Capsim Simulation Lecture Flashcards

Practice vocabulary flashcards generated from the Capsim lecture notes covering operational metrics, buying criteria, financial guidelines, and strategic rules.

Maximum Plant Utilization Capacity

The absolute maximum percentage of capacity achievable with plant utilization is $200\%$.

Capsim Market Segments

The five market segments in Capsim are Traditional, Low End, High End, Performance, and Size.

Sales Budget Diminishing Returns Threshold

The maximum expenditure on a segment's Sales Budget to avoid diminishing returns is about \\text{\\$3 million} per product.

Direct Material Cost Reduction Method

The most direct way to decrease material costs is to reduce MTBF (reliability).

Low End Product Repositioning Rule

You should refrain from repositioning a product in the Low End segment for the first few rounds.

Low-End Primary Buying Criterion

Price is the single most important buying criterion for low-end customers.

Price Insensitive Market Segments

High End and Size are the two market segments least sensitive to price.

Promotion Budget Function

Investment in promotion budgets directly helps to increase product awareness.

Decreasing Product Age Method

A product's age is decreased by revising or repositioning it in R&D.

Increasing Product Age Method

A product's age is increased by letting time pass ($+1\text{ year/round}$) without revising it.

Segment-Level Marketing Budget

The sales budget affects the product segment as a whole through accessibility, whereas promotion affects individual products.

Annual Price Expectation Drift

Price expectations drop by \\text{\\$0.50} (lower) each round.

End-of-Year Inventory Strategy

Companies should not aim for zero inventory; instead, keep about one month's inventory.

Customer Survey Forecasting Formula

$$\text{Segment demand} \times (\text{your survey score} \div \text{total scores in segment})$$

Long-Term Debt Repayment Period

Companies have $10\text{ years}$ before they must pay off long-term debt.

Impact of Increasing Accounts Payable Time

Increasing accounts payable time keeps cash longer, resulting in more cash on hand and less borrowing.

Annual Loss of Awareness and Accessibility

A company loses one-third (about $$33\%$) of its awareness and accessibility each round.

Capacity Purchase Availability Timeframe

Purchased capacity is not available immediately; you must wait a year (available next round).

Target End-of-Round Cash Balance

A good amount of cash to keep on hand at the end of each round is enough to avoid an emergency loan ($\sim \$\text{5--10M}$).

High-End Ideal Age Strategy

To achieve an ideal age of $0.0$ for a high-end product, revise it every year with a revision date of 12/31.

Performance Segment Primary Criterion

MTBF (reliability) is the most important criterion for performance segment customers.

Assembly Line Product Capacity Constraint

You cannot make two different products on the same assembly line.

Automation and Labor Cost Relationship

There is an inverse relationship between automation and labor costs: higher automation yields lower labor costs.

Current Debt Repayment Horizon

When current debt is on the balance sheet, you have $1\text{ year}$ before paying it back.

Direct Drivers of Stock Price

Decisions directly impacting stock prices include dividends, issuing stock, or buying back stock.

Accounts Receivable Policy Effect on Survey Score

Longer terms raise the customer survey score, while $0\text{ days}$ cuts it by $\sim 40\%$.

Target Days of Working Capital

Days of working capital (current assets minus current liabilities in days) should be in the range of $30\text{--}90\text{ days}$.

Production Requirement for New R&D Products

When creating a new product in R&D, you must schedule production units for it (requiring capacity) so it can be sold after the following year.

Ideal Spot Coordinates

The ideal spot for each product is described using performance and size coordinates.

MTBF

Mean Time Between Failures; a product attribute that serves as a measure of reliability.

Traditional Segment Primary Buying Criterion

Age ($2.0\text{ years}$) is the most important criteria for traditional segment customers.

Segment Growth Comparison (Traditional vs. High End)

The High End segment grows faster than the Traditional segment.

Initial Segment Size Comparison (Traditional vs. High End)

The Traditional segment is larger than the High End segment at the start of the simulation.

Automation Definition

Automation is a measure of machine efficiency, not the number of assembly lines in a plant.

Low Asset Turnover Implication

A low asset turnover implies excess/unused production capacity (an underutilized plant).

Methods to Increase Contribution Margin

Contribution margin can be increased by raising product price or cutting material/labor costs.

Largest Market Segment by Units Sold

The Low End segment is the largest Capsim market segment in terms of units sold.

Production Forecasting Ordering Rule

In production, it is best to order a few more units than forecasted to sell.

Perceptual Map Ideal Spot Misconception

The ideal spot for each segment is not always in the exact center of its circle on the perceptual map.

Product Accessibility Driver

Product accessibility is related to a product's distribution channel via the sales budget.

Product Awareness Driver

Decisions in the marketing function (specifically promotion budget) directly affect product awareness.

Cost Comparison: Current Debt vs. Emergency Loan

Incurring an emergency loan is more expensive than taking out current debt.

Multi-Year R&D Revision Limit

If R&D changes take longer than one year, you cannot scale them back the following year to release sooner; the project must finish first.

Competitor Perceptual Map Drift Rates

Perceptual map drift rates are published and available to students in Capsim materials.

MTBF Preference Stability

Customers' preferences for MTBF stay constant and do not change over the eight rounds.

Rough Cut Perceptual Map Boundary

Customers in a segment will never buy a product outside the dashed circle (rough cut) on the perceptual map.

Excess MTBF Utility

Increasing MTBF above the customer's expected range adds no benefit, increases cost, and does not make the product more attractive.

Above-Range Price Tolerance

A segment's customers will buy a product up to $\$1.00$ above the price range in the Courier, but demand drops sharply.

Perceptual Map Position and Material Costs

Leading-edge positions on the perceptual map (higher performance and smaller size) raise material costs.

R&D Project Duration Factors

R&D project completion times depend on the distance moved on the perceptual map, not the total number of products repositioned.

Maximum Automation Rating

The highest level of automation available in Capsim is $10$.

Bond Maturity Accounting Transfer

When a bond comes due, its face value is subtracted from long-term debt and added to current debt.

Early Bond Repayment Penalty

A brokerage fee of $1.5\%$ is charged when retiring or repaying a bond early.

Second Shift Production Efficiency

Adding a second shift is not an efficient production strategy because it incurs higher labor costs ($\sim 1.5\times$ pay).

Borrowing Strategy in Capsim

Borrowing money to fund growth is acceptable and should not be avoided; only emergency loans should be avoided.

Automation Control Function

The Production function controls automation.

Product Revision Date Location

Product revision dates are located on the R&D page.