Capsim Simulation MBA 670
Directions: This document is intended to help you record your thoughts as you apply your team’s chosen strategy through the rounds in Capsim Simulation MBA 670. Listed in each department are the action items given in Capsim: A Systematic Approach to Making Strategic Decisions.
Chosen strategy: Local Broad Differentiators
Research and Development
|Daze||Round 1||Round 2||Round 3||Round 4|
|Region Kit||No||No||Yes, US||Yes, US|
R & D Capsim Simulation MBA 670
With Research and Development, Team Digby applied the broad differentiator strategy. Thus, the goal is to maintain a presence in both segments of the market. The speed and accuracy were set to 6.3 which was a criteria that we believed would appeal to both the low and high tech customers and appeal to all potential purchasers across the USA. With regards to the service life of the product Daze, we set this decision at the medium range of the customer reliability range of 20,000. No region kits were added in this round.
In round 2, Team Digby again adjusted the speed and accuracy for the Daze product in alignment with the Customer Buying Criteria for the year 2024. The speed and accuracy were increased from 6.3 to 6.4 for product Daze. In compliance with Team Digby’s broad differentiator strategy, the service life for the daze was maintained at 20,000. This decision targeted at maintaining the range of high/low tech customer’s preferences. Per the Round 1 simulation report, year-end the 2022 age for product Daze was 4.1.
According to the CAPSIM user guide, modified products are considered to be new and improved, which cuts the perceived age of the product in half (CAPSIM, n.d). Per the Round 1 simulation report, product Daze ended in 2021, with an age of 2.5. Therefore, after changes to speed and accuracy, the product Daze age equaled approximately 2.2. This age is well within the 3-year customer expectation for Round 2.
In round 3, Team Digby again adjusted the speed and accuracy for the Daze product. The speed and accuracy were increased from 6.4 to 6.5 for product Daze. In compliance with Team Digby’s broad differentiator strategy, the service life for the daze was maintained at 20,000. This decision targeted at maintaining the range of high/low tech customer’s preferences. After changes to speed and accuracy, the product Daze age equaled approximately 1.9. This age is well within the 3-year customer expectation for Round 2. Finally, a region kit was added in this round due to the anticipation of sales for product Daze.
In Round 4, Team Digby continued to improve the speed and accuracy of the Daze product to align with the high/low-tech customers. The service life for Daze, was set to appeal to customer expectations at 20,000. This decision was made solely to reduce R&D but, in hindsight, greatly impacted customer demand. For product Daze, the age had progressed to 1.8 at the end of Round 3. Daze remained viable through Round 4 with another region kit added, which helped increase sales in the US market.
Marketing Department Capsim Simulation MBA 670
Regions Selected for Sales – the United States
|Round 1||Round 2||Round 3||Round 4|
|DAZE||USA $||USA $||USA $||USA $|
Team Digby’s chosen local strategy was broad/differentiator. Thus, the focus was to maintain presence in both the low-tech and high-tech market segments. Since our competitive advantage was on keeping the designs fresh and exciting, scoring a high customer awareness, and maintaining prices that were above average. When making marketing decisions, I decided that the price for Daze should be $35, since this was within range of prices that both the low-tech and high-tech customers wanted in the customer buying criteria ($15-$45).
The promo budget was set a $1,300 with the intention that it would help increase customer awareness beyond that of the competitors. Because of the speed and accuracy revision that reduced the product life by half, thus keeping Daze new and exciting, and the average pricing to cater for both low- and high-tech customers, we forecasted that 1,700 units would be sold during round 1.
Daze is being marketed to both low- and high-tech segments. Since price is an important aspect for the product’s competitive advantage, we maintained a price of $35, same as round 1, since it was a price that could be considered above average for both segments. Just to note, team Digby experienced stock outs of Daze product for both market segments. Since similar results were expected in round 2, we increased the sales budget to $1,900 to reach more potential customers and try to improve on the low customer accessibility experienced in round one (46% for both market segments).
Also, we increased the promo budget to $1,600 to increase customer awareness from 68% in round 1. Forecasted units were increased to 2,000 units in round 2 because we believed that the increased promo and sales budget along with revised age of the product (through adjustments of speed and accuracy in round 2) would bring more customers from both market segments. In addition, the demand growth rate was set to rise by 6% for the low-tech segment and 13% for the high-tech segment.
In round 3, the price of Daze stagnated at $35 in line with our broad/differentiator strategy that uses pricing above average as a competitive advantage. As a note, there were stock outs of product Daze for both the low- and high-tech segments. However, the customer awareness and accessibility improved upon an increase in budget allocations for the promo and sales components. Based on the results of round 2, we decided to further slightly increase the promo budget to $1,950 to improve on the customer awareness which was at 83% and hopefully bring it closer to 100%.
However, due to the stockouts experienced in previous rounds, it was decided to significantly increase the sales budget to $3,000 to increase customer accessibility which was still low (52% in previous round) and hopefully bring it closer to 100%. That way, we would be able to reach more potential customers. Due to the increased promo and sales budget and the expected increase in market demand for both market segments, we increased the forecasted units during round 3 to 2,400.
During round 4, we continued with our broad/differentiator strategy of maintaining an above average pricing for both market segments and thus retained the price at $35. The promo budget set of $1,950 set out in round 3 achieved customer awareness of 100% and so this budget was retained as spending above this figure would not improve the results. Also, spending less that $1,950 would bring customer awareness below 100%, which is not what we wanted.
The sales budget was also retained at $3,000, same as in round 3 because customer accessibility improved and although there were stockouts, they were relatively much lower when compared to stock outs in previous rounds. To counter the stockouts in previous rounds, it was decided that we increase the forecasted number of units to 2,700 in round 4, a decision which helped eliminate stock outs at the end of round 4.
|Round 1||Round 2||Round 3||Round 4|
Production Capsim Simulation MBA 670
With Production, Team Digby is following the broad differentiator strategy. The plant location is in the United States and for our products, we decided to strictly participate in the U.S. market for this project. Coming out of Round 0, we produced 1632 units but only sold 1506 units, therefore, in round 1 we increased our scheduled production to 1700 to allow the team to adjust across all 4 sectors for our product to increase demand. We also increased capacity by 300 to support our projected increase in selling units.
For 2024, we produced 1920 units of our Daze products and sold every unit in the U.S. Market, hitting 100% of our plant’s utilization and showing that in this section we understood the necessary forecast for customer demand. Production was scheduled for 2000, capacity increased to 2300, and we left automation at 3.
Team Digby decided to stabilize our plant operations by leaving our capacity at 2300 but increased automation to 3.2 in hopes to decrease cost for labor which in turn will increase our profit margin. This was the first time we saw our production exceed the plant capacity which we believe the region kit contributed to this jump in consumer demand. Reaching a high of 2,448 units sold and produced, in this round our plant utilization increased by 11%, leading to employing staff for a 2nd shift for the first time.
In our final round, we focused on keeping our plant operations the same as far as automation and capacity and only increased our production, which went up to 2850. This increase in production pushed our plant utilization to 124%. Though production increased significantly, we elected not to increase our automation to prevent the additional expenses we would accrue ($4 charge per unit of capacity) and decrease our profit. Dealing with our competitors and their implementation of region kits to boost demand, we knew this would be a risk, however, over the course of this project, our production has trended with an increase in product demand by 13% each round.
Finance Department Capsim Simulation MBA 670
Group consciousness for the first round was to ensure that we maintained a slow and steady approach. Through Finance, we agreed to issue a $2,000,000 Bond to ensure ample funds for our R&D, Marketing, and Production departments. Our closing cash positioning showed a positive increase in year 1.
Within the 2nd year of business Team Digby once again, chose to implement the slow and steady approach with more meticulous decisions in the other departments. Within this year, it was believed to increase market share and demand retirement of $2,000 in bonds would show a great debt to income ratio. Additionally we rewarded our current shareholders with a $0.53 dividend. Even with the dividend payment as well as bond retirement, Team Digby continued to show a positive closing cash position.
Similar to our first two years, Team Digby relied heavily on our approach at incremental progress based on market share, and sales amongst competitors to make decisions. Another $3,000 in bond retirements were paid, as well as a $0.55 Dividend to shareholders. Closing cash positions has shown a positive increase.
Within the 4th year, Team Digby showed positive cash flow, as well as an increase year to year in share price, sales, and overall market share. Decided to issue a $0.60 dividend payment. Team Digby also, in an attempt to shrink the market, retired $500 in available shares to increase the demand and reduce availability. Year 4, has shown the greatest increase from starting to closing cash position.
CAPSIM Global user guide. (n.d.). ww3.capsim.com. https://ww3.capsim.com/modules/
GIA/files/1_0/0/CapsimGlobal/EN/PDF/UserGuide.pdf, p. 9.