Foundation Team Member Guide PDF

Team Member Guide  The Course Road Map 1 Introduction...

Team Member Guide  The Course Road Map 1 Introduction 1.1 The Industry Conditions Report Each simulation industry is unique. As your simulation starts, the Industry Registration Getting Started Practice Rounds (if Competition Rounds Comp-XM (if applicable) Congratulations, you are now in charge of a multimillion dollar company. Conditions Report, which is explained in Chapter 2, will outline the Go to capsim.com/register, Login with your User ID applicable) When the Competition Your instructor might You manufacture sensors, which you market to other manufacturers. They beginning business environment, including customer buying criteria. follow the onscreen and Password at capsim. Most instructors include begins, your decisions include a Comp-XM exam. put your products into the devices they sell. Your company was created instructions and register com Click on Foundation. team Practice rounds. count! Additional tasks Go to the Course Page and The Industry Conditions Report is available from your simulation when the government split a monopoly into identical competitors. As a into your Industry.* Go to Getting Started When the Practice is over could include: choose Comp-XM. Follow Dashboard. monopoly, operating inefficiencies and poor product offerings were not Create your User ID and and follow the steps that the simulation will restart Optional Homework the instructions on the Password. include: from the beginning, using Assignments Dashboard which include: addressed because: Reviewing the Rehearsal the unique model selected Peer Evaluations Decision making 1.2 Management Tools * Your instructor may have Increasing costs could be passed onto customers; and Tutorial by your instructor. See your Dashboard for using the Comp-XM given you an Industry ID Here are the tools you need to run your company. Opening the Foundation complete information. Spreadsheet Mediocre products would sell because customers had no other choices. Number. If not, you can locate Spreadsheet Board Queries (quizzes) your industry by using your Forming your company While last year’s financial results were decent, your products are getting 1.2.1 The Rehearsal Tutorial school name/campus and either the course section old, your marketing efforts are falling short, your production lines need Think of the Rehearsal Tutorial as a driving school for the simulation. The number, start date or your revamping and your financial management is almost nonexistent. tutorial will show you ways to steer the company, including how to: instructor’s initials. Competition in the post-monopoly era means you can no longer ignore Invent and revise products; these issues. If you do, competitors with better products and/ or lower Table of Contents prices will take your market share. Make marketing decisions; Schedule production and buy/sell equipment; and 1 Introduction............................................................1 6 Proformas and Annual Reports........................ 19 Sensors Are Everywhere... 6.1 Balance Sheet..................................................................................... 19 Ensure your company has the financial resources it needs for the 1.1 The Industry Conditions Report....................................................... 1 6.2 Cash Flow Statement..................................................................... 20 upcoming year. 1.2 Management Tools............................................................................... 1 1.3 Company Departments..................................................................... 2 6.3 Income Statement........................................................................... 20 The sample resources used for the Rehearsal, including its Foundation 1.4 Inter-Department Coordination..................................................... 3 FastTrack (see below) and Industry Conditions Report, mirror those used in 7 Additional Modules........................................... 20 the actual simulation. 1.5 Practice and Competition Rounds................................................ 3 7.1 TQM/Sustainability........................................................................... 20 1.6 Company Success............................................................................... 3 7.2 HR (Human Resources)................................................................. 20 The Rehearsal is available from your simulation Dashboard. 2 Industry Conditions.............................................3 8 Plug-ins................................................................ 21 1.2.2 The Foundation FastTrack 2.1 Buying Criteria...................................................................................... 3 8.1 Making Decisions................................................................................21 Every round, you and your competitors will have access to an industry 2.2 Buying Criteria by Segment........................................................... 5 newsletter called the Foundation FastTrack. The FastTrack (described in 9 Situation Analysis.............................................. 21 3 The Customer Survey Score...............................5 Chapter 5) is an extensive year-end report of the sensor industry. It includes 3.1 Buying Criteria and the Customer Survey Score.....................6 10 Forecasting.......................................................22 customer buying patterns, product positioning, public financial records and 3.2 Estimating the Customer Survey Score..................................... 8 10.1 Basic Forecasting Method............................................................22 other information that will help you get ahead. In business, knowledge is 3.3 Stock Outs and Seller’s Market.....................................................9 10.2 Qualitative Assessment................................................................22 power. If you want to evaluate your company’s performance or analyze your 10.2.1 December Customer Survey Score.......................................22 competitors, the FastTrack is the place to start. 4 Managing Your Company....................................9 10.3 Forecasts, 4.1 Research & Development (R&D)...................................................9 Proformas and the December 31 Cash Position..........................23 Every product’s Customer Survey Score (Chapter 3) can be found in Sensors are devices that observe physical conditions. For example, 4.2 Marketing...............................................................................................11 10.4 Worst Case/Best Case..................................................................23 the FastTrack’s Segment Analysis pages. These scores determine sales the average cell phone contains dozens of sensors that allow it to 4.3 Production............................................................................................13 distribution. interpret touch, spatial orientation and signal strength. 4.4 Finance..................................................................................................15 11 Balanced Scorecard..........................................23 New sensor businesses are created every day in areas as diverse The FastTrack Reports “Last Year’s Results” 5 The Foundation FastTrack................................ 17 12 Six Basic Strategies......................................... 24 as security, aeronautics and biomedical engineering. You are in a Broad Cost Leader................................................................................. 24 The FastTrack available at the start of Round 1 displays results for 5.1 Front Page.............................................................................................17 business-to-business market, not a direct-toconsumer market; the Broad Differentiator............................................................................... 24 Round 0, when all companies were equal just after the monopoly’s 5.2 Stock & Bond Summaries...............................................................17 sensors your company manufactures are incorporated into the Niche Cost Leader (Low Technology)............................................ 24 breakup. The FastTrack available at the start of Round 2 will 5.3 Financial Summary............................................................................17 products your customers sell. Niche Differentiator (High Technology)......................................... 24 display the results for Round 1. As the simulation progresses 5.4 Production Analysis..........................................................................17 Cost Leader with Product Lifecycle Focus................................... 24 and strategies are implemented, results among the competing 5.5 Segment Analysis Reports.............................................................18 Differentiator with Product Lifecycle Focus................................ 24 companies will begin to vary. 5.6 Market Share Report....................................................................... 19 5.7 Perceptual Map.................................................................................. 19 5.8 Other Reports.................................................................................... 19 Foundation Team Member Guide 2 Foundation Team Member Guide 1  The FastTrack is available from two locations: 1.3 Company Departments 1.4 Inter-Department Coordination After the conclusion of the Practice Rounds the simulation is reset and the real competition begins. Now it’s time to drive your company to success! From the Foundation Spreadsheet, click Reports in the menu bar; and The Rehearsal Tutorial and Chapter 4 discuss company activities. You have 1.4.1 R&D and Marketing Companies compete for up to eight rounds, with each round simulating one four main departments or functional areas: On the website, log into your simulation and click the Reports link. R&D works with Marketing to make sure products meet customer year in the life of your company. Research & Development, or R&D expectations. 1.2.3 The Situation Analysis 1.5.1 Decision Audits Marketing Completing the Situation Analysis (described in Chapter 9) will enable you 1.4.2 R&D and Production The Decision Audit is a complete trail of all team decisions. It will help you to understand current market conditions and how the industry will evolve in Production R&D works with Production to ensure assembly lines are purchased for new identify your decision-making strengths and weaknesses. the next few years. It will assist you with your operational planning. products. If Production discontinues a product, it should notify R&D. Finance The audit is available from two locations: The Situation Analysis comes in two versions: Many simulations utilize the Human Resources and TQM (Total Quality 1.4.3 Marketing and Production From the Foundation Spreadsheet, click Help in the menu bar; or Online interactive Management)/Sustainability modules. These modules require additional Marketing works with Production to make sure manufacturing quantities management decisions. Your simulation Dashboard will tell you if the On the website, log into your simulation then click the Decision Audit link. Downloadable PDF (pen and paper) are in line with forecasts. Marketing’s market growth projections also help modules are included. Production determine appropriate levels of capacity. If Marketing wants to The Situation Analysis is available from your simulation Dashboard 1.6 Company Success Companies use the Foundation Spreadsheet to enter departmental discontinue a product, it tells Production to sell the product’s production or via the Getting Started area on your left-hand menu. The board of directors, shareholders and other stakeholders expect you to decisions. line. make the company a market leader. Successful managers will: 1.2.4 Proformas & Annual Reports 1.3.1 Research & Development (R&D) 1.4.4 Marketing and Finance Proformas and annual reports are specific to your company. Proformas are Analyze the market and its competing products; Your R&D Department designs your product line. The department needs to Marketing works with Finance to project revenues for each product and to projections for the upcoming year. Annual reports are the results from the Create and execute a strategy; and invent and revise products that appeal to your customers’ changing needs. set the Accounts Receivable policy, which is the amount of time customers previous year. can take to pay for their purchases. Coordinate company activities. The proformas will help you envision the impacts of your pending decisions 1.3.2 Marketing 1.4.5 Finance and Production Best of luck in running a profitable and sustainable company! and sales forecasts. The annual reports will help you analyze last year’s Your Marketing Department prices and promotes your products. It interacts results. with your customers via its sales force and distribution system. Marketing is Production tells Finance if it needs money for additional equipment. also responsible for sales forecasts. Proformas are only available from the Foundation Spreadsheet’s If Finance cannot raise enough money, it can tell Production to scale back 2 Industry Conditions Proformas menu. its requests or perhaps sell idle capacity. 1.3.3 Production To access the annual reports: Your Production Department determines how many units will be 1.4.6 Finance and All Departments The information in your Industry Conditions Report will help you manufactured during the year. It is also responsible for buying and selling understand your customers. From the Foundation Spreadsheet, click Reports in the menu bar; or The Finance Department acts as a watchdog over company expenditures. production lines. Finance should review Marketing and Production decisions. Finance should Your customers fall into different groups, which are represented by market On the website, log into your simulation then click the Reports link. cross-check Marketing’s forecasts and pricing. Are forecasts too high or segments. Customers within a market segment have similar needs. The 1.3.4 Finance too low? Will customers be willing to pay the prices Marketing has set? Is segments are named for the customer’s primary requirements such as: 1.2.5 The Foundation Spreadsheet Your Finance Department makes sure your company has the financial Production manufacturing too many or too few units? Does Production The Foundation Spreadsheet is the nerve center of your company where you resources it needs to run through the year. The department can raise money Low Tech need additional capacity? Has Production considered lowering labor costs formulate and finalize management decisions for every department. via one-year bank notes, 10-year bonds or stock issues. by purchasing automation? High Tech After you log into your simulation, the spreadsheet is available The department can also issue stock dividends, buy back stock or retire The Industry Conditions Report lists market segment sales percentages and from the Decisions link. bonds before their due dates. 1.5 Practice and Competition Rounds projected growth rates unique to your simulation. 1.2.6 Just in Time Information Practice Rounds allow you to organize workflow among the members of 1.3.5 Plug-ins The Industry Conditions Report is published once at the beginning your company. You will begin to compete against the other companies in In the spreadsheet decision areas, look for the flag symbol shown to the Plug-ins are different than modules. Plug-ins and their decisions have a of the simulation. It is available from your simulation Dashboard. your simulation or, if you are in a Footrace competition, against a common right. Clicking it will give you detailed information about the area you are greater overall impact on your organization. set of computer-run companies. viewing. 2.1 Buying Criteria For example, the simulation might include the Ethics plug-in, which Don’t confuse the Rehearsal Tutorial with the Practice Rounds! presents you with an unexpected dilemma. Group discussion and consensus Customers within each market segment employ different standards as they During the Rehearsal Tutorial, you are shown how to make is imperative because your decisions will affect your financial results. evaluate products. They consider four buying criteria: Price, Age, MTBF decisions in a scripted environment. During the Practice Rounds, (Mean Time Before Failure) and Positioning. Your simulation Dashboard will notify you if a plug-in has been scheduled. you can experiment with your decisions in a competitive environment. Foundation Team Member Guide 2 Foundation Team Member Guide 3 2.1.1 Price Each year, the High Tech segment demands greater improvement than the reposition products, keeping them within the moving segment circles. See Each segment has different price expectations. Low Tech wants inexpensive Low Tech segment. Therefore they drift at different rates. High Tech moves “4.1 Research & Development (R&D)” for more information. products while High Tech, seeking advanced technology, is willing to pay faster and farther than Low Tech. As time goes by, the overlap between the higher prices. segments diminishes. 2.2 Buying Criteria by Segment Drift rates are published in the Industry Conditions Report. Buyers in each segment place a different emphasis upon the four buying 2.1.2 Age criteria. For example, some customers are more interested in price, while Each segment has different age expectations, that is, the length of time since Market segments will not move faster to catch up with products that are others are more interested in positioning. the product was invented or revised. High Tech wants new technology while better than customer expectations. Customers will refuse to buy a product Low Tech prefers proven technology that has been in the market for a few positioned outside the circles. Customers are only interested in products Positioning criteria change every year. Price, age and MTBF years. that satisfy their needs. This includes being within the circles on the criteria always remain the same. Perceptual Map! Buying Criteria for the previous year are reported in the Foundation 2.1.3 MTBF (Mean Time Before Failure) or Reliability Perceptual Maps Can Be Used for Many Types of Products... FastTrack’s Segment Analysis pages. As you take over the company to make MTBF (Mean Time Before Failure) is a rating of reliability measured in decisions for Round 1, your reports reflect customer expectations as of hours. Segments have different MTBF criteria. High Tech prefers higher Perceptual Maps can be used to plot any two product December 31, Round 0 (yesterday). The Industry Conditions Report displays MTBF ratings while Low Tech is satisfied with lower ratings. Figure 2.1 The Perceptual Map Used in the Simulation: characteristics. For example, cereal manufacturers could plot the Round 0 buying criteria for each market segment. Here are two example The Perceptual Map plots product size and performance nutrition and taste. The dots in the figure below represent sales segments. 2.1.4 Positioning characteristics. of breakfast cereals based on ratings of taste and nutrition. There Sensors vary in their dimensions (size) and the speed/sensitivity with which are few sales in the lower-left corner– not many consumers want Example 1: Customers seek proven products at a modest price. 2.1.5 Market Segment Positions on the Perceptual Map they respond to changes in physical conditions (performance). Combining products that have poor taste and poor nutrition. Age, 2 years– importance: 47% size and performance creates a product attribute called positioning. Market segments have different positioning preferences. The Low Tech segment is satisfied with inexpensive products that are large in size and slow As they review product sales, marketers would notice three Price, $15.00-$35.00– importance: 23% The Perceptual Map performing. It wants products that fall inside the upper-left set of dashed distinct clusters. The cluster to the upper left indicates a group Ideal Position, size 16.0/performance 4.0– importance: 21% Positioning is such an important concept that marketers developed a tool to and solid circles in Figure 2.2. The High Tech segment wants products that of customers that is more interested in nutrition than taste. The track the position of their products and those of their competitors. This tool are faster performing and smaller in size. It wants products that fall within cluster to the lower right indicates a group that is more interested MTBF, 14,000-20,000– importance: 9% is called a Perceptual Map. the lower-right set of dashed and solid circles. in taste than nutrition. The cluster to the upper right indicates a Example 2: Customers seek cutting-edge technology in size/ performance group that wants both good taste and good nutrition. Note the Perceptual Map in Figure 2.1. You will see this map quite often Over time, your customers expect products that are smaller and faster. and new designs. through the course of the simulation. This causes the segments to move or drift a little each month. As the years Ideal Position, size 12.4/performance 6.6– importance: 43% The map measures size on the vertical axis and performance on the progress the locations of the circles significantly change. The example in Age, 0 years– importance: 29% horizontal axis. Each axis extends from 0 to 20 units. The arrow in Figure 2.1 Figure 2.3 shows the location of the market segments at the end of the points to a product called Able with a performance measurement of 8.0 and fourth year. Figure 2.4 shows the segments at the end of the eighth year. MTBF, 20,000-26,000– importance: 19% a size of 12.0. Price, $20.00-$40.00– importance: 9% 3 The Customer Survey Score In any month, a product’s demand is driven by its monthly customer survey score. Assuming it does not run out of inventory, a product with a higher The clusters, or market segments, could then be named “Taste,” score will outsell a product with a lower score. “Nutrition” and “Taste/Nutrition.” The simulation uses a similar positioning method to name its market segments. In the simulation, there are zero customers interested in products positioned outside of the dashed circles. Figure 2.2 Beginning Segment Positions: Figure 2.3 Segment Positions at the End Figure 2.4 Segment Positions at the At the beginning of the simulation, of Year 4: The segments have moved End of Year 8: The segments have Your R&D and Marketing Departments have to make sure your products segment positions are clustered in the to the middle of the map. The overlap moved to the lower right; very little keep up with changing customer preferences. To do this, R&D must upper-left portion of the perceptual map. between the segments decreases overlap remains. Watch a video overview at: http://capsim.com/go/v/fcss because the Low Tech segment moves more slowly than the High Tech segment. Foundation Team Member Guide 4 Foundation Team Member Guide 5  Customer survey scores are calculated 12 times a year. The Rough Cut Circle Positioning Rough Cut Sensors priced $1.00 above or below the segment guidelines lose about 10% December customer survey scores are reported in the Foundation The dashed outer circle defines the outer limit of the segment. Customers Products placed in the rough cut area (orange rings, Figure 3.1) are between of their customer survey score (orange lines, Figure 3.2). Sensors continue FastTrack’s Segment Analysis pages. are saying, “I will NOT purchase a product outside this boundary.” We call 2.5 and 4.0 units from the center of the circle. Products here are poorly to lose approximately 10% of their customer survey score for each dollar the dashed circle the rough cut boundary because any product outside of it positioned and they will have reduced customer survey scores. The farther above or below the guideline, on up to $9.99, where the score is reduced by A customer survey score reflects how well a product meets its segment’s “fails the rough cut” and is dropped from consideration. Rough cut circles they are from the fine cut circle, the more the scores are reduced. Just approximately 99%. At $10.00 outside the range, demand for the product is buying criteria. Company promotion, sales and accounts receivable policies have a radius of 4.0 units. beyond the fine cut, scores drop 1%. Halfway across the rough cut, scores zero. also affect the survey score. drop 50%. Scores drop 99% for products that are almost to the edge of the Fine Cut Circle Price Fine Cut Scores are calculated once each month because a product’s age and rough cut. The solid inner circle defines the heart of the segment. Customers prefer Within each segment’s price range, price scores follow a classic economic positioning change a little each month. If during the year a product is products within this circle. We call the inner circle the fine cut because Sensors that are about to enter the rough cut can be revised by demand curve (green curve, Figure 3.2): As price goes down, the price score revised by Research and Development, the product’s age, positioning and products within it “make the fine cut.” Fine cut circles have a radius of 2.5 Research & Development (see “4.1.1 Changing Performance, Size goes up. MTBF characteristics can change quite a bit. As a result, it is possible for a units. and MTBF”). product with a very good December customer survey score to have had a 3.1.3 MTBF Score much poorer score–and therefore poorer sales–in the months prior to an Ideal Spot The location of each segment’s rough cut and fine cut circles as Each segment sets a 6,000 hour range for MTBF (Mean Time Before R&D revision. The ideal spot is that point in the heart of the segment where, all other of December 31 of the previous year appears on page 8 of the Failure), the number of hours a product is expected to operate before it things being equal, demand is highest. FastTrack. Prices, set by Marketing at the beginning of the year, will not change during malfunctions. Customers prefer products towards the top of the range. the year. Segment Movement Positioning Fine Cut MTBF Rough Cut Each segment moves across the Perceptual Map a little each month. In a Products inside the fine cut (green areas, Figure 3.1) are within 2.5 units of Demand scores fall rapidly for products with MTBFs beneath the segment’s 3.1 Buying Criteria and the Customer Survey Score perfect world your product would be positioned in front of the ideal spot in the center of the circle. Ideal spots for each segment are illustrated by the guidelines. Products with an MTBF 1,000 hours below the segment January, on top of the ideal spot in June and trail the ideal spot in December. black dots. The example on the left illustrates a segment that prefers proven, The customer survey starts by evaluating each product against the buying guideline lose 20% of their customer survey score. Products continue to lose In December it would complete an R&D project to jump in front of the ideal inexpensive technology. The ideal spot is to the upper left of the segment criteria. Next, these assessments are weighted by the criteria’s level of approximately 20% of their customer survey score for every 1,000 hours spot for next year. center, where material costs are lower. The example on the right illustrates a importance. For example, one segment can assign a higher importance to below the guideline, on down to 4,999 hours, where the customer survey segment that prefers cutting-edge technology. The ideal spot is to the lower positioning than the other. A well-positioned product in a segment where score is reduced by approximately 99%. At 5,000 hours below the range, right of the segment center, where material costs are higher (see Figure 4.1 positioning is important will have a greater overall impact on its survey demand for the product falls to zero. for an illustration of material positioning costs). score than a well-positioned product in a segment where positioning is not MTBF Fine Cut important. Participants often ask, “Why are some ideal spots ahead of the Within the segment’s MTBF range, the customer survey score improves as segment centers?” The segments are moving. From a customer’s The Industry Conditions Report and the FastTrack’s Market MTBF increases (Figure 3.3). However, material costs increase $0.30 for perspective, if they buy a product at the ideal spot, it will still be a Segment Analysis pages break down each segment’s criteria in every additional 1,000 hours of reliability. cutting-edge product when it wears out. For contrast, if they buy order of importance. a product at the trailing edge, it will not be inside the segment when it wears out. A perfect customer survey score of 100 requires that the product: Be positioned at the ideal spot (the segment drifts each month, so this can A product’s positioning score changes each month because segments and occur only one month per year); be priced at the bottom of the expected ideal spots drift a little each month. Placing a product in the path of the range; have the ideal age for that segment (unless they are revised, products ideal spot will return the greatest benefit through the course of a year. grow older each month, so this can occur only one month per year); and have an MTBF specification at the top of the expected range. 3.1.2 Price Score Figure 3.1 Positioning Scores: The dashed outer circle defines the Your customers want perfection, but it is impractical to have edge of the rough cut. It measures 4.0 units from the center of the Each segment has a $20.00 price range. Customers prefer products–the “perfect” products. In many cases you will have to settle for circle. The inner circle defines the edge of the fine cut. It measures ideal–towards the bottom of the range. 2.5 units from the center. Segment ideal spots are represented by “great” products, but the better the products, the higher the the black dots. Segment price expectations correlate with the segment’s position on the costs. Your task is to give customers great products while still Perceptual Map. High Tech customers are willing to pay higher prices than making a profit. Your competitors face the same dilemma. The example on the left displays a positioning score for a segment Low Tech customers. that prefers products with slower performance and larger size. The example on the right displays a score for a segment that Figure 3.2 Classic Price/ Figure 3.3 Mean Time 3.1.1 Positioning Score Price Rough Cut demands cutting-edge products with high performance and small Demand Curve (Green Bow): Before Failure (MTBF) Score: Marketers must understand both what customers want and their Sensors priced $10.00 above or below the segment guidelines will not be As price drops, demand size. The orange areas represent the segment rough cuts, where As MTBF increases, the boundaries. In terms of a product’s size and performance (as discussed in scores rapidly decrease towards zero. considered for purchase. Those products fail the price rough cut. (price score) rises. Scores score increases. Customers “Section 2.1.5”), the Perceptual Map illustrates these ideas with circles. Each drop above and below the are indifferent to MTBFs price range (orange lines). above the segment range. segment is described with a dashed outer circle, a solid inner circle and a dot we call the ideal spot (Figure 3.1). Foundation Team Member Guide 6 Foundation Team Member Guide 7 Customers ignore reliability above the expected range– demand plateaus at ease with which customers can work with you after they begin sourcing. To Similar products with higher awareness and accessibility will score See “How Is the Customer Survey Score Calculated?” in the Online the top of the range. the 4 P’s we can add two additional elements– credit terms and availability. better than those with lower percentages (see “4.2 Marketing” for more Guide’s FAQ|Reports section for more information on assessing Credit terms are expressed by your accounts receivable (A/R) policy. information on awareness and accessibility). your products. 3.1.4 Age Score Availability addresses inventory shortages. If the TQM/Sustainability module is enabled, some initiatives can The age criteria do not have a rough cut; a product will never be too young increase the customer survey score (see “7.1 TQM/Sustainability”). or too old to be considered for purchase. 3.2.1 Base Scores 4 Managing Your Company To estimate the customer survey score, begin with the buying criteria High Tech customers demand cutting-edge technology. They prefer 3.3 Stock Outs and Seller’s Market available in the FastTrack’s Segment Analysis reports. For example, suppose newer products. Low Tech customers prefer older products with proven It’s time to unlock the doors and turn on the lights. Welcome to your the buying criteria are: What happens when a product generates high demand but runs out of technology. company. The Rehearsal Tutorial (described in Section 1.2.1) shows you inventory (“stocks out”)? The company loses sales as customers turn to its Age, 2 years– importance: 47% the mechanics of the company departments described below. Remember, Each month, customers assess a product’s age and award a score based upon competitors. This can happen in any month. entering decisions is the easy part; determining what decisions to enter their preferences. Examples of age preferences are illustrated in Figure 3.4. Price, $20.00-$40.00– importance: 23% The Market Share Report of the Foundation FastTrack (page 7) requires some thought. This chapter and the Rehearsal Tutorial will help you Age preferences for each segment are published in the Industry Ideal Position, size 16.0 /performance 4.0– importance: 21% can help you diagnose stock outs and their impacts. get started. Conditions Report and the Segment Analysis pages of the MTBF, 14,000-20,000– importance: 9% Usually, a product with a low customer survey score has low sales. However, Every company starts the simulation with one sensor product. The Foundation FastTrack. A perfect score of 100 requires that the product have an age of 2.0 years, a if a segment’s demand exceeds the supply of products available for sale, a product sells to both Low Tech and High Tech customers. Products can be price of $20.00, a position at the ideal spot (16.0 and 4.0) and an MTBF of seller’s market emerges. In a seller’s market, customers will accept low- terminated or added. Your company must have at least one product and 20,000 hours. scoring products as long as they fall within the segment’s rough cut limits. cannot have more than five. Products can be targeted to one segment or For example, desperate customers with no better alternatives will buy: both segments. Your decisions, made every year on January 1, are carried out The segment weighs the criteria at: Age 47%, Price 23%, Positioning 21% and by your employees throughout the year. MTBF 9%. You can convert these percentages into points then use these A product positioned just inside the rough cut circle on the Perceptual numbers to estimate a base score for your product. For example, price is Map– outside the circle they say “no” to the product; Your simulation might also include additional modules and plug- worth 23 points. The perfect price of $20.00 would get 23 points, but at the ins. Your simulation Dashboard will notify you if these decisions A product priced $9.99 above the price range– at $10.00 customers opposite end of the price range, a price of $40.00 would get zero points. are scheduled. reach their tolerance limit and refuse to buy the product; and You can use the age and positioning charts in your Industry A product with an MTBF 4,999 hours below the range– at 5,000 hours 4.1 Research & Development (R&D) Conditions Report to estimate average points for those criteria. below the range customers refuse to buy the product. The Research and Development (R&D) Department oversees invention and However, the base score can fall because of poor awareness (promotion), Watch out for two common tactical mistakes in a seller’s market: Figure 3.4 Age Scores: The example on the left displays a score redesign. It develops the innovations needed to keep the company ahead of accessibility (place) or the credit terms you extend to your customers. the competition. R&D is responsible for the “product” portion of the 4 P’s for a segment that prefers products with an age of one year. The 1. A company disregards products that are in the positioning rough example on the right displays a score for a segment that prefers of Marketing (“product, price, place and promotion”). This makes R&D an 3.2.2 Accounts Receivable cut. These products normally can be ignored because they have low products with an age of two years. essential part of any marketing process. customer survey scores. However, when the company increases the A company’s accounts receivable policy sets the amount of time customers price, the customer survey score falls below the products in the rough Your R&D Department invents new products and changes specifications for have to pay for their purchases. At 90 days there is no reduction to the base 3.2 Estimating the Customer Survey Score cut areas, which are suddenly more attractive than their product. score. At 60 days the score is reduced 0.7%. At 30 days the score is reduced existing products. Changing size and/or performance repositions a product The customer survey score drives demand for your product in each segment. 7%. Offering no credit terms (0 days) reduces the score by 40% (see “4.4.5 2. The company fails to add capacity for the next round. A seller’s market on the Perceptual Map. Improving performance and shrinking size moves Your demand in any given month is your score divided by the sum of Credit Policy”). sometimes appears because a competitor unexpectedly exits a segment. the product towards the lower right on the map (see “2.1.4 Positioning”). the scores. For example, if your product’s score in April is 20 and your This creates a windfall opportunity for the remaining companies. competitors’ scores are 27, 19, 21 and 3, then your product’s April demand is: 3.2.3 Awareness and Accessibility (However, a well-run company will always have enough capacity to meet After your product leaves the factory and enters the marketplace, the demand from its customers.) 20 / (20+27+19+21+3) = 22% calculations for its score become less exact. The score will be affected by the How can you be sure of a seller’s market? You can’t, unless you are certain Assuming you had enough inventory to meet demand, you would receive level of the product’s awareness (the percentage of people who know about that industry capacity, including a second shift, cannot meet demand for the 22% of segment sales for April. your product) and its segment’s accessibility (the number of customers who segment. In that case, even very poor products will stock out as customers can easily interact with your company). What generates the score itself? Marketers speak of “the 4 P’s”–price, search for anything that will meet their needs. product, promotion and place. Price and product are found in the buying Awareness is built over time by the product’s promotion budget. Promotion Watch a video overview at: http://capsim.com/go/v/frd criteria. Together they present a price-value relationship. Your promotion budgets fund advertising and public relations campaigns. Accessibility is budget builds “awareness,” the number of customers who know about your built over time by the product’s sales budget. Sales budgets fund salespeople product before sourcing. Your sales budget (place) builds “accessibility,” the and distribution systems to service customers within the product’s market segment. Foundation Team Member Guide 8 Foundation Team Member Guide 9 Your R&D decisions are fundamental to your Marketing and Production Inventing Sensors 4.1.2 Project Management Log into the Foundation Spreadsheet and click the Decisions plans. In Marketing, R&D addresses: New products are assigned a name (click in the first cell that reads NA in the The Low Tech segment circles move on the Perceptual Map at a speed of menu. Select Research & Development. To change a product’s name column), performance, size and MTBF. Of course, these specifications 0.5 units per year. The High Tech segment circles move at 0.7 units per year. performance, enter a number in the New Pfmn cell; to change The positioning of each product inside a market segment on the should conform to the criteria of the intended market segment. The name of You must plan to move your products (or retire them) as the simulation its size, enter a number in the New Size cell. To change the Perceptual Map all new products must have the same first letter of the company name. progresses. Generally, the longer the move on the Perceptual Map, the reliability rating, enter a number in the MTBF cell. As you vary the The number of products in each segment longer it takes the R&D Department to complete the project. specifications, observe the effect upon the revision date, project The Production Department must order production capacity to build the cost, material cost and age. The age of your products new product one year in advance. Invention projects take at least one year Project lengths can be as short as three months or as long as three years. The reliability (MTBF rating) of each product to complete. Project lengths will increase when the company puts two or more products into R&D at the same time. When this happens each R&D project takes The Rehearsal Tutorial’s R&D Tactics show you how to run In Production, R&D affects or is affected by: All new products require capacity and automation, which should longer. Assembly line automation levels also affect project lengths. R&D the department. Log in at the Capsim website and go to the be purchased by the Production Department in the year prior The cost of material project costs are driven by the amount of time they take to complete. A six- Dashboard for information about the Rehearsal. to the product’s revision (release) date. If you don’t buy the month project costs $500,000; a one-year project costs $1,000,000. The purchase of new facilities to build new products assembly line the year prior to its introduction, you cannot manufacture your new product! 4.2 Marketing Sensors will continue to produce and sell at the old performance, size and Automation levels (The higher the automation level, the longer it takes MTBF specifications up until the day the project completes, shown on the Marketing functions vary widely depending on the industry and company. to complete an R&D project.) It is not possible to produce new products prior to the revision date. A new spreadsheet as the revision date. Unsold units built prior to the revision date In general, the department drums up interest in the company’s products or product with a revision date of July 1 will be produced in the second half of All R&D projects begin on January 1. If a product does not have a project are reworked free of charge to match the new specifications. services through a mix of activities. These can include advertising, public the year. The capacity and automation will stand idle for the first half of the already under way, you can launch a new project for that product. However, relations and good old-fashioned salesmanship. year. If the project length takes more than a year, the revision date if a project begun in a previous year has not finished by December 31 of last year, you will not be able to launch a new project for that product (the will be reported in the next Foundation FastTrack. However, the Your Marketing Department is concerned with the remaining P’s (beyond decision entry cells in the R&D area of the Foundation Spreadsheet will be new performance, size and MTBF will not appear; old product R&D’s product): price, place and promotion. Your Marketing Department is locked). attributes are reported prior to project completion. also in charge of sales forecasting. 0.5 When