Capstone Business Strategy

Simulation
 Broad Segments of Evaluation & Weights

• Game Performance: 60%

• End-term Exam: 40%

 Game Performance Components

• Cumulative Profit: 20%

• Balanced Score Card: 20%

• Success Measures: 10%

• Presentation: 10%
 The Story: Background on Your Company
FTC required Sensors Inc. to be broken up
into separate companies:
Andrews Baldwin
Chester Digby
Erie Ferris

Started as a single corporation named Sensors, Inc.

Sold sensors as main product

Corporation was shut down by FTC due to

monopolistic operations

Your job: Operate one of the companies

and make it successful.
© 2012 Capsim Management
 The Start

When Sensor Inc. breaks up, each of the new companies

starts off with the following scenario:

$100 Million in
5 Product Lines
Sales

Closed
5 Market Marketplace
Segments

© 2012 Capsim Management

 The Marketplace: A Look Into The Segments

Round 1 Consumer Segment Each year, consumers

Round 8 Consumer Segment
Expectations will expect faster Expectations
Perceptual map used (higher performance)
to track changing and smaller products
consumer demands in (lower size)
size and performance • This causes the segment
circles to drift to the lower
right constantly

*Note the drift

towards the lower
Market segments right(expectations of
continue to diverge faster and smaller
over time products). Also note
the divergence of the
segments.

© 2012 Capsim Management

 Low End Consumer Characteristics
What the customers say

I want to
spend as
• Price sensitive. Prefer • Prefer less little money
price to be lowest cutting edge as possible!
possible. products
(Bigger Size &
Low
Performance) I want them
Price Positioning to have been
around for a
while…no
beta testing!

They have to
be
Reliability Age moderately
reliable…but
not enough
to drive up
the price!
• Ideal MTBF: 12000- • Ideal Age: 7
17000 years
The
technology
doesn’t have
to be cutting
edge.

© 2012 Capsim Management

 Traditional Consumer Characteristics
What the customers say

I want these
sensors to be
• Price sensitive, but • “Average” moderately
willing to spend more cheap.
Performance
than Low End and Size
consumers

I want them
Price Positioning to have been
around for a
while…no
beta testing!

They have to
be
Reliability Age moderately
reliable…but
not enough
to drive up
the price!
• Ideal MTBF: 14000- • Ideal Age: 2
19000 years
I want good
sensors… not
cutting edge,
but reliable.

© 2012 Capsim Management

 High End Consumer Characteristics
What the customers say

Price is not
an issue. I
want the
• Not price sensitive, • High best sensors
willing to pay highest Performance in the
market!
prices. and Small Size

I want the
Price Positioning newest
sensors you
have!

We need the
total package.
Reliability Age High
performance and
miniaturized for
our products.
• Ideal MTBF: 20000- • Ideal Age: 0
25000 years
Only the
most cutting
edge
products will
satisfy me!

© 2012 Capsim Management

 Performance Consumer Characteristics
What the customers say

I am willing
to pay for
• Not price sensitive, • Highest what I need.
willing to pay Performance
moderately high prices and Less
important Size

I want them
Price Positioning to have been
around for a
while…no
beta testing!

Reliability and
Reliability Age Performance
are very
important
and must be
high.
• Ideal MTBF: 22000- • Ideal Age: 1
27000 year
I prefer
newer
technology!

© 2012 Capsim Management

 Size Consumer Characteristics
What the customers say

I am willing
to pay for
• Not price sensitive, • Average what I need.
willing to pay Performance
moderately high prices but Maximum
Miniaturization

I want them
Price Positioning to have been
around for a
while…no
beta testing!

Reliability Age They must be

miniature to
fit our
technology

• Ideal MTBF: 16000- • Ideal Age: 1.5

21000 years old
I prefer
newer
technology!

© 2012 Capsim Management

 Segment Growth

According to a Market
Analyst, there will be
continuous growth in the
sensor market.
I see the entire
market growing at
around 14% or 15%
per year. The high
tech market alone
will be growing at
16%.
Your goal: Prepare your
company’s products to
meet the needs of the
growing market.

Unforgettable Business Learning

© 2012 Capsim Management
 Segment Buying Criteria
• Traditional: customers seek proven products
at a modest price
– Age, 2 years – importance – 47%
– Price, $20-$30 – importance – 23%
– Ideal Position, performance 5.0 size 15.0 –
importance – 21%
– MTBF, 14,000 – 19,000 – importance – 9%
• Low: customers seek low prices and well
proven products
– Price, $15 - $25 – importance – 53%
– Age, 7 years – importance – 24%
– Ideal Position, performance 1.7 size 18.3 –
importance – 16%
– MTBF, 12,000 – 17,000 – importance – 7%
• High: customers seek cutting edge technology
in size/performance and new designs
– Ideal Position, performance 8.9 size 11.1 –
importance – 43%
– Age, 0 years – importance – 29%
– MTBF, 20,000 – 25,000 – importance – 19%
– Price, $30 - $40 – importance – 9%
•  Performance: customers seek high reliability
and cutting edge performance technology
– MTBF, 22,000 – 27,000 – importance – 43%
– Ideal Position, performance 9.4 size 16.0 –
importance 29%
– Price, $25 - $35 – importance – 19%
– Age, 1 year – importance – 9%
• Size: customers seek cutting edge size
technology and younger designs
– Ideal position, performance 4.0 size 10.6,
importance – 43%
– Age, 1.5 years – importance – 29%
– MTBF, 16,000 – 21,000 – importance – 19%
– Price, $25 - $35 – importance – 9%
Ideal spot positions for each round
        Rounds      

Segment Co-ordinates 0 1 2 3 4 5 6 7 8

                     

Traditional Performance 5 5.7 6.4 7.1 7.8 8.5 9.2 9.9 10.6

  Size 15 14.3 13.6 12.9 12.2 11.5 10.8 10.1 9.4

                     

Low Performance 1.7 2.2 2.7 3.2 3.7 4.2 4.7 5.2 5.7

  Size 18.3 17.8 17.3 16.8 16.3 15.8 15.3 14.8 14.3
                     

High Performance 8.9 9.8 10.7 11.6 12.5 13.4 14.3 15.2 16.1

  Size 11.1 10.2 9.3 8.4 7.5 6.6 5.7 4.8 3.9
                     

Performance Performance 9.4 10.4 11.4 12.4 13.4 14.4 15.4 16.4 17.4

  Size 16 15.3 14.6 13.9 13.2 12.5 11.8 11.1 10.4

                     

Size Performance 4 4.7 5.4 6.1 6.8 7.5 8.2 8.9 9.6
  Size 10.6 9.6 8.6 7.6 6.6 5.6 4.6 3.6 2.6
                     
• Age range is static
– Traditional- demand peaks at 2; peak age zone 1.5
to 2.5
– Low-demand peaks at 7; peak age zone 6 to 8; min
age zone 4 to 9
– High- demand peaks at 0; peak age zone 0 to 1
– Performance- demand peaks at 1; peak age
zone 0.5 to 1.5
– Size- demand peaks at 1.5; peak age zone 1 to 2
• Price range is dynamic
– it falls by $0.50 every year in all segments.
– You may go up to $4.99 above the range in case of
sellers’ market, where supply runs short on the
demand.
– In a buyers’ market please stay within the price
range for that year.
• MTBF range is static through the rounds.
Please determine MTBF of a product based
upon buying criteria and your strategy in that
segment.
• Automation levels – Recommended for each
segment - must happen asap
•  Traditional – 8, Low – 10, High – 5,
Performance - 6, Size - 6
• Sales Turnover – Minimum for each Round
•  1 - $115mil, 2-131mil, 3-150mil, 4-
170mil, 5-195mil, 6-221mil, 7-252mil,
8-287mil
• Highest Performances so far, at the end of
round 8:
– Cumulative Profit: over $700 mil
– Stock price: over $800/-
– Market Capitalization: over $1.5bil
– Average Market share: 36%