Strategic Management Capsim Round Analysis PDF

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Summary

This essay goes over exactly what I did in the Capstone Simulation step by step and gives my results for each round....

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INTRO: WHAT IS CAPSIM The Capsim simulation is a very engaging way to learn about what makes a company work. We had to find the right combination of changes in research and development, marketing, production, finances, human resources, and TQM initiatives which would make us profitable. The ultimate goal of us doing the Capstone simulation is to help us relate to what happens in the real world. We have to look at our competition to see what they are doing, then adapt and strategize to do things better than them and make better decisions, which is what happens in the actual competitive marketplace.

ROUND 1 ANALYSIS I did not perform very well in round 1. My sales decreased to $83,664,931. I took a loss of more than ($1.6M), and my contribution margin was the lowest of all the companies at 25.8%, which I believe is because of my position as cost leader. My stock prices took a big hit as well, dropping more than $10 to $24.21 per share. My market capacity, book value per share, and EPS also decreased this round. My cash position also fell, mainly because of the huge inventory expense, which caused me to require an emergency loan of almost $2M. My production was also less than my capacity, which didn’t help either. I issued some long-term debt in order to help my closing cash position, which did not help, because I ended up requiring an emergency loan. For Able, my Traditional product, I left the performance and size measures alone for this round, but I lowered the MTBF because this was not important to the consumers of this segment, and it saved me some material costs per unit. I drastically lowered the price to $25.50 to be able to compete on this basis with the other companies. I set my promotional and sales budgets fairly high for this product because I expected this to help my sales numbers. I produced about 1,200 units for this round, which is much less than my capacity, and I decided to sell off a small amount of my capacity because I was anticipating a larger sales volume for the next round, but I did not need that much capacity. I also increased the automation for this product because this will make labor costs cheaper in the long run. I sold 641 units and had 799 units leftover in inventory. The large number of units leftover really hurt my inventory expense and profits for this round. This is probably because my survey score ended up being really low at only 10. My contribution margin was only 19% for this product in this round, which I plan on improving in future rounds. This product only had 8% of the Traditional market, which is much lower than I was expecting.

For Acre, my Low End product, I decided to leave the performance and size measures where they were, but lower the MTBF because this was not important to the consumers of this segment, and it saved me some material costs per unit which enabled me to decrease the price. I lowered the price to $19.50 to be able to compete on the basis of price with the other companies. I set my promotional and sales budgets fairly high for this product because I felt like this product had a good chance of having a large sales volume. I produced about 1,800 units this round, which is greater than my capacity, because I anticipated a large sales volume. I also increased my automation this round because this will help with my labor costs for this product in the long run. My contribution margin was 27%, which wasn’t too bad for being a cost leader in this segment. I sold 1,821 units and had nothing leftover in inventory, so I stocked out. I did not expect my sales volume to be that high, so my forecasting was off. My customer survey score was not great for this round, only at a 19. This product had 18% of the Low End market as well as the highest score on the customer survey for this round. For Adam, my High End product, I left the performance and size measures where they were, but I lowered the MTBF because this was not very important to the consumers of this segment and it dropped the material cost, enabling me to lower the price of the product to $36.50. I lowered the price because my strategy is to compete with the other companies on the basis on price. I did not set my promotion and sales budgets very high because I expect to phase this product out of the High End segment and into the Traditional segment. I sold off some capacity and left the automation where it was because I will be transitioning this product into the Traditional segment. I sold 264 units and had 197 units leftover in inventory. I did expect to sell more than I actually did, and the inventory cost hurt my profits this round. My survey score was only 4 this round, which probably

really hurt my sales. My contribution margin for this product was decent at 30%, but I only held 10.6% of the High End market. For Aft, my Performance product, I actually slightly decreased my performance and MTBF, but I left my size alone to get this product to a good spot on the perceptual map and transition it towards the Transitional segment. I actually left the price where it was at $33.00 because this boosted my contribution margin. My promotion and sales budgets were not set very high because I did not expect to sell a large number of units for this product even if I did set the budgets high. I sold off some capacity and left the automation where it was because I will be transitioning this product into another segment. I sold 420 units and had 54 units leftover in inventory, so my forecasting for this product was pretty accurate. I only got a 13 on my survey score, which is not very good. My contribution margin for this product was 26%, which is my second lowest percentage for a product. I have 15% of the Performance market, which is much more than I expected for this segment. For Agape, my Size product, I left the performance and size where they were, but I decreased the MTBF to lower my materials cost and improve my contribution margin. I left the price where it was at $33.00 because this also boosted my contribution margin. My promotion and sales budgets were not set very high because I did not expect to sell a large number of units of this product even if I did set the budgets high. I sold off some capacity and left the automation where it was because I will be transitioning this product into another segment. I sold 224 units and had 185 units leftover in inventory. As you can see, my forecasting was really off for this round, and my survey score was only 4. My contribution margin was 29% and I held only 9% of the market share for this segment.

In future rounds, I plan to be more careful about my forecasting and increase my contribution margin, which should improve my profits. I did not perform as well as I would have liked to, but hopefully the changes I make in the next round will improve my standings.

ROUND 2 ANALYSIS I performed much better in round 2. My sales increased to $85,261,339. I had a profit of $4.3 million, and my contribution margin increased to 30.5%. My stock prices improved as well, increasing almost $6 to $30.16 per share. My market capacity, book value per share, and EPS also increased this round, and I was able to issue a small dividend. My cash position also improved this round, and I did not require an emergency loan. My production was more than my capacity, which also helped me out this round. I did not issue stock or debt in this round either. For Able, I increased my performance and decreased my size, but left the MTBF where it was. I actually had to increase the price to improve my contribution margin, even though this did not align with my strategy. I left my promotion and sales budgets where they were because I was hoping this would improve my sales. I drastically decreased my capacity because of the large amount of inventory leftover. I did not think I would need that much capacity if I ended up with more inventory leftover than I had sold in the previous round. I did increase the automation because I did plan on continuing to produce the product and this will help with labor costs in the long run. I ended up being better off in this round, selling 1,049 units and only having 97 leftover. My forecasting greatly improved in this round. My survey score also increased to 16, which isn’t great, but it is seeing some improvements. My contribution margin also increased to 35%, and I now hold 12.6% of the traditional market. For Acre, I left R&D where it was because it seemed to be in a decent position on the perceptual map and because this aspect doesn’t matter to the Low End consumers as much as the age of the product does. I did slightly increase my price to $20.00 because I am still in the lower half of the price range, and I wanted to improve my contribution margin. I left my

promotion and sales budgets where they were because these numbers helped me to perform very well in the last round. I also left my capacity where it was, but I increased my automation in hopes of decreasing my labor costs in the long run. My sales increased to 1,884 units this round, leaving 393 units in inventory. My forecasting was off again for this round, but I overcompensated this time. My customer survey score improved to 22, which is not great, but it is an improvement. My contribution margin also improved to 30%, but I now hold only 17.0% of the Low End market. For Adam, I left the performance, size, and MTBF metrics where they were because I plan on transitioning this product into the Traditional segment within the next couple of rounds. I actually increased the price to $38.00 to try to make a decent contribution margin, but I did not fully think this through all the way, because I dropped my promotion and sales budgets, which caused me to not make hardly any sales at all. I decreased my capacity because I did not anticipate a large sales volume in future rounds, and I left my automation where it was because I did not see this having a huge impact on my labor costs. I only sold 53 units and I had 145 units leftover at the end of this round. My survey score also dropped to only 1, which is due to my poor judgement skills in this round for this product. My contribution margin decreased to only 18%, and I only held 1.6% of the High End market. Hopefully these metrics improve when Adam fully transitions into the Traditional segment. For Aft, I left the performance and MTBF where they were, but I decreased the size in hopes of keeping up with the competition. I kept my price at $33.00 for this round again. I increased my promotion budget in hopes of reaching more people, but I left my sales budget where it was. I decreased my capacity and left my automation where it was because I plan on phasing out this product. I actually did better than I thought I would with this product. I sold 351 units, causing me to stock out, but my survey

score was only 9 for this round. My contribution margin improved to 29% this round, but my market share decreased to only 10.3% of the performance segment. For Agape, I increased the performance but left the size and MTBF metrics where they were to place this product at a better location on the perceptual map. I slightly increased the price in this round to $33.50, and I decreased the promotion and sales budgets in order to make a better contribution margin. I slightly decreased my capacity because I do not anticipate a high sales volume in future rounds, but I left my automation where it was. My sales did not do as well for this product in this round, selling only 154 units and leaving 378 units leftover in inventory. This is possibly because my survey score dropped even more to only 3. My contribution margin also decreased to 20%, and I only held 4.8% of the Size market. I performed much better in this round than in the previous round, but there are still some areas that need improvement. Better forecasting should improve my days of working capital and employee productivity. I will also increase my sales budget to improve my customer accessibility and hopefully increase my sales as well.

ROUND 3 ANALYSIS I performed fairly well in round 3 as well. In this round, my sales slightly decreased to about $73 million. I had profits of almost $1.5 million, and I increased my contribution margin to 34.1%. My stock price also went up by $2.27 to $32.42. My market capacity increased again this round, but my book value per share stayed about where it was last round, and while my EPS was still positive, it actually decreased this round. I issued another small dividend this round as well. I did not issue stock or debt, and my cash position was not as good for this round, but I did not require an emergency loan. As in the last round, my production was greater than my capacity. For Able, I increased the performance, decreased the size, and left the MTBF where it was to better align with the customer criteria. I left the price where it was because this enabled me to keep my contribution margin at a good level. I increased my promotion and sales budgets to hopefully increase my sales volume. Because of the high volume of sales in the previous round, I slightly increased the capacity and the automation to keep up with product demand. I actually sold less units this round, selling only 816 units, leaving only 73 units leftover. Although my sales weren’t as great, my forecasting is getting better each round. My customer survey score doubled this round to 32. My contribution margin remained about the same as last round at 34%, but my market share decreased to only 11.3% in the traditional segment. For Acre, I left the performance, size, and MTBF where they were because as in the last round, these metrics aren’t as important as the age of the product to the consumers of this segment. I also left the price at $20.00 for this round because of how well this product sold at this price in the last round. I increased my promotion and sales budgets to reach more people in this round. I left my capacity where it was, but I increased my automation

to help with my labor costs in the long run. In this round, I sold 1,829 units, but I had nothing leftover in inventory, so I stocked out. My survey score went up to 27, which probably helped my sales. My contribution margin also increased to 39%, but my market share decreased to only 14.8% of the Low End segment. In this round, Adam finally fully transitioned into a primarily Traditional product. I left the performance where it was, but I actually slightly increased the size, and decreased the MTBF to fit in with the Traditional segment criteria. I also lowered the price to $31.00 to fit in with the criteria as well. I increased my promotion and sales budgets because my metrics fit in with the criteria very well, and I was hoping that by increasing my budgets, this would also increase my sales. I left my capacity where it was for this round, but I increased my automation to help with my labor costs in the long run. My sales improved in this round, selling 317 units, leaving me with only 26 units leftover in inventory. This is partially because my survey score slightly increased in this round to 9. My contribution margin improved to 27% in this round, and my Traditional market share is now at 11.3%. This is the last round that Aft was one of my products before it was phased out. I left the performance, size, and MTBF where they were because I did not see it being beneficial to make changes at this point. I did actually increase the price slightly to $33.50 in order to help my contribution margin. I decreased my promotion and sales budgets because I did not see a reason to spend a lot of money on these things when I’m phasing the product out. I also sold off my capacity because I will no longer be producing this product. I sold only 1 unit and had nothing leftover in inventory. My survey score decreased again to only 4. My contribution margin improved this round to 31%, but I only held 0.1% of the Performance market.

For Agape, I increased the performance because it was slightly lacking in that aspect, but I left the size and MTBF where it was. I also left the price at $33.50, but I decreased the promotion and sales budgets because I could not really afford more than that in my budget for this round. I left the capacity and automation where it was because I was hoping for a larger sales volume in future rounds, but this did not happen. I only sold 123 units, leaving 626 units leftover in inventory. My customer survey score remained extremely low at only 3. My contribution margin dropped to only 1%, and I only held 3.8% of the Size market. In this round, I created a new High End product, Ace, because I noticed that the performance, size, and MTBF measures would be the same through the end of the game, and because I knew that these numbers would fit in with the Traditional segment before long too. This product will be ready in round 4, and I have hopes of high profits for this product. I did not perform as well as I hoped to in this round, but I still made a profit. As in the last round, I cannot seem to get my forecasting to be accurate. I also plan to increase my sales budget spending again in the next round to improve Customer Accessibility.

ROUND 4 ANALYSIS I did not perform nearly as well in this round as I did in the previous round. My sales decreased to almost $67 million, and I actually took a loss of about $850,000. Although my sales were not great and I took a loss, my contribution margin was still very good at 34.2%. My stock price dropped $8 to $24.42, and my market capacity, book value per share, and EPS also dropped in this round. I did issue another small dividend, but it did not help because I ended up taking a loss in this round. I took on long term debt because I was hoping to be able to fund plant and product improvements. Although my cash position wasn’t as bad as it was in the previous round, it was negative again, and I did not require an emergency loan. As in the previous round, my production was greater than my capacity again. For Able, I continued to increase my performance and decrease my size to keep up with the customer criteria, but I left the MTBF where it was from the previous round. I decided to slightly decrease my price to $27.00 to keep my position as cost leader. I slightly decreased my promotion budget because my awareness was already really high, but I left my sales budget where it was because I wanted to keep my accessibility high as well. I left my capacity and automation where it was because I anticipate that these numbers will be perfect to keep up with demand in future rounds. I actually performed much better than I thought I would in this round in respect to sales. I sold 667 units and had nothing leftover in inventory, meaning I stocked out. Although my forecasting had been getting better, I did not do very well in that aspect this round. My customer survey score remained at 31 this round as well. My contribution margin increased to 42%, but I now hold only 10.8% of the traditional market. For Acre, I kept the performance, size, and MTBF metrics the same again for this round because the age was in a great position. I left the price

at $20.00 again because this product performed very well at this price in the last round. I also left my promotion and sales budgets where they were because these numbers performed well in the last round too. My capacity and automation remained where it was previously too because it seemed to be more costly than beneficial to increase either aspect. I sold 1,386 units and had nothing leftover in inventory, so I stocked out again in this round. My forecasting abilities need some improvement, especially for this product. My survey score at the end of this round was 21, which is slightly less than last round. My contribution margin jumped to 47%, but my market share decreased again to 10.1% of the Low End segment. For Adam, I actually slightly decreased the performance and the MTBF, but I left the size where it was. This enabled me to decrease the price to $28.50 to fit into the Traditional segment criteria. I left the promotion and sales budgets where they were because these numbers worked really well for me in the previous rounds. I increased my capacity because I was expecting a larger sales volume in fu...