf Trad Sweet Spot Size High Small Fast Slow

8. Price Two Stage Purchase Decision Stage 1 - Match Product to Market Size 1. Product must plot within the segment. 2. Product must fall within price guidelines. Quality 3. Product must fall within quality guidelines

9. Two Stage Purchase Decision Stage 2 – Competitive Rankings of Best Products Quality 1. Positioning 2. Age 3. Quality 4. Price Position Sweet Spot 0 Yrs 1 Age Price 20000 25000 HIGH END $30 $40

10. Segment Criteria Ranking Traditional Low End High End Perf Size • Age • Price • Position • Quality • Price • Age • Position • Quality • Position • Age • Quality • Price • Quality • Position • Price • Age • Position • Age • Quality • Price

11. Functional Areas and Value Creation Production R&D HRM Finance Marketing

12. Value Chain Analysis Support Activities Inbound Logistics Primary Activities

13. Value Chain Analysis Support Activities Inbound Logistics Manufacturing Primary Activities

14. Value Chain Analysis Support Activities Inbound Logistics Outbound Logistics Manufacturing Primary Activities

15. Value Chain Analysis Support Activities Inbound Logistics Outbound Logistics Marketing Manufacturing Primary Activities

16. Value Chain Analysis Support Activities Service Inbound Logistics Outbound Logistics Marketing Manufacturing Primary Activities

17. Value Chain Analysis Support Activities Procurement Service Inbound Logistics Outbound Logistics Marketing Manufacturing Primary Activities

18. Value Chain Analysis Support Activities Technology Development Procurement Service Inbound Logistics Outbound Logistics Marketing Manufacturing Primary Activities

19. Value Chain Analysis Human Resource Management Support Activities Technology Development Procurement Service Inbound Logistics Outbound Logistics Marketing Manufacturing Primary Activities

20. Value Chain Analysis Headquarters Activities Human Resource Management Support Activities Technology Development Procurement Service Inbound Logistics Outbound Logistics Marketing Manufacturing Primary Activities

21. Capstone Value Chain Activities Firm Infrastructure Human Resource Management MARGIN Technological Development Procurement Service Inbound Logistics Marketing & Sales Outbound Logistics Operations MARGIN

22. Inbound Logistics Raw materials and components receiving Warehousing Materials handling Inbound Logistics

23. Production Capacity and production levels Production schedule Automation levels Labor force utilization levels Improve efficiency Relatively Few Management Layers to Reduce Overhead Firm Infrastructure Effective Training Programs to Improve Worker Efficiency and Effectiveness Human Resource Management Investments in Technology in order to Reduce Costs Associated with Manufacturing Processes Technological Development Procurement Frequent Evaluation Processes to Monitor Suppliers’ Performances Efficient Plant Scale to Minimize Manufacturing Costs Delivery Schedule that Reduces Costs Small, Highly Trained Sales Force Service Inbound Logistics Selection of Low Cost Transport Carriers Products Priced to Generate Sales Volume Outbound Logistics Timing of Asset Purchases Operations Operations Policy Choice of Plant Technology Efficient Order Sizes Organizational Learning

24. Outbound Logistics Packaging Warehousing Inventory management Shipping and distribution Firm Infrastructure Human Resource Management Technological Development Procurement Frequent Evaluation Processes to Monitor Suppliers’ Performances Delivery Schedule that Reduces Costs Small, Highly Trained Sales Force Effective Product Installations to Reduce Frequency and Severity of Recalls Service Outbound Logistics Selection of Low Cost Transport Carriers Products Priced to Generate Sales Volume Outbound Logistics Marketing & Sales Efficient Order Sizes National Scale Advertising Interrelationships with Sister Units

25. Marketing Sales forecasting Pricing strategy Marketing strategy and budget Sales force management Firm Infrastructure Human Resource Management MARGIN Technological Development Procurement Service Outbound Logistics Marketing & Sales Marketing & Sales Inbound Logistics Operations

26. Service Customer relations Warrantees, guarantees Spare parts Tech help Repair Firm Infrastructure Human Resource Management Technological Development Procurement Service Service Inbound Logistics Outbound Logistics Marketing & Sales Operations

27. Procurement Firm Infrastructure Human Resource Management Technological Development Procurement Procurement Service Inbound Logistics Outbound Logistics Marketing & Sales Operations Purchasing Vendor relations Business services outsourcing

28. R&D Firm Infrastructure Human Resource Management Technological Development Technological Development Procurement Establish the specification of the products to meet customer demand Build the quality and reliability (MTBF) into the products Create new products to meet the changing marketplace Manage new product cycle times Service Outbound Logistics Inbound Logistics Marketing & Sales Operations

29. Research & Development • Set Product coordinates (Position) • Set MTBF rating (Quality) • Drives Perceived age (Age) • Drives breadth of product line High High Eight < < < Low Low One Quality Age Breadth

30. R & D Factors on Existing Products Cycle time affected by: • Automation level of production line • Number of projects underway • Distance moved on perceptual map High High High Long < < < < Low Low Low Short Automation Level Number of Projects Distance moved Cycle Time

31. HRM Firm Infrastructure Human Resource Management Human Resource Management Technological Development Production line staffing Recruiting and training of new employees Wages and benefits for employees Negotiate with labor union Procurement Service Outbound Logistics Inbound Logistics Marketing & Sales Operations

32. HQ Activities Firm Infrastructure Firm Infrastructure Human Resource Management Support Activities Government relations Public relations General Counsel Strategy and decision making Finance and Accounting Technological Development Service Marketing & Sales Outbound Logistics Inbound Logistics Operations

33. Success Measurements Practice Rounds: All criteria equally weighted Competitive Rounds: YOU choose at least TWO • Ending Stock Price must be at least 20% • Others – Your choice: • Cumulative Profit • Avg. Market Share • Asset Turnover • Avg. ROA • Avg. ROE • Avg. ROS • Criteria and weights will remain proprietary throughout the simulation

34. Capstone Scoring Report Winner ! Erie Ferris Andrews Chester Digby Baldwin

35. Assignments & Grading

36. Computers and Facilities A typical “day” of Capstone

37. Assignments for This Week MONDAY-TUESDAY • Subscribe to Capstone • See pg. 2 of syllabus • Tutorials (esp. Spreadsheet Demonstrations) • Solo Rehearsal WEDNESDAY • Upload Practice Round 1 decisions by 11:00 a.m. • Results available 12:00 p.m. • Meet for Debriefing at 1:00 p.m. or 2:00 p.m. • Round 1 (for real!) decisions due by 6:00 p.m. • Submit Strategy eMemo by 7:00 p.m.

38. Good Luck and Enjoy!