Acct 2220 - Capsim SimulationAcct 2220 - Capsim SimulationTeams will run their own companies and Teams will run their own companies and

compete against one another. The focus is compete against one another. The focus is on “Business Integration” and using on “Business Integration” and using

accounting information to develop good accounting information to develop good analysis & decision-making skills.analysis & decision-making skills.

Acct 2220 - Capsim SimulationAcct 2220 - Capsim SimulationTeams will run their own companies and Teams will run their own companies and

compete against one another. The focus is compete against one another. The focus is on “Business Integration” and using on “Business Integration” and using

accounting information to develop good accounting information to develop good analysis & decision-making skills.analysis & decision-making skills.

Why use Simulation?Why use Simulation?•An opportunity to take control of your An opportunity to take control of your learning.learning.•An application of what we are discussing in An application of what we are discussing in class.class.•Planning & making your own business Planning & making your own business decisions & understanding the implications of decisions & understanding the implications of those decisions.those decisions.•Learning about the integration of multiple Learning about the integration of multiple business disciplines (i.e. R&D, Mkt, Prod, Acct, business disciplines (i.e. R&D, Mkt, Prod, Acct, Finance).Finance).•Recognition that there are no “perfect” Recognition that there are no “perfect” answers.answers.•Team-building opportunity to work with Team-building opportunity to work with others.others.•A challenging, but engaging experience!A challenging, but engaging experience!

ELECTRONIC SENSORS:

AN INDUSTRYOVERVIEW

ELECTRONIC SENSORS:

AN INDUSTRYOVERVIEW

The Marketplace The Marketplace • Customers (OEMs) Customers (OEMs) need sensors for their need sensors for their productsproducts

• Initially one Initially one segment, now segment, now breaking into twobreaking into two

• Different customer Different customer demands developing demands developing between the segmentsbetween the segments

• Diversification in the Diversification in the use and utility of the use and utility of the sensorssensors

Low Low TechTech

High High TechTech

The Marketplace The Marketplace • In our industry we track the changing customer demand on a perceptual map.

• Over 8 years, customers will demand much faster and smaller sensors.

• Market Segments will continue to diverge.

LowTech

HighTech

Low-Tech Customer Demands:Low-Tech Customer Demands:

You arenot giving me what I

want…

• “I want these sensors to be cheap”

• “I want them to have been around for a while – no Beta Testing!”

• “They have to be moderately reliable.”

• “The technology doesn’t have to be cutting edge.”•Ex: Heat/Cooling sensors, Pressure switches, Security apps, generic needs.

High-Tech Customer Demands:High-Tech Customer Demands:

I’m not getting what I want!

• “These sensors have to be small, like micro, and fast”

• “I need them to be right out of R&D, I’m talking ZERO years on the market”

• “I’m willing to pay more to get what I want.”

• “I like a pretty high reliability.”•Ex: Apple, Google, Dell, etc.

INDUSTRY ANALYSTS PROJECT HIGH GROWTH IN THE SENSOR INDUSTRY!

Consistent growth is projected over the next 8 years. All market segments will increase at a “nice clip,” according to market analysts.

“I see the entire market growing at around 14% or 15% per year. The High Tech market alone will be growing at a whopping 16-20%.”

I hope those companies out there are ready for that kind of expansion!”

0

1000

2000

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4000

5000

6000

7000

8000

Year 1 Year 2 Year 3 Year 4 Year 5

Low Tech High Tech

SEC ANNOUNCES BREAKUP OF MONOPOLYFOR IMMEDIATE RELEASE

The SEC, took dramatic action today by breaking up the monolithic corporation, Sensors, Inc.

In a statement to the press, the SEC outlined the reason and the outcome of this move.

“We cannot allow monopolies of this sort to impact an entire industry! The customers that utilize these sensors are being held hostage.”

“Effective immediately Sensors, Inc will be dissolved into the Andrews, Baldwin, Chester, Digby, Erie and Ferris companies.”

The CompetitionThe Competition

6 Companies$40 Million in Sales

1 Product Line2 Segments

Closed Marketplace

ANDREWS DIGBY

BALDWIN ERIE

CHESTER FERRIS

SHAKE UP IN SENSOR INDUSTRYSHAKE UP IN SENSOR INDUSTRY

Company Board Fires Management TeamAfter poor results, lackluster sales and angry customer reports, the Chairman of the Board of Directors has announced the immediate termination of the Management Team.

“This is a terrible day for our company,” said Chairman Zeigler. “We need to hire a dynamic leadership group who will be able to take this company into the future!”

“Due to this immediate need I have hired the Dream Team to start on January 1st. I expect to see great things from this new Executive Team!

WELCOME TO YOUR NEW COMPANY!

WELCOME TO YOUR NEW COMPANY!

Functional Areas:Functional Areas:

R&DR&D

ProductionProduction

Acct/Acct/FinanceFinance

MarketingMarketing

Additional Modules- HR (added Rnd 2 thru 8)- TQM (added Rnd 4 thru 8)

Companies will need to coordinate strategy and tactics across the following areas:

Research & DevelopmentResearch & Development

““Our productsare not well

positioned inthe marketplace.”

•We need to establish the specification of the products to meet customer demand.

•What quality and reliability level should we choose for our products?

•Let’s ensure the perceived age of the product meets customer demands.

•Let’s create new products to meet the changing marketplace!

MarketingMarketing

““Our productsare not optimally

priced.

And many of ourcustomers don’teven know our

product exists!”

•We need to set the price of our products in the marketplace.

•We need to build customer awareness through promotion.

•We need to establish a sales force and distribution channels.

•We must prepare a sales forecast for our products each year!

•We need to set Credit Policies (A/R & A/P)

ProductionProduction

How do our labor costs compare tothe competition?

Very soon, wemay also run out

of capacity tomeet demand!”

•Should we purchase machinery to automate our facilities?

•Should we buy or sell “capacity”?

•We will need to schedule production for each product line!

•We must manage the companies’ fixed (long-term) assets

•We must determine & manage our workforce (i.e. # of workers)

Finance & Accounting

We have poorcash flow andsubstandard

financial ratios!

We have nofinancial plan

in place!

•How will we pay for all of this?•How will we acquire “capital”?

•Should we issue Stock?•Issue short-term Debt?•Issue long-term Bonds (Debt)?

•Should we pay dividends to our shareholders? If so, how much?•We must analyze financial stmts.•We must evaluate our Proformas.

Proforma FinancialsProforma FinancialsA great management tool driven by forecasts and projections. Allows “What if” Scenarios by the company.

•Balance SheetBalance Sheet•Profit & LossProfit & Loss•Cash FlowCash Flow•Financial Financial RatiosRatios

Performance Metrics UsedPerformance Metrics Used1) Success Measures (must commit by 1) Success Measures (must commit by Round 2):Round 2):How will your team be evaluated? Select the criteria & weighting factors.(Note: minimum 1% weighting for each of the 8 components below):

•ROS (Profitability)•ROA (Profitability)•ROE (Profitability)•Cumulative Profit•Stock Price (per share)•Total Market Capitalization•Asset Turnover (Mgmt Efficiency)•Percentage of Market Share

NoteNote: From your dashboard, see upper left for : From your dashboard, see upper left for Homework/Success Measures.Homework/Success Measures.

2) The “Balanced Scorecard” (Results of 2) The “Balanced Scorecard” (Results of Decisions):Decisions):

RUNNING YOUR COMPANY…RUNNING YOUR COMPANY…

THINGS TO DO ON AN ANNUAL BASIS…THINGS TO DO ON AN ANNUAL BASIS…

To Do List:To Do List:

•First,First, establish a long-term Strategic Plan. establish a long-term Strategic Plan.•Review Foundation FastTrack for industry Review Foundation FastTrack for industry conditions.conditions.•Make Make tacticaltactical decisions across each functional decisions across each functional area that is consistent with your overall area that is consistent with your overall company company strategystrategy..•Upload your decisions to Capsim site by due Upload your decisions to Capsim site by due dates.dates.•Review each round’s results and analyze not Review each round’s results and analyze not only your results, only your results, but the competitors as wellbut the competitors as well..•Build your business and create shareholder Build your business and create shareholder wealth!wealth!

Groupwork Considerations:Groupwork Considerations:

Good Luck in Running Your Company!

Next Steps:

1) Registration in lab.

2) Individually complete the “Getting Started”

assigns by the due date (see class website).

3) Three Practice rounds (1 week).

4) Eight Competition rounds (6 weeks).