WELCOME TO CAPSTONE BUSINESS SIMULATION

WELCOME TO CAPSTONE BUSINESS SIMULATION

ProfessorTed Clark ProfessorTed Clark

HK University of Science &

Technology

HK University of Science &

Technology

• Demonstrate effectiveness of multi-Demonstrate effectiveness of multi-discipline teams working together.discipline teams working together.

• Use strategic thinking to an advantage.Use strategic thinking to an advantage.• Test your business acumen.Test your business acumen.• Understand overall interaction and impact Understand overall interaction and impact

of various parts of a business on one of various parts of a business on one another.another.

• Grow an awareness of competition.Grow an awareness of competition.• Take away practical know-how to improve Take away practical know-how to improve

the effectiveness of your business.the effectiveness of your business.

• Demonstrate effectiveness of multi-Demonstrate effectiveness of multi-discipline teams working together.discipline teams working together.

• Use strategic thinking to an advantage.Use strategic thinking to an advantage.• Test your business acumen.Test your business acumen.• Understand overall interaction and impact Understand overall interaction and impact

of various parts of a business on one of various parts of a business on one another.another.

• Grow an awareness of competition.Grow an awareness of competition.• Take away practical know-how to improve Take away practical know-how to improve

the effectiveness of your business.the effectiveness of your business.

ObjectivesObjectives

Why SimulateWhy Simulate

• Risk Free

• View Alternative Strategies

• Enjoyable • Compresses Time (1 Round=1Year)

• “Siloing” <> Integration

• Risk Free

• View Alternative Strategies

• Enjoyable • Compresses Time (1 Round=1Year)

• “Siloing” <> Integration

SENSORINDUSTRYOVERVIEW

SENSORINDUSTRYOVERVIEW

The Marketplace The Marketplace

Customers (OEMs) need sensors for their productsCustomers (OEMs) need sensors for their products

Initially one segment, now breaking into fiveInitially one segment, now breaking into five

Very different customer demands developing between the segments

Very different customer demands developing between the segments

Diversification in the use and utility of the sensorsDiversification in the use and utility of the sensors

The Marketplace The Marketplace

In our industry we track the changing customer demand on a perceptual map

In our industry we track the changing customer demand on a perceptual map

Over 8 years the customers will demand much faster and smaller sensors

Over 8 years the customers will demand much faster and smaller sensors

Market Segments will continue to divergeMarket Segments will continue to diverge

LowTech

Traditional

HighTech

Performance

Size

Low Tech & Traditional CustomersLow Tech & Traditional Customers

“I want these sensors to be cheap”“I want these sensors to be cheap”

“I want them to have been around for a while – no Beta Testing!”“I want them to have been around for a while – no Beta Testing!”

“The technology doesn’t have to be cutting edge.”“The technology doesn’t have to be cutting edge.”

“They have to be moderately reliable.”“They have to be moderately reliable.”

You’renot giving me what I

want

High Tech, Size & Performance CustomersHigh Tech, Size & Performance Customers

“These sensors have to be small, like micro, and fast”“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 need them to be right out of R&D, I’m talking ZERO years on the market”

“I like a pretty high reliability.”“I like a pretty high reliability.”

“I’ll pay more to get what I want.”“I’ll pay more to get what I want.”

And I’m not getting what I

want!

SENSOR INDUSTRY ANALYST PROJECT ONGOING GROWTHSees 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 alone will be growing at a whopping 16%.”

I hope those companies out there are ready for that kind of expansion!”

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Year1

Year2

Year3

Year4

Year5

Year6

Year7

Year8

COMPANYOVERVIEWCOMPANYOVERVIEW

The CompetitionThe Competition

6 Companies6 Companies

$100 Million in Sales$100 Million in Sales

5 Product Lines5 Product Lines

Closed MarketplaceClosed Marketplace

ANDREWSANDREWS

BALDWINBALDWIN

CHESTERCHESTER

DIGBYDIGBY

ERIEERIE

FERRISFERRIS

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 (Chainsaw Ted ) Clark, “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 expect to see great things from this Executive Team!

WELCOME TO YOUR NEW COMPANY!

WELCOME TO YOUR NEW COMPANY!

Functional AreasFunctional Areas

R&DR&DR&DR&D

MarketingMarketingMarketingMarketing

ProductionProductionProductionProduction

FinanceFinanceFinanceFinance

Research & DevelopmentResearch & 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

• 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 productsOur productsare not wellare not well

positioned inpositioned inthe marketplace.”the marketplace.”

MarketingMarketing

• 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

• 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 productsOur productsare not pricedare not priced

optimally.optimally.

And many of ourAnd many of ourcustomers don’tcustomers don’teven know oureven know our

product exists.”product exists.”

• Purchase machinery to automate our facilities

• Buy or sell capacity of product lines

• Schedule production for each line

• Manage the majority of the company’s fixed assets

• Establish your workforce complement

• Purchase machinery to automate our facilities

• Buy or sell capacity of product lines

• Schedule production for each line

• Manage the majority of the company’s fixed assets

• Establish your workforce complement

ProductionProduction

““We are payingWe are payingtoo much fortoo much forlabor costs.labor costs.

Very soon weVery soon wewill run outwill run out

of capacity toof capacity tomeet demand.”meet demand.”

• 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

• 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

FinanceFinance

““We have poorWe have poorcash flow andcash flow andsubstandardsubstandard

financial ratios.financial ratios.

We have noWe have nofinancial policyfinancial policy

statement.”statement.”

• Balance Sheet

• Profit & Loss

• Cash Flow

• Financial Ratios

• Balance Sheet

• Profit & Loss

• Cash Flow

• Financial Ratios

ProformasProformas

A great management tool driven by forecasts and projections. Allows “What if” Scenarios by the company.

A great management tool driven by forecasts and projections. Allows “What if” Scenarios by the company.

Scoring the GameScoring the Game• Select a minimum of two

criteria to be measured by:– ROE– ROS– ROA– CUM PROFIT– STOCK PRICE– MARKET

CAPITALIZATION– ASSET TURNOVER– MARKET SHARE

• Weight each selection.

• Select a minimum of two criteria to be measured by:– ROE– ROS– ROA– CUM PROFIT– STOCK PRICE– MARKET

CAPITALIZATION– ASSET TURNOVER– MARKET SHARE

• Weight each selection.

RUNNING YOUR COMPANYRUNNING YOUR COMPANY

Some Suggestions

Some Suggestions

• Do set up an organization (team) structure & agendaDo set up an organization (team) structure & agenda• Don’t be rigid in that structureDon’t be rigid in that structure• Do pick a strategy that is funDo pick a strategy that is fun• Don’t try to pre-determine the other 5 strategies – Don’t try to pre-determine the other 5 strategies –

You won’t!You won’t!• Do rotate the keyboardDo rotate the keyboard• Don’t forget to save often!Don’t forget to save often!• Do use all the data in the reportsDo use all the data in the reports• Don’t become a victim of “Analysis – Paralysis”Don’t become a victim of “Analysis – Paralysis”• Do initiate your strategy in the first roundDo initiate your strategy in the first round• Don’t over-commit and shut off all possibility of mid Don’t over-commit and shut off all possibility of mid

course correctioncourse correction

• Do set up an organization (team) structure & agendaDo set up an organization (team) structure & agenda• Don’t be rigid in that structureDon’t be rigid in that structure• Do pick a strategy that is funDo pick a strategy that is fun• Don’t try to pre-determine the other 5 strategies – Don’t try to pre-determine the other 5 strategies –

You won’t!You won’t!• Do rotate the keyboardDo rotate the keyboard• Don’t forget to save often!Don’t forget to save often!• Do use all the data in the reportsDo use all the data in the reports• Don’t become a victim of “Analysis – Paralysis”Don’t become a victim of “Analysis – Paralysis”• Do initiate your strategy in the first roundDo initiate your strategy in the first round• Don’t over-commit and shut off all possibility of mid Don’t over-commit and shut off all possibility of mid

course correctioncourse correction

Some SuggestionsSome Suggestions

Good Luck and Enjoy!Good Luck and Enjoy!