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Capsim Report – Digby Team

Mina Abedi

University Canada West

BUSI 601 - Business Environment, Ethics & Strategy 

Professor: Abhinav Tomer

18th March 2020

Table of Contents

1. Executive Summary …………………………………………………..

2. Round 1………………………………………………………………..

3. Round 2 ……………………………………………………………….
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4. Round 3 ……………………………………………………………….

5. Round 4………………………………………………………………..

6. Round 5 ………………………………………………………………..

7. Round 6 ………………………………………………………………..

8. Individual Learning from Capsim ……………………………………..

Executive Summary

The name of our organization is Digby, which was established for developing affordable

products for high and low tech markets. The main motto of Digby is to focus on customer

comfort, and based on this, and we develop our products in the medium range where we can
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cover higher and lower both customers. We believe in sustainability, innovation, and strong

customer service, which build strong and strategic relationships. The management team of Digby

comprises of; Rabeya E Jahan Mumu as the Head of Research and Development; Lida Moradi as

the Chief Financial Officer (CFO); Seyedeh Maryam Shahrestani as Head of Human Resources

(HR) and Head of Production; Mina Sokhanvar as the Head of Marketing. The business focus

area of Digby in high tech and low tech in both markets. Although for some financial and

production issues, this strategy was not able to make an effective role. The management of the

organization took a quick strategy and changed the focus area only for the low tech market. This

sudden strategical change made a positive effect on the performance of the organization and

changed the profit ratio almost double. In the long run, this strategy proved sustainable to

increase the stock price, Return on Sales, market share, return on assets, return on equity from

the beginning of the journey. The greatest achievement for Digby is to maintain a steady position

from its foundation in this competitive market. The further illustrated report in the below. 

Team Digby Capsim Report

Our company Digby made two products, and these are Daze and Duss. Duss entered in a

high tech market. But our other product Daze, covered the low tech market but stayed its position

in high and low both markets. It gives our company an additional benefit in the beginning.

Round 1

R&D:

We need to clear our concept about some key issues which are needed for us to know for

research and development for new products. We need to know about size, performance,

MTBF(Mean time between failure), and the focus market for getting the best output from

research. Size is an essential factor that affects the revision date, age of revision, and R& D
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costs. Performance refers to the capability of products.MTBF means failures elapsed time during

technical or electrical systems during normal operations of the system. More MTBF gives us

more reliability and quality. Now is the time to choose the desired market where high tech

segments refer demand for the highest technology, and low tech segments refer to design the

product to think about price priority. We found one product from our research and development

for round one. Our first product, Daze, represents the middle line of high tech and low tech. So

it can fit it in both high and low tech market. Daze started with a performance of 6.4, a size of

13.6, and an MTBF 21000, and we keep it the same in round one. Next, we started to research

and development to our other product Duss. We found it we will launch it as an entirely high tech

product. But we were not feeling to begin in round one. So we just select the performance of 7.1,

a size of 13.0, and an MTBF of 20,000 for Duss, which will cover the high tech market in the

future.

Marketing:

In marketing, we were working on our product Daze to set the price at $34.00, hoping to

have the cheapest low-tech product to win the most market share. We set our promotional budget

at $1900 to raise our awareness and accessibility. Here are cost awareness and cost accessibility

of 80% and 48% consecutively. Our Variable Costs (Labor, Material, Carry) was 40,029 that was

a little bit high, and our Contribution Margin that deals company’s ability to have enough

revenue to cover the variable cost of the product was $11,751.Our taxes were 641, which was

lower than other competitors, and our net profit was $2.809, which is not too small for a start.

Production:

In the first round, we completely sold out 1,523 units of our first product, which was

called Daze. In other words, we sold out 1,100 units in low-tech and 422 units in high-tech. We
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also defined another product in the high-tech sector which is Duss. According to the previous

round, our automation rate was 3%. Our material cost was $14.73, and our labor cost was

$10.88. Market share has increased 3%, which was equal to 20% in the low-tech market in this

round, and for high-tech, the number reduced 1%, which was 16%. Moreover, the percentage of

customer awareness for this round was 80%, and customer accessibility was 48%.

Note. Production Vs. Capacity in Round 1. Adapted from Capsim,

https://ww3.capsim.com/student/portal/index.cfm?

template=reports.reports.courier_frame_2004&round=1&simid=F115788

Finance:

Round 2

R&D:

For Daze, we increased the MTBF was according to the needs of the low tech segment,

and we made most changes to Daze because it was there for the maximum time in the market,

and it had sold, so we thought of bringing it within the buying criteria of the people. We changed

the performance value of Daze in 6.0, and others all value are remaining the same as round 1.

Marketing:
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In series two, we set the price 50 for Duss to increase our profit. Besides, we want to

avoid losses that are usually the result of insufficient margin causes by a high-cost structure and

too low prices. Also, we decrease the promo budget that is for advertising and increase our sales

budget to try to enhance our sales and earn more profit. Our Variable Costs(Labour, Material,

Carry) was $43,937 that was less than round one, and it was good. Our contribution margin

increases to 19.191 that is increased from series one. Our net profit reaches $5.068.

Production:

In the second round, generally, we sold 1,738 units of our two low-tech and high-tech

products. First, Daze has produced in the low-tech segment, and we completely sold out 1,485

units. Second, Duss for the high-tech segment, which was sold 253 units and 61 units have

remained in inventory. For solving this, we tried to make some changes to our automation rate.

In the low-tech segment, we changed the number to 3.8, and for the high-tech segment, we

changed it to 2.9. We also made changes in our capacity for the next round. For low-tech, we

changed it to 850, and for high-tech to 200. Our material cost was $12.55 for Daze and $14.55

for Duss. Labor cost was $11.05 for Daze and $14.54 for Duss. Our market share remains the

same for Daze in the low-tech segment, but in the high-tech segment, it has sharply decreased to

9% and 8% for Daze and Duss. Customer awareness and accessibility was 67% in this round.
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Note. Production Vs. Capacity in Round 2. Adapted from Capsim,

https://ww3.capsim.com/student/portal/index.cfm?

template=reports.reports.courier_frame_2004&round=2&simid=F115788.

Finance:

Round 3

R&D:

In this round, we slightly change our MTBF strategy for both products. We choose to

lower the value. Considering the requirement of the segment, we made Daze size in 13.6.

Round1 Round2 Round3

Size Performanc MTB Size Performance MTB Size Performance MTBF

e F F

Daze 6.4 21000 14.0 6.0 21000 13.6 6.0 20500

13.6

Duss 7.1 20000 12.9 7.1 20000 12.9 7.1 19500

12.9
Marketing:

In this round, we decrease the price of Duss and to increase our sales. Also, we increase

the sales budget of Duss to help sell more from this product. Our variable costs decrease to

42,421. Our sales were 64,383. Our contribution margin increases to 21,962 that means we can
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cover more expenses. Our net profit increase to $6737, which shows changing the price of Duss

was reasonable.

Production:

In the third round, we sold out 1,535 units of Daze in the low-tech sector and 254 of Duss

in the high-tech sector and 203 units left in inventory. According to our unit sold, we increased

our automation rate to 4.1 for low-tech and 3.3 for high-tech products. The material cost for

Daze was $11.60 and $13.10 for Duss. Also, the labor cost for Daze was $10.75, and Duss was

$12.33. We have not made changes in our capacity due to the number of products that remained

in inventory and based on our finance department. Customer awareness about our low-tech

product was 100%, and their accessibility was 66%. In the high-tech segment, this amount was

equal to 53% and 80%.

Note. Production Vs. Capacity in Round 3. Adapted from Capsim,

https://ww3.capsim.com/student/portal/index.cfm?

template=reports.reports.courier_frame_2004&round=3&simid=F115788

Finance:

Round 4
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R&D:

In round three, our products Daze already stocked out. So we change the size of Daze in

13.6, and we increase the MTBF in 21000. But for another high tech product Duss, we decrease

the MTBF in 19000. Our Product Daze took the position in high tech and low tech both markets,

and we gain our market share from both markets.

Marketing:

We do not change the price of Daze, which helps increase sales in this particular product.

Our sales decrease to 62,749; however, our variable cost decrease to 41,647. Our net profit was

5,487, that was as a result of the low price of two product.

Production:

In the fourth round, we sold out 1,683 units of Daze and 110 units of Duss, and in the

inventory, 440 units of Duss remained, but we fixed this problem in the next round. We reduced

the automation rate for Duss to 3.0 and increased it to 4.2 for Daze. Our material cost was $10.95

and $11.71, in order, for Daze and Duss. And about the labor cost, it was $10.98 and $11.92. The

market share for Daze in this round was 20%, while this number for Duss was 2%. Regarding

customer awareness and accessibility, for Daze, the number was 100% and 65%, and for Duss, it

was 100% and 76%.

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Note. Production Vs. Capacity in Round 4. Adapted from Capsim,

https://ww3.capsim.com/student/portal/index.cfm?

template=reports.reports.courier_frame_2004&round=4&simid=F115788

TQM:

TQM refers to Total Quality Management, which gives an advantage for lowering the cost of

material, cost of production, and faster r & d. We use a total of $2100 for TQM, and it helps to

deduct our material cost, labor cost, and admin cost by 18%, .23% and 2.08% accordingly.

Finance:

Round 5

R&D:

Now we made a huge change in our research and made both our products for low tech.

We want to focus only on the low tech market because we think our present company condition

is more suitable for the low tech market. So we changed the performance of Daze in 6.0 and

Duss in 6.6.

Marketing:

We decrease the prices of Dass and Daze products to sell everything we have in store.

Our sales increase to 76,349 that means changing the prices of Duss and Daze help to sale more

and our net profit boost to 7,828.

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Production:

In the fifth round, we decided to focus only on low-tech products to solve the problem of

the previous round. We sold out 1,683 units of Daze completely, and we by setting a lower price

in the marketing sector, we finally sold 434 units of Duss, and just five groups remained in the

inventory. Material cost and labor cost was $9.87 and $10.86 for Daze, and we increased the

automation rate to 7.0 for this product. Due to the enormous amount of remained goods in

inventory (Duss), we decided to do not to produce this product to sell out the inventory goods.

Therefore, we do not have labor and material cost. We increased the automation rate for Duss to

6.0 too. Moreover, we increased capacity to 1,050 (for Daze) and 250 (for Duss) to produce more

since we were solving the old problems.

Note. Production Vs. Capacity in Round 5. Adapted from Capsim,

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https://ww3.capsim.com/student/portal/index.cfm?

template=reports.reports.courier_frame_2004&round=5&simid=F115788

TQM:

In this round, we increase our TQM budget is $3150, and we got a considerable reduction

of our admin cost at 29.53% and our material cost and labor cost to deduct in 3.04% and 3.78%

respectively.

Finance:

Round 6

R&D:

To see the success of our round five, we keep the same value for both products and only focus on

the low tech market.

Round 4 Round 5 Round 6

Size Performance MTB Size Performanc MTB Size Performance MTBF

F e F

Daze 6.4 21000 13.0 6.0 21000 13.0 6.0 21000

13.6

Duss 7.1 19000 12.7 6.6 20500 12.7 6.6 20500

12.9

Marketing:

our profits were $ 11,669,917. Losses are usually the result of insufficient margin caused

by a high-cost structure and too low prices. Profit can also suffer from excessive expenditures in
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selling and advertising, heavy interest payments on debt, and losses on liquidation (scrapping) of

inventory when retiring a product line. Our corporate contribution margin is 55.4%. A good

benchmark for contribution margin is 30%.

Production:

This was the last round, and we finally sold out all of our products, which were 1,595 for

Daze and 504 for Duss. As I mentioned before, we had two low-tech products, but based on the

report, in the high-tech segment, we sold out three units of Duss too. Our material and labor costs

were $8.28 and $5.76 for Daze, and $8.80 and $7.66 for Duss. Therefore, our share market was

18% for Daze and 6% for Duss in the low-tech segment. Customers' awareness and customer

accessibility for both products were 100% and 79%. Finally, we could achieve a higher margin

for both of our products, which were 57% for Daze and 49% for Duss.
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Note. Production Vs. Capacity in Round 6. Adapted from Capsim,

https://ww3.capsim.com/student/portal/index.cfm?

template=reports.reports.courier_frame_2004&round=6&simid=F115788.

TQM:

To see the savings for our material and admin cost, now we decide to increase our TQM

budget in total $6000, and our admin cost reduction rate is more than 50%, and the value is

57.47%. At that time, our demand increases by 5.55%.

Finance:

Our benefits were $ 11,669,917. Misfortunes are generally the consequence of lacking

edge brought by a significant expense structure and too low costs. The benefit can likewise

experience the weak effects of inordinate uses in selling and publicizing, overwhelming interest

installments on obligation, and misfortunes on liquidation (rejecting) of stock while resigning a

product offering. We kept away from a crisis credit and emergency loan. The reenactment gives

us each advantage of uncertainty, however on the off chance that we are out of money toward the

year's end, "Enormous Al" shows up to give us merely enough money to rescue us - at a 7.5 rate

point premium. In reality, we frequently allude to crisis advances as "a liquidity emergency," or

just "Liquidation," because of that, and we maintained a strategic distance from the crisis credit.

Our stock value rose a year ago by $ 14.14. Stock cost is influenced by execution, resource base,

obligation, profit arrangement, and the number of offers exceptional. In a time of forceful

interest in plant development and robotization, we would expect that the critical obligation

burden would cause some disquiet concerning investors. Be that as it may, if the stock value

plunges more than $15.00, it might be an admonition indication of a lot of obligation. The stock

cost can likewise endure in productive years Delivering profits in the abundance of benefits, or
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getting Major Al crisis advance, will negatively affect stock cost. The chart below shows our

cashflow chart in round six.

Individual Learning from Capsim

Lida Moradi: In the beginning, Capsim seems very difficult and complicated for me. By

the time passed, I understand that the most significant problem is not knowing the objective of

the team and put it in action .planning for the long run was another aspect that I found more

useful in Capsim. As I read the opinion of the other on Capsim, I found out that Moderation is a

crucial term on Capsim.

Maryam Shahrestani: Although the Capsim environment was a bit hard to understand, at

first sight, after the third round, everything got more exciting and understandable. I learned about

different sectors in a business and the way that they make decisions to run it. All the decisions

affected other parts. Specifically, in the production part, I got some knowledge about the effects

of the price on selling products, results of automation rate in productivity, how to buy capacity

for producing more, and some knowledge about labors and materials.

Rabeya E Jahan Mumu: Capsim taught me to think differently to research for a new

product. I learned how lots issue is related to run a company. It helps me to enlarge my critical
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thinking skills and decision-making ability. I also learned to take risks in business and how it can

change the total picture of the company.

Mina Sokhanvar: I learned that a detailed and methodical examination of the company as

a whole should have been completed before those decisions since those decisions would shape

the future of the company. An investment in automation was also a key lesson learned for me.

The pricing of our products was another lesson learned from this project. Our team priced our

high-end products below the average high-end price. Mistakes in estimating the proper amount

of sensors produced taught the team that mistakes in this area resulted in decreased profitability.

When the company “stocked out” of a specific product, the team learned the company could

have been more profitable.

References
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