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1 introduction .............................................................. 1 1.1 The Industry Conditions Report ..................................1 1.2 Management Tools .......................................................1 1.3 Company Departments ............................................... 2 1.4 Inter-Department Coordination ................................. 3 1.5 Practice and Competition Rounds .............................. 3 1.6 Company Success .........................................................3

2 industry conditions .......................................... 3 2.1 Buying Criteria .............................................................. 3 2.2 Buying Criteria by Segment ........................................ 5

3 the customer survey score ............................. 5 3.1 Buying Criteria and the Customer Survey Score ............. 6 3.2 Estimating the Customer Survey Score ...................... 8 3.3 Stock Outs and Seller’s Market ...................................9

4 managing your company ................................. 9 4.1 Research & Development (R&D) ................................10 4.2 Marketing ....................................................................11 4.3 Production ...................................................................13 4.4 Finance .........................................................................15

5 the capstone courier ...................................... 17 5.1 Front Page ................................................................... 17 5.2 Stock & Bond Summaries .......................................... 17 5.3 Financial Summary ..................................................... 17 5.4 Production Analysis ....................................................17 5.5 Segment Analysis Reports .........................................18 5.6 Market Share Report ..................................................19 5.7 Perceptual Map .......................................................... 19

5.8 Other Reports ..............................................................19

6 proformas and annual reports...................... 19 6.1 Balance Sheet .............................................................. 19 6.2 Cash Flow Statement ................................................. 20 6.3 Income Statement ...................................................... 20

7 additional modules ......................................... 20 7.1 TQM/Sustainability ..................................................... 20 7.2 HR (Human Resources) .............................................. 20

8 plug-ins ............................................................. 21 8.1 Making Decisions ....................................................... 21

9 situation analysis ............................................ 2110

forecasting ...................................................... 22 10.1 Basic Forecasting Method ........................................ 22 10.2 Qualitative Assessment ............................................. 22 10.3 Forecasts, Proformas and the December 31 Cash Position ............................................................... 23 10.4 Worst Case/Best Case ............................................... 23

11 balanced scorecard ....................................... 23

12 six basic strategies ...................................... 24 12.1 Broad Cost Leader ..................................................... 24 12.2 Broad Differentiator ................................................... 24 12.3 Niche Cost Leader (Low Technology) ....................... 24 12.4 Niche Differentiator (High Technology) ................... 24 12.5 Cost Leader with Product Lifecycle Focus ............... 24 12.6 Differentiator with Product Lifecycle Focus ............ 24

Most instructors include team Practice rounds. When the Practice is over, the simulation will restart from the beginning, using the unique model selected by your instructor.

When the Competition begins, your decisions count! Additional tasks could include:

» Optional Homework Assignments » Peer Evaluations

See your Dashboard for complete information.

Login with your User ID and Password at capsim.com. Click on Capstone. Go to Getting Started and follow the steps that include:

» Reviewing the Rehearsal Tutorial » Opening the Capstone Spreadsheet » Forming your company

The Course Road Map

Getting Started

Practice Rounds (if applicable)

Competition Rounds (if applicable)

Your instructor might include a Comp-XM exam. Go to the Course Page and choose Comp-XM. Follow the instructions on the Dashboard which include: » Decision making

using the Comp-XM Spreadsheet

» Board Queries (quizzes)

Go to capsim.com/register, follow the onscreen instructions and register into your Industry.* Create your User ID and Password.

*Your instructor may have given you an Industry ID Number. If not, you can locate your industry by using your school name/campus and either the course section number, start date or your instructor’s initials.

Registration

Table of Contents

SUPPORT TICKETS:

If you need assistance, please submit a support ticket. Login at capsim.com, click Capstone, then in the left menu, select Help > Support. If you have problems registering, send an email to support@capsim.com.

Team Member Guide

Management Tools

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1 Introduction

Congratulations, you are now in charge of a multimillion dollar company. You manufacture sensors, which you market to other manufacturers. They put your products into the devices they sell. Your company was created when the government split a monopoly into identical competitors. As a monopoly, operating inefficiencies and poor product offerings were not addressed because:

• Increasing costs could be passed onto customers; and • Mediocre products would sell because customers had no

other choices.

Although last year’s financial results were decent, your products are getting old, your marketing efforts are falling short, your production lines need revamping and your financial management is almost nonexistent.

Competition in the post-monopoly era means you can no longer ignore these issues. If you do, competitors with better products and/ or lower prices will take your market share.

Sensors Are Everywhere...

Sensors are devices that observe physical conditions. For

example, the average cell phone contains dozens of sensors

that allow it to interpret touch, spatial orientation and

signal strength.

New sensor businesses are created every day in areas as

diverse as security, aeronautics and biomedical engineering.

You are in a business-to-business market, not a direct-to-

consumer market; the sensors your company manufactures

are incorporated into the products your customers sell.

1.1 The Industry Conditions Report

Each simulation industry is unique. As your simulation starts, the Industry Conditions Report, which is explained in Chapter 2, will outline the beginning business environment, including customer buying criteria.

The Industry Conditions Report is available from your

simulation Dashboard.

1.2 Management Tools

Here are the tools you need to run your company.

1.2.1 The Rehearsal Tutorial Think of the Rehearsal Tutorial as a driving school for the simulation. The tutorial will show you ways to steer the company, including how to:

• Invent and revise products; • Make marketing decisions; • Schedule production and buy/sell equipment; and • Ensure your company has the financial resources it needs for

the upcoming year.

The sample resources used for the Rehearsal, including its Capstone Courier (see below) and Industry Conditions Report, mirror those used in the actual simulation.

The Rehearsal is available from your simulation Dashboard.

1.2.2 The Capstone Courier Every round, you and your competitors will have access to an industry newsletter called the Capstone Courier. The Courier (described in Chapter 5) is an extensive year-end report of the sensor industry. It includes customer buying patterns, product positioning, public financial records and other information that will help you get ahead. In business, knowledge is power. If you want to evaluate your company’s performance or analyze your competitors, the Courier is the place to start.

Customer Survey Scores for each product (Chapter 3) can be found in the Courier’s Segment Analysis pages. These scores determine sales distribution. In general, the higher the score, the better the sales.

The Courier Reports “Last Year’s Results”

The Courier available at the start of Round 1 displays results

for Round 0, when all companies were equal just after the

monopoly’s breakup. The Courier available at the start of

Round 2 will display the results for Round 1. As the simulation

progresses and strategies are implemented, results among

the competing companies will begin to vary.

Company Departments

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1.3 Company Departments

The Rehearsal Tutorial and Chapter 4 discuss company activities. You have four main departments or functional areas:

• Research & Development, or R&D • Marketing • Production • Finance

Many simulations utilize modules such as Human Resources and TQM (Total Quality Management)/Sustainability. Modules require additional management decisions. Your simulation Dashboard will tell you if any modules are included.

Companies use the Capstone Spreadsheet to enter departmental decisions.

1.3.1 Research & Development (R&D) Your R&D Department designs your product line. The department needs to invent and revise products that appeal to your customers’ changing needs.

1.3.2 Marketing Your Marketing Department prices and promotes your products. It interacts with your customers via its sales force and distribution system. Marketing is also responsible for sales forecasts.

1.3.3 Production Your Production Department determines how many units will be manufactured during the year. It is also responsible for buying and selling production lines.

1.3.4 Finance Your Finance Department makes sure your company has the financial resources it needs to run through the year. The department can raise money via one-year bank notes, 10-year bonds or stock issues.

The department can also issue stock dividends, buy back stock or retire bonds before their due dates.

1.3.5 Plug-ins Plug-ins are different than modules. Plug-ins and their decisions have a greater overall impact on your organization.

For example, the simulation might include the Ethics plug-in, which presents you with an unexpected dilemma. Group discussion and consensus is imperative because your decisions will affect your financial results.

Your simulation Dashboard will notify you if a plug-in has been scheduled.

The Courier is available from two locations:

• From the Capstone Spreadsheet, click Reports in the menu bar; and

• On the website, log into your simulation and click the Reports link.

1.2.3 The Situation Analysis Completing the Situation Analysis (described in Chapter 9) will enable you to understand current market conditions and how the industry will evolve in the next few years. It will assist you with your operational planning.

The Situation Analysis comes in two versions:

• Online interactive • Downloadable PDF (pen and paper)

The Situation Analysis is available from your

simulation Dashboard.

1.2.4 Proformas & Annual Reports Proformas and annual reports are specific to your company. Proformas are projections for the upcoming year. Annual reports are the results from the previous year.

The proformas will help you envision the impacts of your pending decisions and sales forecasts. The annual reports will help you analyze last year’s results.

Proformas are only available from the Capstone

Spreadsheet’s Proformas menu.

To access the annual reports:

• From the Capstone Spreadsheet, click Reports in the menu bar; or

• On the website, log into your simulation then click the Reports link.

1.2.5 The Capstone Spreadsheet The Capstone Spreadsheet is the nerve center of your company where you formulate and finalize management decisions for every department. The spreadsheet comes in two versions:

• A Web Version that allows you to work via any Internet browser; and

• An XLS Version that runs via Microsoft® Excel®.

After you log into your simulation, the spreadsheet is

available from the Decisions link.

1.2.6 Just in Time Information In the spreadsheet decision areas, look for the flag symbol shown to the right. Clicking it will give you detailed information about the area you are viewing.

Team Member Guide

Buying Criteria

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to success! Companies compete for up to eight rounds, with each round simulating one year in the life of your company.

1.5.1 Decision Audits The Decision Audit is a complete trail of all team decisions. It will help you identify your decision-making strengths and weaknesses.

The audit is available from two locations:

• From the Capstone Spreadsheet, click Help in the menu bar; or

• On the website, log into your simulation then click the Decision Audit link.

1.6 Company Success

The board of directors, shareholders and other stakeholders expect you to make the company a market leader. Successful managers will:

• Analyze the market and its competing products; • Create and execute a strategy; and • Coordinate company activities.

Best of luck in running a profitable and sustainable company!

2 Industry Conditions

The information in your Industry Conditions Report will help you understand your customers.

Your customers fall into different groups, which are represented by market segments. Customers within a market segment have similar needs. The segments are named for the customer’s primary requirements such as:

• Traditional • Low End • High End • Performance • Size

The Industry Conditions Report lists market segment sales percentages and projected growth rates unique to your simulation.

The Industry Conditions Report is published once at the

beginning of the simulation. It is available from your

simulation Dashboard.

2.1 Buying Criteria

Customers within each market segment employ different standards as they evaluate products. They consider four buying criteria: Price, Age, MTBF (Mean Time Before Failure) and Positioning.

1.4 Inter-Department Coordination

1.4.1 R&D and Marketing

R&D works with Marketing to make sure products meet customer expectations.

1.4.2 R&D and Production R&D works with Production to ensure assembly lines are purchased for new products. If Production discontinues a product, it should notify R&D.

1.4.3 Marketing and Production Marketing works with Production to make sure manufacturing quantities are in line with forecasts. Marketing’s market growth projections also help Production determine appropriate levels of capacity. If Marketing decides to discontinue a product, it tells Production to sell the product’s production line.

1.4.4 Marketing and Finance Marketing works with Finance to project revenues for each product and to set the Accounts Receivable policy, which is the amount of time customers can take to pay for their purchases.