Capsim Report Group 2 V1 PDF

Preview

Summary

Please give as much additional information as possible....

Description

CAPSIM Report- Group 2- Andrews Co. ( AMZO) Zachary Pryzbek Mohamed Shawky Olga Golotina Leonor Barradas Anu Davaasuren

September - 27 - 2020

CAPSIM Report- Group 2 Decisions In CAPSIM Simulation, we were managing Group 2`s decisions. As soon as we received the CAPSIM project, we decided the departments to be headed by respective team members. Anu Davaasuren - R&D. This department focused on designing the new product and improving the existing ones with respect to consumer preferences. Zachary Pryzbek - Marketing department makes decision regarding the 3 Ps: price, promotion and product. The decision-making process of marketing department is focused on customer awareness, accessibility and sales forecast. Mohamed Shawky - Production Department is responsible for achieving the production schedule according to the input (sales forecast) by the marketing department Olga Golotina - Finance - This department monitors the company’s flow of money, the lifeblood of any business. Leonor Barradas - HR and TQM – HR: is the department responsible about staffing and TQM is related to the quality of our staff and products. Before starting CAPSIM simulation, we discussed and decided our strategy to be Broad Differentiator. By choosing this strategy, we aimed to maintain a presence in both segments High-Tech and low-Tech. We focused on R&D and marketing activities to achieve the desired outcome by creating high awareness and easy accessibility. We started with Able for low-tech segment and then we introduced A-Dragon and A2 for high-tech segment.

Round 1 (2021) Decisions: R&D We decided to keep our existing low-tech product- Able . At this stage, we aimed to focus on one product in order to understand the market and see what our competitors will do at the same time and try to generate cash flow to produce a high-tech product in round 2. In Low tech segment, consumers are more price sensitive and value products with proved market life. Main buying criteria for this segment are price, age, reliability and ideal position. Our focus was to capture low tech market as much as we can. Our main aim was to offer Able as a product, which could perform better than it previous version, and therefore decided to improve its performance from 6.4 to 6.7, and reducing its size from 13.3 mm to 13.0, and MTBF from 21000 to 17000. Marketing We decided to launch a new product in high tech segment for the upcoming rounds, We didn’t have any solid strategy for our competitors at this time, as this was the opening round, and we could only formulate strategies after analyzing our competitors’ products, and therefore avoided any unnecessary risks, in order to remain profitable and induce sales of Able, which was our only offered product in this round, so we decided to price Able for $34.99, promo budget $2000 and Sales budget $2000 to be able to maintain and increase the customers’ awareness in round 2. Production For the production department, the essential part was to maintain production according to sales forecast and maximizing plant utilization while making sure that the second shift capacity

is kept under control without incurring extra costs. Our capacity was 800 units in total for Able based on our 940 units forecast and automation level was increased from 3.0 to 3.1. Total Industry Unit Demand for low-tech was 940 units. Production units were 860. We utilized 7.5% of the second shift capacity. After discussions with marketing and finance departments, we decided to buy 100 units of capacity. Finance As we decided on launching a new product and increase production capacity in round 2, finance department focused on sufficient funding. We neither issued any stock nor any type of debt. We also planned not share any profit in terms of dividends as we were not aware of the profit margin and our goal was to investment in R&D for longer sustainability. In addition to a Long term debit $2400 for R&D. A/R was increased from 30 to 35 days as an attractive point for the customers.

Result Overview: We left with 0 units of inventory on hand. For which, we sold 939 units At the end of Round 1, ROA (Return on assets) and ROS (Return on sales) were 4.1% and 5.7% respectively. Profit and cumulative profits were $1,347,716 and $3,841,421 as our sales figure touched $32,846,783. We stood in the last position in terms of profit wise. We inferred the reason being at the last position due to the number of Items Produced. The reason is we didn’t utilize our production numbers to the optimum number compared to our capacity, which our competitors Baldwin, Chester, Digby, Erie and Ferris managed well. We decided to introduce High tech product under A-Dragon for the next round and increase Production of Able. Total band score 45.7/82

Round2 (2022)

Decisions:

R&D We decided to further improve existing low-tech product- Able. At this stage, we aimed to focus on increasing production because the product was sold out completely. We generated cash flow to produce a new high-tech product - A-Dragon. In High tech segment, consumers are less price sensitive and value products with good quality. Main buying criteria for this segment are ideal position, age and price. Our focus was to capture both low- and high-tech markets as much as we can. Our main aim was to offer Able as a product, which could perform better than its previous version, and therefore decided to improve its performance from 6.7 to 6.9 and reducing its size from 13.0 mm to 12.8. New product was created to be close to ideal position with performance of 8.1 and size of 11.9

Marketing We decided to keep price of Able as before - $34.99, Promo budget - $2000 and Sales budget $2500 to maintain and increase the customers’ awareness and improve customer accessibility in round 3. Forecast was set up as 1300 units, based on industry demand, growth and potential market share.

Production

For the production department, the essential part was to maintain production according to sales forecast withing existing plant utilization while making sure that the second shift capacity is kept under control without incurring extra costs. Our capacity was 900 units in total for Able based on our 1300 units forecast and automation level was increased from 3.1 to 4.2 to maximize contribution margin. Total Industry Unit Demand for low-tech was 1300 units. Production units were 1450. We utilized 61% of the second shift capacity. For the new product we bought 300 units capacity and set up automation as 3.

Finance As we increased capacity and automation in round 2, finance department had to finance these decisions. Company didn’t issue stock or borrow money in a shor-term. We did not share any profit in terms of dividends as our goal was to re-invest in R&D for longer sustainability. We increased a Long-term debit by $1790. AR and AP policies were not changed.

HR We invested $2,000 in recruiting and set 80 hours for training.

Result Overview: We left with 76 units of inventory on hand. For which, we sold 1359 units. At the end of Round 2, ROA (Return on assets) and ROS (Return on sales) were 7.8% and 4.7% respectively. Profit and cumulative profits were $2,236,459 and $6,077,881 as our sales figure touched $47,563,572. We stood better in terms of profit wise than last round. We inferred the reason being at the last position due to the quite high price of a product. The reason is we can’t

reduce the price is because we have high cost and need enough capital to cover new product production. We decided to produce High tech product for the next round and further increase Production of Able. Total band score 61.8/89.

Round 3 (2023) Decisions: R&D In this round, we decided to improve our low-tech product, Able, by an increment of 0.1 in performance and size - performance was increased to 7.0 from 6.9 and size reduced to 12.7 from 12.8. We did not change R&D numbers for A-Dragon. Marketing For A-Dragon, we stood at 3 rd place in terms of quality and price, therefore, we decided to slightly increase price to $40.49 from $38.00 to hopefully stand in between the 2 other competitors. Promo and sales budgets are set to $2000 each. We anticipated our forecast as 400 units. However, as our low-end product, Able, sold out 98%, we decided to keep its price of $34.99. We decreased promo budget to $1600 and decreased sales budget to $2000 as we had sufficient customer awareness. Forecast was set to an aggressive amount of 1500 (185 more than benchmark prediction). Production We increased production schedule for Able to 1550 and for A-Dragon to 550.

To increase profitability, we increased automation for Able from 4.2 to 5.5 and we added 100 in capacity. As for A-Dragon, we increased capacity to 200 but kept automation the same as we did not want to change R&D amount. Finance As we were short on cash, we needed to borrow funds of $6300 through issuing long term debt. A/R and A/P policies remained unchanged, HR Recruiting spend and training hours were not changed this year.

ROUND 4 (2024)

Decisions: R&D After 3 rounds and learning more about CAPSIM our team decided to revisit our initial strategy and make necessary changes to ensure we are competitive in the sensor market. Consequently, our team has made significant modifications in round 4. We strongly believe that the decisions made in Round 4 will help propel our brand to be leaders in the industry. It all starts with R&D. We took a deep dive and analyzed the Industry Conditions Report, Foundation Fast

Track and our Balance Score Card. We realized that we were struggling in consumer demand because we were not giving our customers what they want. Our ideal positioning was off. Understanding our customer demand is the most important success parameter. As a result, we identified our segments ideal positioning on the perceptual map. It is important to note that we identified, the ideal position at the time of project completion. It would not make sense to revise Able and A-Dragon to fulfil Round 4 Ideal Positioning, if the modifications would not be ready until Round 5 or 6. By that time we would be behind once again. For Able, our low tech product, we decided to revise performance and size according to the ideal low tech position between Round 5 and 6 to 7.5 performance and 12.4 size (that is when the revisions will come into affect). For A-Dragon, we had to make significant changes as we understand that high tech consumers place a strong importance on positioning and age, two areas influenced by revising a product. We decided to revise performance and size according to the ideal high tech position between Round 5 and 6 to 11.1 performance and 8.9 size (that is when the revisions will come into affect). Lastly, as per the reports on CAPSIM, high tech consumer demand is growing rapidly at 20%, and we want to ensure we can fulfil the demand in the high-tech segment. Therefore, we introduced a third product, a second high tech product, A2 and set up positioning aligning with consumer ideal positioning in between the 5 th and 6th round (invention will be completed by then) at 11.6 performance and 8.2 size.

Marketing After analyzing or Balance Score Card and Foundation Fast Track, the promo budget has been working very hard with our investment and all of our products have been achieving high

awareness scores. Consequently, we decided to decrease the promo budget for Able given the product has strong awareness in the existing market and we left A-Dragon’s promo budget unchanged. However, we were not happy with our customer accessibility score. It does not matter how strong our awareness is if our consumers can not access it. Therefore we dialed up our sales budget for Able and A-Dragon from 2000 to 2500. In order to create the revised forecast, we identified what we sold last year, what our market share is, what the industry demand is along with each market segment growth rates and established best- and worst-case scenarios. We decided to leverage the best-case scenario forecasts for production and planned for the worst case. As Able becomes older and drifts further from the ideal position of low tech, we decided to decrease the price to $33.49. A-Dragons price remained unchanged. We need to sell what we make and marketing decisions can help us achieve that.

Production In production, we decided to maintain according to our best-case scenario forecast. As we invest more money behind A-Dragon and anticipate high sales growth, we needed to increase capacity. We increased capacity by 100. In order to improve profitability and prepare for ling term success, we purchased more automation (+0.5). Additionally, A2, our newest product set to hit the market in Round 6 had capacity purchased (+200) and automation set for 3.0.

HR No changes were made to staffing in Round 4. We will continue to monitor and make relevant changes if needed.

Finance Improving Able and A-Dragon product positioning while inventing a new product in the high-tech market (A2) has proven to be a large investment. Additionally, increasing our sales budget and adding more capacity and automation has also added significant expenditures to our balance sheet. Consequently, to help fund for the initiatives listed above we borrowed 8000 in long term stock and balanced out our ROE and Working Capital by issuing 4800 in stock. Lastly, in attempts to be paid earlier and improve our closing cash position, we revised our AR terms to be paid in 25 days instead of 30 days.

TQM After completing the TQM training, we understand the importance our labour force has on the success of our business. People are the number one asset in our company and therefore we have decided to invest in them. Providing them with the most effective TQM spend ($750) in each TQM component we should see an improvement in productivity leading to decreased labour costs, material costs, quicker R&D project turnarounds, better ROI on sales budget and improved consumer perceptions.

Result Overview: After executing Round 4 decisions, our low tech product, Able was left with 312 units of inventory on hand, selling 1,607 units while our high tech product, A Dragon completely sold out of inventory selling 693 units. ROA (Return on assets) and ROS (Return on sales) were 6.8% and 4.4% respectively. Profit and cumulative profits increased to $3,655,231and $11,918,515 as our sales figure jumped to $82,214,246. Profitability increased substantially in Round 4 and we are hopeful that in Rounds 5 and 6 our new strategic plan will help drive an increase in market share propel our team forward as leaders in the industry. Total score increased to 73.4/100

ROUND 5 (2025) Decisions: R&D Able and A-dragon both needed significant improvements and we decided to focus on adjusting size, performance and MTBF of both products. For Able, performance was improved to 7.5, size was improved to 12.4 and MTBF was remained 21000. A-dragon was improved with performance 11.1, size 8.9 and MTBF to 23000. A2 was improved with performance 11.6, size 8.4 and MTBF to 23000.

Marketing As we analyzed the Fast Track Report from the previous round and decided to improve our pricing strategy. Sales and promotion budgets are also reviewed and we made a comparison between our competitors. The product was priced fair, and therefore generated good sales, which helped us in coming second position in profit. Able was well positioned in the market, with improvements in size and performance, and could have sold more if we had increased our budget for Customer Accessibility, as our accessibility percentage was 4.5/5 in this round, meaning we needed to allocate more promotion budget towards marketing our product. Production We didn’t change our accounts payable days. Deciding on the production schedule was an issue of discussion with marketing department. We want to get rid of the inventory as soon as possible. At the same time, produce the right amount of units so that we don’t miss out any market share was a though call to make. Also, we increase our automation and capacity to be ready for A2 issuance next round in the market. Finance Since we had inventory from the last round, we aimed to sell these unsold units as soon as possible to improve our financial results. Especially our leverage and profits were 4.1/9 and 5.3/8 respectively, which we need to improve in the next rounds. Result Overview: Our market position improved in this round, as we regained our spot and made a good come back, as the previous years didn’t mark much of success for us. All departments collaborated well in order to produce these results. Our efforts paid off, and our profits began to rise. Final balance scorecard was 82.8/100

ROUND 6 (2026)

Decisions: R&D Team decided to modify A_Drag sensor with performance 12.3 and size 7.7 to be more competitive in high tech sector in the next round 7. Two other products are competitive and do not need any changes.

Marketing All products have 100% customer awareness and team decided to keep Promo budget the same. Sales budget for A2 was increased from $2000 to $2500 to increase new product accessibility.

Sales forecast was increased significantly because all products were in high

demand. Prices remained unchanged.

Production We decided to reach maximum capacity for all products. As a result, we invested in capacity to be able to produce more to match sales growth. Low tech product plant capacity was increased by 300 units, while high tech plants capacity was increased by 200 units. We increased automation (+0.5) for the new product A2 up to 3.5 to reduce labor cost.

Staffing We decided to invest in Recruiting $5000 to increase productivity. Finance Dividends were issued as $1 per share to increase stock price as we have enough liquidity and do not need to borrow. TQM We kept the same strategy as before and spent $750 in each section to have competitive advantage decreasing labour and material cost and increasing productivity.

Result Overview: After executing Round 6 decisions, our low-tech product, Able, was left with 2 units of inventory on hand, and 1,879 units sold while our high-tech product, A2, completely sold out with 891 units and A_Drag left with 376 units inventory on hand and 912 units sold. ROA (Return on assets) and ROS (Return on sales) were 24.4% and 15.5% respectively. Profit and cumulative profits increased to $21,824,216 and $45,881,739 respectively, and sales increased to $140,390,164. Total score increased to 85.5/100.

ROUND 7 (2027)

Decisions: R&D Given our teams strategy to be a niche differentiator in the high-tech market, providing our customers with the most ideal positioned products each year is pivotal for the overall success of our company. A few rounds prior we had made impactful progress in revising our high-tech products A-Dragon and A2 to land in the absolute ideal position in the later rounds of CAPSIM (Rounds 7 and 8) in order to capitalize on the strong growth rates experienced in the high tech market. Consequently, in Round 7, A2 was currently in the ideal high-tech position at 11.6 performance and 8.4 size. However, in Round 8, which is arguable the most important for overall success, we would slightly be out of the idea position. Therefore, we made an improvement to ADragon that will come into effect in Round 8 (12.3 performance and 7.7 size). Furthermore, our other high-tech product, A2 was currently in between the idea positions for Round 7 and 8 and would land in the ideal position for Round 8 at the start of next round. As a result, we made no revisions to A2. Lastly, although we are niche differentiators in the high-tech market, its important to diversify and have options for other segments of the industry. Able, our only low tech product has been out of the ideal position, but if we made revisions the age would become much newer which as per the Industry Conditions and Foundation Fasttrack, our low tech customer buying criteria places a much bigger importance...