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©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


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


  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


  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


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.”


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.”


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


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


Competition after the Break-Up

SIX COMPANIES

$100 million in Sales

5 Product Lines

Closed Marketplace

ANDREWS

BALDWIN

CHESTER

DIGBY

ERIE

FERRIS


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!”


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


WELCOME TO YOUR NEW COMPANY!

Marketing

Production

Finance

R&D


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.


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.”


 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.


  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.”


 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.


Industry Conditions Report


Low End Buying Criteria



High End Buying Criteria



“I skate to where the puck is going to be …

not where it has been.”

- Wayne Gretzky


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


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


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


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


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


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


Scoring the Simulation III THE BALANCED SCORECARD (BS)

Internal evaluation of management’s performance across 4 categories with up to 19 criteria

✔ ✔ ✔ ✔


Scoring the Simulation III THE BALANCED SCORECARD Recap

Recap of: Average Cumulative Ending Results

✔ ✔


Scoring the Simulation IV SUCCESS MEASURES YOU determine the weighting of your Success Measures prior to CR #5 with your Strategy


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


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


Getting Started Intro, Rehearsal Tutorial & Situation Analysis

✔

✔ ✔

✔


Getting Started Intro, Rehearsal Tutorial & Situation Analysis

✔

✔

✔

✔


Getting Started Additional Modules – Marketing, HR & TQM

✔ ✔ ✔


“If you don’t have a strategy you will be . . . part of somebody else’s strategy.”

- Alvin Toffler

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