mgt 180 capsim

​​Research and Development (R&D)

1. Creating New Products

2. Upgrading Products

3. Retiring Products from Market

- Designs product line

- Invent + revise products that appeal to customer's changing needs

R & D Sliders

Performance

Size

Reliability

Performance

- Sensor's levels of functionality

- 0-20 scale (higher # = more appealing)

Size

- Physical size and portability of sensor

- 20-0 scale (lower # = more appealing)

Reliability

- Avg # of hours before device is expected to fail

- 14000-23000 hr scale

- Each 1000 hrs adds $.30 to unit material cost

Product Positioning

performance and size

Creating a new product

- Blue "+ New Product" button

- Set Capacity and Automation level

Retiring a product

- Red "-" button

- Product Specifications and Remaining Inventory will be sold at 50% of material cost

- Cannot sell all products at once, must have at least one to stay in industry

R&D Outputs

Age, Material Cost, Revision Date

Age

- Each Performance or Size revisions will cut perceived age in HALF

- Reliability changes will not affect age

Material Cost

- Based on Positioning (size/performance) and Reliability

- Cost rise when products move towards High Tech Positioning and upper limit of Reliability scale

Revision Date

Day when your product is updated or released (all units of inventory are updated)

Marketing

1. Setting Product Prices

2. Setting Product Promotion and Sales Investments

3. Forecasting Sales for each Product

- Interacts w/ customers via sales forces and distribution system

Marketing Sliders

Price, Promotion Budget, Sales Budget, Forecasting

Price

- Each segment has $20 price range

- Customers prefer cheaper products (towards bottom of range)

- High Tech segment willing to spend more

- Find acceptable price range for each segment in Buying Criteria

Promotion Budget

- Determines level of awareness

- Every year 33% of customers forget about product

- New products create 25% awareness increase at no cost

- Awareness = "Before" Sale (persuading customers to look at product)

Awareness percentage

# of customers who know about product

Starting Awareness

Last Year's Awareness - (33% x Last Year's Awareness)

New Awareness

Starting Awareness + Additional Awareness from Promo Budget Curve

Sales Budget

- Contributes to segment accessibility

- If sales budget reaches 0, you lose ⅓ accessibility each year

- Accessibility applies to segment, not product

- Accessibility = "After" Sale (governs everything during/after sale; closing the deal via salespeople and distribution channels)

Segment Accessibility Percentage

# of customers who can easily interact with company via sales people, customer support, etc

New Accessibility

Starting Accessibility + Additional Accessibility from Sales Budget Curve

Forecasting

- Sales forecasts set production levels for the year and calculate Proformas (projected results)

- KEY ELEMENT TO SUCCESS

2 primary methods to forecast

1. Last Year's Acual Sales x (1 + Segment's Current Round Growth Rate)

2. Last Year's Potential Sales x (1 + Segment's Current Round Growth Rate)

Potential Sales

- amount of units you would expect to sell in a perfect market (including product stock-outs)

- Gives better idea of what you will likely sell next year (should no new products enter market)

Production

1. Scheduling Production of Units

2. Buying or Selling Capacity

3. Increasing Automation

- Determines how many units will be manufactured to meet forecasted demand

- Responsible for buying + selling product lines, deciding levels of capacity and automation of plant

Production Sliders

Promotion Schedule, Capacity, Automation

Promotion Schedule

- setting production schedule for each product

To meet demand set by Marketing Forecast:

Current Inventory on-hand + Production after Adjustment = # of Units Available for Sale

Production after Adjustment line

1% of all products will be thrown out for defects

Capacity

- Each new unit of capacity = $6 floor space + ($4 x automation rating)

- For each unit of capacity, you can schedule overtime work = 100% of Plant Capacity (you can double capacity)

Overtime Labor Costs

50% higher than producing in first shift

Automation

- As automation levels increase, # of labor hrs fall (decreases costs 10% per point)

- Lowest automation rating = 1.0; highest = 10.0

- Higher automation level = longer for product to be revised by R&D (Any changes will take at least 1 year to complete)

- Each point that automation is changed, $4 charge per unit of capacity

Finance

1. Raising Capital

2. Retiring Debt/Stock

3. Issuing Dividends

- Makes sure your company has resources to run through year (cash position is positive)

- Can borrow money or pay it back

Finance sliders

Raising Capital, Retiring Debt/Stock, Issuing Dividends to Shareholders, Emergency Loans

Raising Capital

1. Current Debt (Bank Loans)

2. Stock Issues

3. Bond Issues (Long-term Debt)

Current Debt

1 year loans with yearly interest rate

Stock Issues

selling common stock to public

Bond Issues

$ bond markets will issue you (Capped at having up to 80% of last years fixed assets)

Retiring Debt/Stock

To reduce # of outstanding shares or amount of longterm debt

Retire Stock

you can buy back 5% of shares each round

Retire Bonds

you can retire any long-term debt/bonds (earlier than 10 year period) w/ 1.5% brokerage fee

Issuing Dividends to Shareholders

- Can impact stock price- owners of a company like to see some return on their investment

- Healthy stock price → increases ability to raise capital → further profits → more dividends

Emergency Loans

1 year loan from emergency lender

AVOID!!

Making Decisions

High tech segment will grow more (20%) than low tech segment (10%) each round; more $ in high tech segment but also more demand

5 Key Performance Indicators (KPIs)

1. Sales/Revenue ($ you sell in 1 year)

2. Profit ($ you make after revenue and costs are accounted for)

3. Stock Price (Value per share of company that is traded on public stock exchange)

4. Contribution Margin (percentage your company earns on each unit sale)

5. Emergency Loan (Issued if company runs out of money at inflated interest rate)

Contribution Margin

Sales minus Variable Costs divided by Overall Sales

R&D Results

Customer Buying Criteria

Perceptual Map

Product List

Customer Buying Criteria

detailed buyer info for both segments

Perceptual Map

shows where customer segment and ideal spots are

Product List

complete list of products in the industry (w/ specifications, ages, revision dates)

Marketing Results

(broken into segments)

Customer Buying Criteria, Demand Info, Market Share, Top Products

Demand Information

market size, growth rate sales info for LAST YR

Market Share

company market share, measured by overall sales of all products

Top Products

complete list of products that sold in segment in prior yr (w/ info on price, units sold, sales, promo budget, accessibility, awareness, customer satisfaction)

Production Results

2 areas: Unit Costs & Manufacturing Plants

unit costs

- Assess company material and labor costs

- Compare how your product costs match up to competitors

manufacturing plants

See all info relating to your products manufacturing (units produced, leftover inventory, plant automation, next year's automation + capacity)

Finance Results

Income Statement, Cash Flow Statement, Balance Sheet, Product Income Statement

Income Statement

Last year's net profit;

Each company's high level sales and costs

(variable costs, fixed costs, interest, taxes)

Variable costs

direct labor and material costs

Fixed costs

R&D, sales, administrative expenses

Interest

calculated on debt you owe

Taxes

35% of remaining profits

Cash Flow Statements

Where cash went over the past year

(operating expenses, investing in plant and equipment, financing activities)

Balance Sheet

Assets, Liabilities, Equity, Current Assets, Current Liabilities, Fixed Assets., Long-term Liabilities

Assets

$ of what each company owns

Liabilities

what company owes

Equity

amount contributed by investors

Current assets

can be quickly converted to cash

Current liabilities

short-term debt

Fixed assets

take longer to convert to cash (including pant and equipment)

Long-term liabilities

long-term debt holdings (bonds)

Product Income Statement

More detailed assessment of products

(Contribution of each product + how they impacted company's profitability)