Capsim Business Strategy: Market Segments, Production, and Financial Decisions

What is the absolute maximum percentage of capacity you can achieve with plant utilization?

200%

What are the five market segments in Capsim?

Traditional, Low End, High End, Performance, Size

What is the maximum you should spend on a segment's Sales Budget to avoid diminishing returns?

$3,000

What is the most direct way to decrease material costs?

Lower MTBF

Does the Courier show you what other companies spent on promo and sales for their products?

No

Which segment's product should you refrain from repositioning for the first few rounds?

Low End

What's the single most important buying criteria for low-end customers?

Price

Which two market segments are least sensitive to price (care least about price)?

High End, Performance

What does investment in promotion budgets help to increase?

Awareness

How do you decrease your product's age?

Update in R&D

How do you increase your product's age?

Do nothing

Which budget, promotion or sales, affects the product segment as a whole instead of individual products?

Sales budget

How much and in which direction do price expectations change each round?

-$0.50 each round

Do all segments grow at the same rate?

No

Should you aim to have zero inventory left over at the end of the year?

No

What is the customer survey forecasting formula?

December survey ÷ sum of all

How many years do you have before you must pay off long-term debt?

10 years

How does increasing the accounts payable time impact your company's finances?

Less cash now, more later

What percentage of awareness and accessibility do you lose each round?

33% awareness, 1/3 accessibility

If you buy capacity it is available immediately or do you have to wait a year?

Next year

What's a good amount of cash to have on hand at the end of each round?

$5-10 million

How do you achieve an ideal age of 0.0 for a high-end product?

New product

In the Performance segment, what is the most important criterion for customers when making a purchase?

Performance

Can you make two different products on the same assembly line?

No

What is the relationship between automation and labor costs?

Inverse

When you have current debt on your balance sheet, how many years do you have before you must pay it back?

1 year

What is one decision that directly impacts stock prices in Capsim?

EPS

What is the relationship between accounts receivable policy and customer survey score?

Longer terms = higher score

Your company's days of working capital should be in what range?

30-90 days

When you create a new product in R&D, what must you do in production so that you can sell it after the following year?

Buy capacity

Which criteria are used to describe the ideal spot for each product?

Performance & Size

Which product attribute is a measure of reliability?

MTBF

Which product criteria is most important to traditional segment customers?

Age

Which segment grows faster, traditional or high end?

High End

Which segment is larger at the start of the simulation, traditional or high end?

Traditional

True or false: Automation is a measure of the number of assembly lines in your plant.

False

If a Capsim team's asset turnover is low, what does this imply about its use of its production capacity?

Overcapacity

What is one way to increase a product's contribution margin?

Raise price or lower cost

In terms of units sold, which is the largest Capsim market segment?

Low End

In production, is it best to order exactly the number of units forecasted to sell, a few more, or a few less?

A few more

True or false, the ideal spot for each segment is in the center of its circle on the perceptual map.

False

Which company is more efficient, the one with a 5% ROA or the one with a 7% ROA?

7% ROA

Which is better in Capsim, to stock out of a product or to have about one month's worth of inventory left at the end of the year?

Inventory leftover better

Is product accessibility related to a product's distribution channel or its price point?

Distribution channel

Decisions in which Capsim function directly affect product awareness?

Promotion

Which is more expensive, taking out current debt or incurring an emergency loan?

Emergency loan

Give an example of an information flow in Capsim, where information entered on one page flows to another page.

R&D → Production

If you make R&D changes that will take longer than one year to complete, can you scale them back the following year to get the updated product out sooner?

Yes

Does the Courier tell you what your competitors' automation levels will be next round?

No

Does the Courier tell you what your competitors' capacity will be next round?

No

True or false, if you change your forecasts then your pro forma income statement will change.

True

What are the two metrics in the Courier you use for the basic forecasting method?

Last year's sales, growth rate

Which of these metrics are used in forecasting? Contribution margin or December customer survey score?

December survey score

The Courier is published on December 31. Do the criteria describe what customers wanted last year or what they want in the new year?

New year

Each year customers expect a product's size to be larger, smaller, or stay the same?

Smaller

Each year customers expect a product's performance to be better and faster, worse and slower, or stay the same?

Better and faster

What are the two product attributes that make up its ideal position on the perceptual map?

Performance, Size

True or false, all market segments in Capsim drift across the perceptual map at the same rate.

False

True or false, perceptual map drift rates are made available to students in the Capsim published materials.

True

Do customers' preferences for MTBF change over the eight rounds?

No

Will a segment's customers ever buy a product outside the dashed circle (the rough cut) on the perceptual map?

No

Will increasing MTBF above the customer's expected range make that product more attractive to customers?

No

True or false, your accounts receivable terms are a factor in your customer survey score.

True

Will a segment's customers ever buy a product that is $1.00 above the price range in the Courier?

No

What is the relationship between a product's position on the perceptual map and its material costs?

Higher performance = higher cost

True or false, the more products your company repositions in a year, the longer those projects will take to complete.

True

What is the relationship between repositioning a product and the product's perceived age?

Resets age lower

True or false, about 1/3 of your customers forget about your products each year, and you must continually promote them to maintain awareness.

True

Which marketing expenditure benefits all your products in a segment, promotion or sales?

Sales budget

True or false, sales budgets have a smaller effect on products outside the fine cut circle.

True

What does it mean when your actual sales are greater than your potential sales?

Stockout

What does it mean when your potential sales are greater than your actual sales?

Lost sales

What is the highest level of automation available in Capsim?

10

When a bond comes due, the face value of the bond will be subtracted from long term debt and added where?

Cash

True or false, a brokerage fee is charged when you repay a bond early.

True

Can you retire stock (buy back shares) in Capsim?

Yes

Can you create a new product in Capsim?

Yes

Can you discontinue a product in Capsim?

Yes

Where do you find the contribution margin for each individual product you sell?

Courier

Can you sell capacity to raise money?

Yes

Is adding a second shift to your production an efficient way to produce products?

No

Should you try to avoid borrowing money in Capsim?

Yes

Which Capsim function controls automation?

Production

Where can you find the revision date for a product you've updated?

R&D page