Download Mission Statement

Capism: Business Simulation
Vision Statement
Our vision is to differentiate ourselves within the sensor industry. We will achieve this with designs that are both
fresh and exciting to our customers. Our customers are the companies that build the technology of the future.
Therefore, it is important to us that we provide them with the best sensors that will result in production of
industry leading technology for tomorrow and the future.
Mission Statement
Erie Global Sensors’ mission is to become the global leader in the sensors industry. We strive to build sensors that
best meet the needs of our customers. We utilize the latest innovative technologies to consistently improve our
products. We believe that with our innovative products we can provide the best sensors for the technology of the
future.
Prof Bowen: Page 1 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Formal Organizational Chart
Gerald Harrison
R&D Manager
1. Update products Pfmn,
Size, and MTBF.
2. Discuss Plant Capacity
needs and New
Automation needs with
Production.
3. Update Promo Budget
as needed.
4. Coordinate Sales
Budget with Finance.
5. Discuss Pricing Strategy
with Marketing.
6. Work with Finance on
TQM initiatives to keep
material and labor costs
down.
Derrick Felder
Production Manager
Ekaterina Vorobyova
Marketing Manager
Chris Arata
Finance Manager
Charles Meighen
Finance Manager
1. Update Production
Schedule.
2. Buy or sell Plant
Capacity as needed.
3. Increase Automation
as needed.
1. Perform the
calculations to create the
Sales Forecast.
2. Discuss pricing strategy
with R&D Manager and
Finance Managers.
3. Set Product Pricing.
1. Work with marketing
to create competitive
forecast and pricing.
2. Work with production
to determine forecast
and pricing.
3. Double check all other
expenses and
investments to insure
overall firm health.
4. Make sure revenues
cover expenses/
investments prior to
processing each round.
5. Determine capital
structure goals and
sources of funds for each
round.
1. Perform analysis on
the Proformas to make
sure the company is
maintaining profitability.
2. Discuss with Marketing
about pricing of products
and make adjustments as
necessary.
3. Set Promo and Sales
budget numbers.
4. Set all of the HR
numbers.
5. Set and adjust TQM
numbers.
Strategic Management Process
Marketing Manager
Our goal is to monitor prices and promotion of our sensors. We will interact with our customers through our sales team and distribution system. We will also be
responsible for sales forecasting. In addition, our marketing department will work closely with our production department to ensure manufacturing quantities
are accurate and in line with forecasts. We will also work with our finance department to project revenues for each product and to double check our forecasting
numbers.
1. Perform a situational analysis on each previous round using the Capstone Courier and compare all companies. Each round analyze their prices and
amount of products in each category sold
2. To determine the Forecast in the first few rounds, I used a specific formula when computing for each product:
Sales forecast part 1: [(Industry Demand x Next Year’s Growth Rate) # of products with Market Share of 10%+]
Prof Bowen: Page 2 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Sales forecast part 2: [sales forecast part 1+ (sales forecast part 1/ 12)]
3. After about the third round, I started forecasting using a different method, which was to select the group that sold the highest amount of units (if our
product stocked out) and multiply that amount by Next Year’s Growth Rate for that particular product and add 1 month extra supply by taking that
forecast and adding the same forecast after dividing it by 12. For products we did not stock out in, I used the units we sold and multiplied it by that
product’s growth rate for the next year then added the forecast divided by 12, to add an extra month’s supply
4. With the numbers calculated for my team’s sales forecast, I consulted with the Production Manager to make sure that our capacity allowed my team to
produce the sales forecast calculated. If for some reason the capacity was not high enough to match the sales forecast, we would lower the sales
forecast to the highest possible capacity for that product.
5. Determine sales prices and keep a chart of all teams’ prices for each product starting with Round 1. Keep track and analyzed the changes to prices made
by other groups of the course of each round to predict their price range for the next round, in order to keep a competitive price in the sensor business
6. Analyze competitor’s prices and review the Capstone Courier report for the previous round and check each product’s section to ensure that sales price
was within the expected range for the next round, which is always 50 cents lower than the previous round
7. Each time there was a price adjustment for the next round, I consult with the Product and R&D Manager as well as the Finance Managers to make sure
everyone agrees on the price
Research & Development
Our goal is to listen to what our customers want as far as sensor size, performance, and mean time before failure (MTBF). We do this by closely monitoring the
segment analysis reports as well as feedback that we receive from analyzing reports and reading the Capstone Courier. Knowing this information will allow us to
differentiate ourselves within the sensor industry because we can then update our sensors to stay aligned with what our customers want. This makes it possible
for us to position ourselves within each of our five market segments to capture the largest market share in the industry by providing exactly what the market
demands when they need it. All of this is accomplished by having ongoing communication with our Marketing Manager and our Production Manager.
1. Perform a situation Analysis of the perceptual map using the industry conditions report to determine the ideal spot locations for each industry segment
2. Use product information from page 4 of the Capstone Courier to see where our products rank against our competitors, comparing each market segment
against the industry leader for that year
3. Use Traditional Customer Buying Criteria from pages 5-9 of the Capstone Courier to find out what our customers want as far as product age,
performance, size, and MTBF
Prof Bowen: Page 3 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
4. Discuss next year’s forecast and pricing with Marketing and Finance to determine sales estimates and product pricing. We look at Traditional Statistics
and Traditional Customer Buying Criteria utilizing industry unit demand, segment growth rate, and segment price range to make some assumptions
about our forecast
5. Discuss plant utilization and automation levels with Production and Finance to determine our future needs
6. Assist Production with calculations to determine our capacity needs for the upcoming year
7. Work with Finance to find ways to improve our Contribution Margin. I do this by examining the Segment Analysis pages of the Capstone Courier to see
how our products rank in customer awareness and accessibility. I then make changes to the Promotion Budget and Sales Budget as needed
8. Look at the TQM Summary of the Capstone Courier to see what we are spending compared to our competitors and compare that to how our company is
doing with respect to our competition. I try to determine which initiatives are giving the most return for dollars spent. This plays into the Contribution
Margin analysis
Production Manager
Main responsibility is to manufacture and produce products in order to reach consumer demand. Also in charge of buying or selling capacity in order to make
factory size smaller (selling) or bigger (buying).
Production Schedule
In order to determine the production schedule, we must use the sales forecast numbers and minus it by the inventory on hand. As a production manager I try
my best to prevent stock outs by having a little inventory left over after each round. In some cases where there is no inventory on hand, we match the numbers
of the production schedule with the sales forecast numbers in order to produce some inventory and avoid a stock out in the following year. When making a
production schedule we take in consideration the 2nd shift production and contribution margin to ensure that our plant will have enough workers to cover the
2nd shift in production just in case our workers can’t produce all of the products necessary in the 1st shift.
1.
2.
3.
4.
Check unit sales forecast to make sure that we can produce enough units
Check how much inventory on hand we have for each of our products
Take unit sales forecast and subtract out inventory on hand to determine production amount
Match the results to production after adjustment by increasing the production schedule until the production after adjustment matches the results from
#3
Prof Bowen: Page 4 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Production Equipment
For production equipment, the key elements that are taken into consideration are buying/selling capacity and automation. In determining buying and selling
capacity we take into consideration the size of our 1st shift capacity. If our 1st shift capacity is too big then we would consider selling some of the capacity to
make our plant smaller and more efficient for production. If our capacity size is too small then we would consider buying capacity to ensure that we have
enough equipment needed for making a product. We can also reduce labor costs by increasing automation along with buying or selling capacity and the amount
of increase in automation will be carried over in total investments if we bought capacity or in the sales of plant and equipment if we sold capacity in the finance
department. We don’t have to buy or sell capacity and increase automation all the time but only in situations where our plant is in bad condition or if we don’t
have enough money to cover the investments made for our plant
1.
2.
3.
4.
5.
6.
7.
8.
9.
Check 2nd shift Production for each product to see if it is under or over 70%
If 2nd shift production is under 70% then I won’t buy capacity for that product
If 2nd shift production is over 70% then I would buy capacity for that product
Determine the amount of capacity to buy for each product by multiplying the growth rates for each segment by their unit sales forecasts and then add
that on to the sales forecasts. I then divide each result by 1.7 and subtract the current 1st shift capacity from the result. I round the results up to the
nearest whole number for next the year’s capacity needs
Use the same results and add it to the current 1st shift capacity
Check total unit cost for each product (labor & material)
Check contribution margin for each product
If contribution margin is over 35% then I won’t buy automation
If contribution margin is under 30% then I would buy automation based on the growth rate for the following year
Finance Manager
Our objective here is to assist our marketing department with their forecasting of sales and setting prices. In addition to that we provide marketing with
promotional and sales budget information. We also make decisions regarding human resources functions such as: labor negotiations, recruitment spending,
training hours, and set TQM budgets. We also work closely with our Production Manager to make sure they have the inventory on hand that they need to meet
production demand. We do this by determining if the company’s financial position is such that we can meet the needs of production. We work closely with
production when investment decisions are made about buying/selling capacity and increasing automation. Once we have determined expenses and investments
for the round we make decisions for the financial structure of the company. Determine the capital structure and decide which source of funds fits the current
needs and goals of the firm.
1. Check the current cash position of the company.
Prof Bowen: Page 5 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
2.
3.
4.
5.
6.
7.
8.
9.
10.
Check forecasted prices and make adjustments with marketing manager.
Work with production to see if we have the cash position to add more plant capacity.
Take the investment number and subtract it from our calculated cash position and determine if we need to raise funds using equity or debt.
Use the Proformas such as the Balance sheet and Income statement to make decisions about more LT debt/buying back LT debt or issuing more
Common Stock/buying back Common stock.
Use the ratios to determine if we are levered properly such as the Leverage ratio.
By looking at the Income statement we can see the net margin and try to raise it by investing in TQM and raising prices on products when necessary.
Make sure labor negotiations are being met in order to minimize employee turnover and strikes and to increase productivity. By checking the cash
position and accounting for these costs we determine how much we can spend.
Work with production and marketing to raise the contribution margin by cutting costs in promo, sales budget, and by raising prices.
Lastly, we double check with the other managers to go over the numbers and talk about any concerns.
Prof Bowen: Page 6 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 1a. Internal Factors Assessments
Financial Perspective
Total Sales Revenues are above industry average and
growing at or beyond our goals
Our Leverage (i.e., Debt/Equity) ratio is healthy
Our ability to cover short term debt (Current ratio) is
healthy
Our ability to raise fast cash (Liquidity ratio) is healthy
Our ability to convert revenues to profit is comparatively
strong (Net profit margins)
Our investors are confident in our future earning potential
(P/E ratio)
Management is efficiently turning sales into earnings
(ROS)
Our company is using its assets efficiently (ROA)
Our returns to shareholders are competitive and
encourage investment (ROE)
The true value of our company is large relative to our
competitors (Market Cap)
Our historical ability to effectively manage company cash
flow is strong [Emergency loan(s)?]
Strength (+)
Weakness (-)
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
③②①
①②③
①②③
Total Sales Revenues are below average and not reaching
our goals
Our leverage ratio is unhealthy
Our ability to cover short term debt is inadequate
Our inability to raise fast cash puts us at risk
Our poor net profit margins show lack of cost control and
insufficient earnings
Our investors lack confidence in our future earning
potential
Management is not using company assets efficiently to
generate earnings
Our company is operating less efficiently
Our returns to shareholders are not competitive and
discourage investment
The true value of our company is poor relative to our
competitors
Our company has needed one or more emergency loan(s)
to survive
Prof Bowen: Page 7 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 1b. Internal Factors Assessments (cont.)
Internal Business Processes Perspective
Strength (+)
Weakness (-)
Our company’s contribution margin ≥ 30%
Utilization of our production facilities is efficient
Our working capital is sufficient
Forecasting skill prevents lost sales due to stock-outs
Forecasting skill minimizes inventory carrying costs
Our cumulative operating profit is growing and adequate to
fund our corporate growth needs
Demonstrated management team efficiency (e.g., everyone
engaged, productive, and working hard)
Demonstrated management team effectiveness; that is,
everyone is well-prepared (i.e., all preparation assignments
completed) and contributing to achievement of desired results
Strategic Management process well organized, functional, and
understood
③②①
③②①
③②①
③②①
③②①
①②③
①②③
①②③
①②③
①②③
Our contribution margin < 30%
Our plant utilization is inefficient
Our working capital is insufficient
Poor forecasting creates lost sales due to stock outs
Forecasting skill minimizes inventory carrying costs
③②①
①②③
Our cumulative operating profit is inadequate
③②①
①②③
Demonstrated management team dysfunction
③②①
①②③
Demonstrated management team ineffectiveness
③②①
①②③
Demonstrated ineffective strategic management
planning and processes
③②①
③②①
①②③
①②③
Prof Bowen: Page 8 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 1c. Internal Factors Assessments (cont.)
Customer Perspective
Strength (+)
Weakness (-)
③②①
①②③
③②①
①②③
Our products are aligned with customer buying criteria
③②①
①②③
Customers are aware of our products
Potential customers can purchase our products
③②①
③②①
①②③
①②③
We sell the maximum number of viable products
③②①
①②③
We are controlling our SG&A expenses
Our overall weighted average Customer survey score is the
highest in the industry
Company market share (overall) is the highest in the industry
We have invested in sufficient capacity to meet current and/or
future customer needs
We have invested competitively in production efficiencies to
be a able to meet customer needs while still making a profit
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
①②③
③②①
③②①
①②③
①②③
Our company’s product/segment mix is currently optimized
(i.e., all segments performing well and fit with our mission)
Our company’s product/segment mix positions us in the
marketplace well to move the company profitably into the
future
Our company’s product/segment mix is not optimal
(i.e., we need to cut or add segments)
Our company’s product/segment mix needs
adjustment(s) if the company is to move profitably
into the future
Our products are not aligned with customer buying
criteria
Customers are unaware of our products
Our products are unavailable to potential customers
We sell fewer viable products than our top
competitor(s)
Our SG&A expenses are too high
Our overall weighted average Customer survey score
is the lowest in the industry
Company market share is the lowest in the industry
We have insufficient production capacity to meet
current and/or future customer needs
Our cost structure is too high to allow us to profitably
meet customer needs
Prof Bowen: Page 9 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 1d. Internal Factors Assessments (cont.)
Learning and Growth Perspective
We are skilled at managing employee satisfaction/turnover,
resulting in more efficient operations
We are developing productive employees
We are realizing gains from TQM investments in Materials Cost
reduction
We are realizing gains from TQM investments in R&D cycletime reduction
We are realizing gains from TQM investments in
Administrative Cost reduction
We are realizing gains from TQM investments in creating a
Demand increase
Sales/employee (productivity) is improving
Assets/employees (productivity) is improving
Profits/Employee (efficiency) is improving
Strength (+)
Weakness (-)
③②①
①②③
③②①
①②③
We are unskilled at managing employee
satisfaction/turnover
Our employees are unproductive
③②①
①②③
We have not invested to reduce our Materials Costs
③②①
①②③
③②①
①②③
③②①
①②③
③②①
③②①
③②①
③②①
③②①
①②③
①②③
①②③
①②③
①②③
We have not invested to reduce our R&D cycle-time
Costs
We have not invested to reduce our Administrative
Costs
We have not invested to create increased Demand
for our products
Sales/employee (productivity) is not improving
Assets/employees is not improving
Profits/Employee is not improving
Prof Bowen: Page 10 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 2a. External Opportunity Assessments
+
Market/Customer-based Opportunities
Is/Are there opportunity(ies) for new product placement in underserved segment(s)?
Are there segments where customers are either ill-served or “unsatisfied?”
Are we benefitting sufficiently from growing markets?
Can we utilize our financial strength to generate competitive advantages?
Can we utilize our marketing strength to generate competitive advantages?
Can we utilize our production strength to generate competitive advantages?
Can we utilize our internal efficiencies to generate competitive advantages?
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
③②①⓪
Prof Bowen: Page 11 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 2b. External Threat Assessments
-
Market/Competitor-based Threats
Are competitors bringing new products into one or more segments?
Is/Are there threat(s) from competitor dominance is any segment(s)?
Are any competitors, and/or potential competitors, developing threatening “technological” advantages and/or efficiencies (e.g.,
automation)?
Are any of our products failing in the marketplace? Can we afford to “fix” the problems?
Might any of our cost items become unpredictable?
Might any of our cost items become too high/non-competitive, and therefore unsustainable?
Might any market segment become saturated in the near future?
Are any competitors developing threatening cost advantages?
Are any competitors developing threatening “economies of scale” advantages?
Are any competitors developing threatening “marketing” advantages?
Are we vulnerable to a labor strike/stoppage?
Are we vulnerable to future declining industry/economic conditions?
Are we vulnerable to unfavorable legal/regulatory conditions?
Are we susceptible to market or other repercussions from our past or present ethical/social responsibility choices?
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
⓪①②③
Prof Bowen: Page 12 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 3. Organizational Strengths (from Tables 1a-1d)
Corporate-level Strengths
Strategic/tactical option(s)
Positioned and optimized product/segment mix
We have what we think is an optimized product mix. Do not make any changes here but continue to track
each segment and ensure healthy contribution margins.
Business-level Strengths
Strategic/tactical option(s)
Total Sales Growth
Sales are growing at a faster pace than any competitors. Continue to focus on pricing for all products. Look
for pricing patterns and opportunities in the market.
Control the amount of debt used. Continue to check leverage ratio to ensure healthy capital structure.
Highest in the industry. Continue to calculate these ratios each round to ensure firm health.
Stay on top of the pfmn, high, and size products to increase margins. Slight price increase can help the
margin if we see an opportunity to raise the price for these products.
Continue to track this number to remain highest of the industry. We can also control this number by
controlling the amount of equity outstanding. The more shares we buy back the higher the return will be
on current shares. Additionally, check returns and profitability of the firm as a whole to make sure our
investors are satisfied.
Ensure that we are investing in the proper assets. Plant capacity should be 1.7 for each product and
automation should stay up to date with the industry or increase if we see potential opportunity to grow
past competitors. Also Continue to track ROA to ensure healthy ratio.
Customer satisfaction score can be increased. Additionally
Look for opportunities to increase prices in the market also increase automation in high, pfmn, and size.
Capacity is sufficient for each product. Continue to forecast one year ahead for each to product to ensure
170% plant utilization.
Continue to check each product is using plant efficiently. Make sure plant utilization in 170%
Overall Market Share is highest in the industry. Pfmn, size, and high end can be improved.
Check the results at the bottom of the capstone courier. Check the investments of the other firms and the
results of their investments. If we see the opportunity to invest more will give better results we will analyze
TQM and make proper changes.
Leverage
Liquidity and current ratio
Net Profit Margins
P/E Ratio, ROE
ROA
Aligned products and customer satisfaction
Contribution Margin
Sufficient Capacity
Plant utilization
Overall Market Share
TQM
Operating-level Strengths
Strategic/tactical option(s)
Emergency Loans
Make sure revenues are covering expenses for each round and investments are covered through a proper
source of funds (equity or debt).
Continue to minimize current liabilities by raising the proper amount of funds for investing activity to
Sufficient Working Capital
Prof Bowen: Page 13 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Team efficiency
Forecasting
Sufficient Operating Profit
Production Efficiencies
Employee Production/Satisfaction
ensure no current debt.
Continue to check our progress at the beginning of each class and discuss decisions with entire group. Also
calling each other before the round processes to make sure all jobs are done and double checked.
Continue to use the growth rate plus an extra two months of inventory for our forecast. Look for
opportunities in the market where we can take on more risk by producing more products.
Increase automation and TQM each round to compete with industry averages. Advance past industry
averages when we realize the opportunity to grow through investing more money.
Optimize recruiting and training time to increase productivity and decrease turnover. These numbers
should be check after each round to ensure health.
Prof Bowen: Page 14 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 4. Organizational Weaknesses (from Tables 1a-1d)
Corporate-level Weaknesses
Strategic/tactical option(s)
Business-level Weaknesses
Strategic/tactical option(s)
Operating-level Weaknesses
Strategic/tactical option(s)
Customer Accessibility and Awareness
Customer Survey Score
Invest in more promo for pfmn, high, and size products
Overall towards the top of the industry but can improve here. Look more closely to customer criterian for
pfmn, high, and size products
Prof Bowen: Page 15 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 5. External-based Opportunities (from Table 2a)
Corporate-level Opportunities
Strategic/tactical option(s)
We have the highest Return On Sales among
competitors
We have higher Sales among competitors
We have higher profits (Net Profit & Cumulative
Profit) among competitors
Continue developing products that consumers will buy by meeting up with industry unit demands and the
growth rate for each year
Continue developing products that consumers will buy by meeting up with industry unit demands and the
growth rate for each year as well as setting a competitive price
Continue developing products that consumers will buy by meeting up with industry unit demands and the
growth rate for each year
Business-level Opportunities
Strategic/tactical option(s)
Majority of consumers like our products based
on our Customer’s Accessibility for each of our
products
Consumers are aware of our products based on
our Customer’s Awareness for each of our
products
Opportunity to introduce new products in the
marketplace
Continue focusing on positioning our products according to the industry unit demands in each year and
also develop sales forecasts and set prices accordingly to industry unit demands in each year for each of
our products
Continue focusing on positioning our products according to the industry unit demands for each year
Operating-level Opportunities
Strategic/tactical option(s)
We have relatively good contribution margins
for each of our products
We have relatively good Automation rating for
each of our products
We run 0% of overtime for our plant
Continue investing automation and plant capacity for our plant according to the industry unit demands for
each year
Continue to invest in automation rating until we meet our ideal labor/material cost
Develop new products in our R&D and Production departments in the following year so our company can
stay relevant and continue to compete
Continue to grow our plant by investing our automation and plant capacity according to the industry unit
demands for each year
Prof Bowen: Page 16 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 6. External-based Threats (from Table 2b)
Corporate-level Threats
Strategic/tactical option(s)
We are ranked last in total leverage
(assets/equity)
Focus on how other competitors leverage is higher than ours then capitalize
Business-level Threats
Strategic/tactical option(s)
New product entry by competitors
Competitors are lowering their prices
Come out with new products in the following years
Don’t do the same. Just be aware of the situation and keep up with the growth rate and industry unit
demands
Find out how competitors’ customer awareness is higher than capitalize ( we can fix this problem by
coming up with better sales forecast)
Couple of Competitors’ customer awareness for
certain products are higher than some of our
products
Couple of competitors’ customer accessibility for Find out how competitors’ customer accessibility is higher than capitalize (we can fix this problem by
certain products is higher than some of our
coming up with better sales forecast and better pricing and promotions for each of our products)
products
Operating-level Threats
Strategic/tactical option(s)
Stock outs for some of our products
Keep producing enough products in our production schedule so we can still have enough products to sell
for the following years, increase capacity
Prof Bowen: Page 17 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 7: Priorities for Internal Strengths (from Table 3)
Statement of
Internal
Strength(s)
1
Increasing Net
Profit Margin
1 = Low
Likelihood of Occurrence
2
3
4
X’s
5 = High
1 = Low
2
Seriousness
3
4
5 = High
= Strength
Index Number
4
5
20
2
Aligned with
Customer Buying
Criteria
4
5
20
3
Increasing ROA
4
4
16
4
Increasing ROE
4
4
16
5
Increasing
Employee
Production and
Decreasing
Turnover
4
4
16
6
Utilization of
production
facilities
7
Overall Market
Share
4
4
16
4
4
16
Prof Bowen: Page 18 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 8: Priorities for Internal Weaknesses (from Table 4)
Statement of
Internal
Weakness(es)
1
Customer Survey
Score
2
Customer Awareness
1 = Low
Likelihood of Occurrence
2
3
4
X’s
5 = High
1 = Low
5
4
Seriousness
3
4
2
5 = High
= Strength Index
Number
3
15
3
12
3
4
5
6, etc.
Prof Bowen: Page 19 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 9: Priorities for External Opportunities (from Table 5)
Statement of
External
Opportunity(ies)
1
Return On Sales
among competitors
1 = Low
Likelihood of Occurrence
2
3
4
X’s
5 = High 1 = Low
2
Seriousness
3
4
5 = High
= Strength
Index Number
5
5
25
2
Sales among
competitors
3
Profits (Net Profit &
Cumulative Profit)
among competitors
5
5
25
5
5
25
4
No overtime
5
5
25
5
Contribution Margin
5
5
25
6, etc.
Prof Bowen: Page 20 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 10: Priorities for External Threats (from Table 6)
Statement of
External Threat(s)
1
Last rank in total
leverage
(assets/equity)
1 = Low
Likelihood of Occurrence
2
3
4
4
2
New product entry
by competitors
3
3
Stock outs for
some of our
products
3
4
Lowering of prices
from competitors
3
X’s
5 = High
1 = Low
Seriousness
3
4
2
5 = High
3
7
3
6
5
3
= Strength Index
Number
8
6
5
6, etc.
Prof Bowen: Page 21 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 11. SWOT Possible Strategic/Tactical Recommendations (Prioritized from Tables 7, 8, 9, and 10)
Recommendation(s) to capitalize on identified relative business
STRENGTHS:
1.Increase employee production and decrease turnover
2.Increase production facilities to continue profit growth
3.Increase automation to reduce labor costs and increase margin
4.
5.
Cost
$1,000,000/year
$12,500,000/year
$10,000,000/year
Recommendation(s) to improve on identified relative business
WEAKNESSES:
1.Invest in proper R&D to stay aligned with customer buying criteria to
improve customer survey score(we want to be the best in the industry
here)
2.Increase promo budget
3.
4.
5.
Recommendation(s) to take advantage of business/market
OPPORTUNITIES:
1. Continue developing products that consumers will buy by meeting
up with industry unit demands and the growth rate for each year
2. Continue to grow our plant by investing our automation and plant
capacity according to the industry unit demands for each year
3. Continue focusing on positioning our products according to the
industry unit demands in each year and also develop sales forecasts
and set prices accordingly to industry unit demands in each year for
each of our products
How Financed (if chosen)
Mix of debt and equity
Mix of debt and equity
Mix of debt and equity
Cost
How Financed (if chosen)
$14,000,000/year
Mix of debt and equity
$3,000,000/year
Mix of debt and equity
Cost
How Financed (if chosen)
None
None
Depends on how
much it cost to
increase
automation and
plant capacity for
each year
None
Investments form our cash statements form balance sheet
None
Prof Bowen: Page 22 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
4.
5.
Recommendation(s) to mitigate business/market THREATS:
1. Keep producing enough products in our production schedule so we
can still have enough products to sell for the following years in order
to prevent from stocking out
2. Focus on how other competitors leverage is higher than ours then
capitalize
3. Find out how competitors’ customer accessibility is higher then
capitalize (we can fix this problem by coming up with better sales
forecast and better pricing and promotions for each of our products.
Also by determining the industry unit demands and growth rate for
each of the following years)
4.
5.
Cost
How Financed (if chosen)
None
None
None
None
None
None
Prof Bowen: Page 23 of 33
*©Michael G Bowen, 2012.
Capism: Business Simulation
Table 12. Final SWOT Recommendation Summary (From Table 11 - given available resources)
Corporate-level Strategy tactical recommendation(s) with cost:
1. Focus on how other competitors leverage is higher than ours then capitalize
2.
3.
Cost
None
Business-level Strategy tactical recommendation(s) with cost:
1. Come out with new products in the following years
2. For Competitors that are lowering their prices we will not do the same but instead just be aware of the situation by keeping up
with the growth rate and industry unit demands
3. Find out how competitors’ customer awareness is higher then capitalize (we can fix this problem by coming up with better sales
forecast)
4. Find out how competitors’ customer accessibility is higher then capitalize (we can fix this problem by coming up with better
sales forecast and better pricing and promotions for each of our products)
5.
6.
7.
Operating-level Strategy tactical recommendation(s) with cost:
1. Increase Automation
2.Employee Production
3.Plant size improvements
4.Promo budget
5.
6.
Cost
Depends on the type of
product &, what
segment the new
product will be sold in
None
None
None
Cost
$10,000,000/year
$1,000,000/year
$12,500,000/year
$3,000,000/year
Total Cost of Recommendations:
Prof Bowen: Page 24 of 33
*©Michael G Bowen, 2012.
SWOT Summary

In order to increase total sales, we must we must understand the market and how our
competitors are capitalizing on opportunities and inefficiencies in the market, then develop
forecast numbers and price our product accordingly to meet consumer demand as well as
increasing our sales for the following years. We must also focus on the company leverage ratio
and structure similarly to the industry’s leading firms.

In order to keep up with today’s market is to introduce new products in the following years
ahead in order to stay relevant in the market. Other companies are dumping by setting their
prices lower than they are supposed to but the only thing that we can do for this situation is to
be aware of the matter and not to copy them in any way. We must also research and
understand why some of our competitor’s customer awareness and accessibility is higher than
some of our products and then capitalize on the situation. Some of the things that we can look
into are our sales forecast, the next year growth rate and industry unit demands for each of the
following years. And to also come up with better pricing and promotions tactics for our
products.

In order to increase our market share we must increase our customer awareness and
accessibility according to our promotion budget, sales budget, and to the consumer demand in
each year. In order to reduce our material and labor cost we must continue to invest in
automation until we meet our ideal material and labor cost. Note we don’t have to have the
same labor and material cost as our competitors, just only to the point that our plant can be less
expensive in the following years so it can be run more efficiently. In order to prevent from
stocking out we must continue to produce enough products in our production schedule so we
can have enough products to sell for the current year and for next year and also invest for our
plant’s capacity and automation.
Porter Analysis
Threat of New Entrants: - Low
The threat of new entrants does not exist in our industry. New companies are blocked from entering or
leaving the industry so in that respect we operate like a cartel. Beyond that competition is fierce in the
fight for market share and profits. The way in which a threat exists here is when a team introduces a
new product. However, there are some market segments that would not make sense to introduce a new
product. Introducing a new Low End product would not be good because customers for this segment
want products that are about seven years old. It would be better to convert an aging Traditional product
to a Low End product and introduce a new Traditional product. It also does not make to add a new
Performance product because it is very expensive and customers are somewhat price sensitive so
maintaining a good profit margin is very difficult. It would make better sense to convert a Performance
product into a High End product because the profit margins are better and you can cut costs by have
very similar products. The only two segments that would be good to introduce a totally new product
would be in Traditional and Size.
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Capital Requirements: In Capsim no team is barred from entry because they are already
established in all five market segments. Although the costs are high any team can easily add a
new product in any of the five segments. It does not even matter if the team has the capital
because they would be granted an emergency loan from Big Al. This would be a smart
simulation strategy but it is entirely possible.
Economies of Scale: We do see economies of scale because as production volume increases the
per unit costs can be decreased by increasing automation, by increasing customer awareness
and accessibility with effective spending in Promo and Sales Budget, and by investing heavily in
Process Management Initiatives until maximum benefits are reached.
Product Differentiation: Significant product differentiation is not possible in this simulation,
only minor differentiation is achievable. The teams that figure out how to properly position their
product’s, make accurate production forecasts, and price correctly for each segment will gain a
slight advantage.
Switching Costs: Switching costs are low for our buyers.
Brand Identity: Brand Identity can be assessed by looking at the customer survey scores each
year in the Courier.
Access to Distribution Channels: Each team potentially has the same access to distribution
channels. Monitoring accessibility and awareness in the Courier allow each team to see how
their efforts are paying off.
Promise of Aggressive Retaliation: The threat of retaliation can only be accomplished here by
lowering price. This tactic is only effective in the Low End and Traditional market segments. In
the High End, Size, and Performance segments, price cutting will have a negative effect on sales.
Bargaining Power of Buyers: - Medium
If industry demand is greater than what is produced the bargaining power of buyer’s decreases because
these products are critical to their operations. If there is an oversupply of products in the market then
the bargaining power is with the buyers. Also, if products do not meet buyer’s specifications they will
not buy the product and will go to another company that meets their product requirements.
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Buyer Knowledge: Limited due to the complexity of our products. Buyers have little time or
ability to compare our products to other products.
Purchase Size: We are not able to see individual company purchases.
Product Function: A sensor that is used in many technology products.
Concentration of Buyers: Erie sells sensors that are used in thousands of products sold by
hundreds of companies.
Undifferentiated Products: Our products are undifferentiated.
Buyer Entry into the Industry: N/A
Bargaining Power of Suppliers: - Medium
Erie is dependent on labor in order for products to be built and to be delivered to the market. Labor
negotiations are an important part of our business. The unions supply the labor and if they don’t like the
offers they can just go to another company that is paying better pay/benefits in the market. If demands
aren’t met and somewhat exceeded productivity can fall, employee turnover rate is higher, and
productivity falls. Therefore, bargaining power of our suppliers can be quite high.




Products Crucial to Buyer: Plant & Equipment.
Products with High Switching Costs: None.
High Supplier Concentration: Yes, there aren’t multiple unions to choose from.
Suppliers’ Ability to Enter the Buying Industry: N/A
Intensity of Rivalry in the Industry: - High
Although there is no threat of new entrants, rivalry is very intense because this is a competition
therefore collusion does not exist. Competitors have little opportunity to differentiate their sensors
from the competition. Teams that are operating at a loss continue to be a fierce competitor because
they have the ability to steal a large market share.

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Industry Leader: At this point Erie and Ferris are the industry leaders if we use the Balanced
Scorecard as an indicator. If you look at other figures such as sales it would not be so clear who
the leaders are. In the real world team Andrews would probably have already been bought out
or declared bankruptcy.
Number of Competitors: The number of competitors does not play a role in rivalry intensity
here because the number cannot change.
Fixed Costs: There are relatively high fixed costs and even though these costs can be lowered
over time the price that customers are willing to pay continues to fall each year. Price cutting in



Capsim causes profitability to fall for all teams but profitability falls most for the team doing the
price cutting because profit margins are very slim.
Exit Barriers: Teams in Capsim cannot leave the industry so exit they can only leave market
segments and barriers to exiting a segment are very low. This would briefly decrease
competition in that market segment. As soon as the remaining teams increased capacity,
intense rivalry would resume.
Product Differentiation: Product differentiation in Capsim is very limited so profitability remains
relatively low. Each team has access to the same industry information so each team is trying
meet the specification demands of the customers as closely as they can.
Slow Growth: Growth is high in the Sensor industry. Our industry has very high opportunity to
generate large profits and sales.
Threat of Substitutes: - None
There is no threat of substitutes. There can be no more and no less than the six OEM sensor
manufacturers that presently exist in this industry.