ROUND 3 NOTES PT1

Evaluation of Round 2 Performance and Emergency Loan Status

• Initial Status Report: The team encountered a significant setback in the previous round, resulting in a negative financial balance and the acquisition of an "emergency loan."

• Class-Wide Trends: It was noted that every group in the class also received an emergency loan. While this suggests a systemic difficulty or common error across all teams, it does not alleviate the need for a recovery strategy.

• Root Cause Analysis: Allison and Madison analyzed the Capstone data to determine the cause of the poor performance. They identified two main factors:

  • Overproduction: The team produced too many units for several product lines.

  • R&D Discrepancy: Competitive analysis revealed that products in the last three industries—Adam, Aft, and Agape—had specifications (research and development) that were inferior to competitors.

• Competitor Strategy Observation: Other teams invested heavily in R&D during Round 1. Consequently, those teams began Round 2 with superior product specifications. To remain competitive, the group must now invest aggressively in R&D to close the gap.

• Current Metrics: One member noted that after initial tweaks, the Balanced Scorecard was reflecting a score of $82.7$. Despite the financial loss, the team felt they were performing better than other teams when evaluated through the lens of the scorecard metrics.

Strategic Recovery Plan for Round 3

• Core Objective: The primary strategy for Round 3 is to "pour money into R&D" and reduce production levels to facilitate selling off existing excess inventory.

• Catch-Up Philosophy: Madison argued that the team must mass-invest in R&D for the last three products even if it pushes revision dates late into the year (or even into the next year). If the team does not make this drastic move now, they will remain behind for the rest of the simulation because competitors will continue making incremental improvements.

• Timing Philosophy: The team aims to get their products as close to the "ideal spot" as possible while managing the trade-off regarding revision dates. The goal is to reach competitive parity by the time grading becomes more intensive in Round 6 (the grading covers Rounds 6, 7, and 8).

Research and Development (R&D) Specifications

• Able (Segment: Traditional):

  • Performance: Set to $6.3$.

  • Size: Set to $13.7$.

  • Revision Date: Targeted for June 30, 2029 (a two-year revision cycle).

  • Decision Rationale: This adjustment is intended to catch up to the best competitor, who currently holds a performance of $6$ and a size of $14$. Competitive research suggests going above ideal performance or below ideal size provides extra benefits, while MTBF outside the range does not.

• Acre (Segment: Low End):

  • MTBF (Mean Time Between Failures): Increased to $15,000\,hours$.

  • Age Strategy: The team aims to maintain the age between $5$ and $10$ years. The current specifications are $3$ and $17$. The focus here is on the age factor, which is the second most important attribute for this segment.

• Adam (Segment: High End):

  • Performance: Initially proposed at $9.9$, later discussed at $9.8$ to keep the date within 2029.

  • Size: Initially proposed at $10.1$, later discussed at $10$.

  • Decision Rationale: The team is far behind here; the best competitor is already at performance $9.8$ and size $10$. This is the absolute highest importance factor for this segment.

• Aft (Segment: Performance):

  • Performance: Set to $11.3$ (or $11$ to manage the date).

  • Size: Set to $14.3$ (or $14.4$ to manage the date).

• Agape (Segment: Size):

  • Performance: Set to $5.3$.

  • Size: Set to $8.9$.

  • Comparison: The highest performing competitor is currently at $5.2$ and $9$.

Marketing and Sales Budget Decisions

• Promotion Budget (Customer Awareness):

  • Most products will receive a budget of $1,400$ for maintenance.

  • Aft will receive a higher budget of $1,500$ to push its awareness into the $90\%$ range (currently at $89\%$).

• Sales Budget (Customer Accessibility):

  • Most products set at $1,800$.

  • The last product line set at $1,600$.

• Pricing Strategy:

  • Able: Decreased by $0.50$ to 26.99\ to align with segment priorities where price is the second most important factor.

  • Acre: Set to 18.49\. This is significantly lower than the biggest competitor's price of 18.95\ in the previous round.

  • Adam: Set to 38.99\ (no change from previous pricing).

  • Aft: Set to 33.49\ (a reduction of approximately $0.30$ from the 34.00\ cap).

  • Agape: Set to 33.99\ (near the maximum allowed price).

Production and Forecasting

• Conservative Forecasting: Since R&D revisions for Adam, Aft, and Agape are pushing late into the year (December), the team will not have the updated product available for sale for most of the year.

• Specific Forecast Adjustments:

  • Able: Sales forecast set at $75\%$ of last year's sales.

  • Adam, Aft, and Agape: Sales forecast cut by $50\%$ compared to the previous year.

• Inventory Philosophy: The team expects to stock out on several items, which is preferable to overproducing and holding excess inventory again.

• Market Share Nuance: Madison noted that even with inferior specifications, the team still captured $16\%$ market share for certain products in the last round. This suggests they will still sell some units of their "old" specification products while waiting for the R&D revision to complete late in the year.

Roles and Team Governance

• Lead Identification: There was a brief discussion regarding the team contract and roles. Madison was identified as the lead/simulation coordinator (acting as the tiebreaker in case of disagreements).

• Decision-Making Protocol: The team agreed to defer to Madison's aggressive R&D strategy for Round 3 despite concerns about short-term profit losses. This was treated as a "test round" to see if the bold strategy could rehabilitate their competitive standing.

• Concern about Sales Timing: A teammate expressed concern that pushing product revision dates to December meant the team would not sell anything "new" for the entire year. Madison responded that they will continue to sell the "old" product inventory and that the move is a necessary evil to catch up for the final graded rounds.

• MTBF Discussion: Madison shared that based on external research , increasing MTBF beyond the ideal range does not provide additional benefits to the customer score, so the team should avoid over-investing there.