Capsim Simulation Project 5 MBA 670

Chosen strategy: Global Niche Differentiators

Research and Development for our Capsim Simulation Project 5 MBA 670

 R&D Decision Summary: Capsim Simulation project 5 MBA 670

Daze

Round 1

With Research and Development for Capsim Simulation project 5 MBA 670, Team Digby applied the niche differentiator strategy. Thus, the goal is to focus on the high-tech segment of the market. The speed and accuracy were set to 7.1 which was a criterion that we believed would appeal to 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. Finally, a region kit was added in this round due to the anticipation of sales for product Daze.

Round 2

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 7.1 to 7.4 for product Daze. In compliance with Team Digby’s niche differentiator strategy, the service life for the daze was maintained at 20,000. This decision is targeted at maintaining the range of high-tech customers’ preferences.

Per the Round 1 simulation report, year-end the 2022 age for product Daze was 2.2. And 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.). Therefore, after changes to speed and accuracy, the product Daze age equaled approximately 2.0. This age is well within the 3-year customer expectation for Round 2. A region kit was added in this round due to the anticipation of sales for product Daze.

Round 3

In round 3, Team Digby again adjusted the speed and accuracy for the Daze product. The speed and accuracy were increased from 7.4 to 8.5 for product Daze. In compliance with Team Digby’s niche differentiator strategy, the service life for the daze was increased slightly to 20,500. This decision was made to appeal to the preferences of high-tech customers and reduce material costs. After changes to speed and accuracy, the product Daze age equaled approximately 1.6. This age is well within the 3-year customer expectation for Round 3. Finally, a region kit was added in this round due to the anticipation of sales for product Daze.

Round 4

In Round 4, Team Digby continued to improve the speed and accuracy of the Daze product to align with the high-tech customers. The speed and accuracy were increased from 8.5 to 9.7 and 9.8 respectively. In addition, the service life for Daze was set to appeal to customer expectations at 21,500. Again, this action slightly reduced material costs for the product. For product Daze, the age had progressed to 1.3 at the end of Round 4. Daze remained viable through Round 4 with the US region kit kept, which helped Team Digby to continue to lead in the  high-tech segment of the US market.

Dome

Round 2

In round 2 of Capsim Simulation project 5 MBA 670, Team Digby created a new high-tech product called Dome. This product was geared towards the German market high-tech buyers. The speed and accuracy for the Dome product were set at 6.8. In compliance with Team Digby’s niche differentiator strategy, the service life for the Dome was set at 20,000. This decision was made purely to satisfy high-tech customers’ preferences. A region kit for Germany was added in this round due to the anticipation of sales for product Dome.

Round 3

In round 3, Team Digby maintained the speed and accuracy for the Dome product at 6.8. In compliance with Team Digby’s niche differentiator strategy, the service life for Dome was maintained at 20,000. This decision was yet again targeted at maintaining the range of high-tech customers’ preferences. After changes to speed and accuracy, the product Dome’s age equaled approximately 0.6. This age is well within the 3-year customer expectation for Round 3. Finally, a region kit was kept in this round due to the anticipation of sales for product Dome.

Round 4

In Round 4, Team Digby continued to improve the speed and accuracy of the Dome product to align with the high-tech customers. The speed and accuracy were increased from 6.8 to 8.1. In addition, the service life for Dome was set to appeal to customer expectations at 20,000. For product Dome, the age had progressed to .8 at the end of Round 4. Dome remained viable through Round 4 with the German region kit kept, which helped increase sales in the German market.

Marketing Decision Summary Capsim Simulation project 5 MBA 670

Regions Selected for Sales – the United States Rounds 1 to 4; Germany Round 3 to 4

Round One 

At the start of Round 1 and in the marketing department, team Digby made decisions regarding the price, promo and sales budget, and forecasting of units in alignment with the niche differentiator global strategy. With Daze, the focus was, therefore, on the high-tech market in the US. It was decided early in this round that the price of the product Daze be set above average and at the maximum price for this segment which was $45.

The reasoning behind this was because customers in this segment placed very little importance (10%) on price when making buying decisions. Next, the promo and sales budgets would be set at $2,000 for each with the hopes that these budgets would help get as close to 100% customer awareness and customer accessibility respectively. Due to the speed and accuracy that were set to 7.1 and addition of a region kit during this round, we anticipated that 1,700 units would be sold.

Round Two

During Round 2, we continued with the niche differentiator global strategy targeting the high-tech segment in the US. Thus, the price for product Daze was maintained at $45 to resonate with the strategy’s principle of keeping prices above average. Because the promo budget did well in increasing customer awareness in round 1 (82%), we decided to maintain it at the same figure ($2,000) in this round. It did turn out to be a wise decision as customer awareness reached 100% at the end of round 2. The sales budget was increased by a margin of $300 with the objective of increasing customer accessibility which was relatively low in round 1 at 52%.

However, we did not want to raise the budget by a huge margin, and this was done to test the responsiveness of the increment. Because of the increment in the sales budget, addition of a region kit,  and the revisions for speed and accuracy which halved the age of the product, forecasted units were set at 1,900 for this round.

Round Three

In round 3, team Digby continued with the niche differentiator global strategy. The price was maintained at $45 since the customers in the high-tech market segment in the US, who were our target for product Daze, placed very low importance on pricing when making buying decisions. Also, the promo budget was maintained at $2,000 because the customer awareness had reached 100% in the previous round with this figure and increasing it any further would not produce any meaningful results. Also, lowering it could have detrimental effects.

The sales budget was increased further by a margin of $200 and had the effect of increasing customer accessibility from 61% in the previous round to 68% at the end of this round. Due to predictions of increase in demand for the high-tech market segment in the US, addition of a region kit, increment in sales budget, and revisions in speed and accuracy, we increased the forecasted units for this round to 2,300.

Round Four

In round 4, the price and promo budget were maintained at the same level like in the previous rounds. Therefore, the price remained at $45 and the promo budget at $2,000 since this is the figure that maintained customer awareness at 100%. Customer accessibility was not so good in the previous rounds, a factor that might have played a big role in the reduced demand in round 3 and which caused the team to remain with an inventory of about 500 unsold units.

Thus, a decision was made to make a significant increment to the sales budget which was set at $3,000 during this round and which made the customer accessibility improve from 68% to 77% at the end of this round. Due to the inventory left at the end of Round 3, it was decided to reduce the forecasted units to 2,100 to avoid ending up with a lot of inventory at the end of round 4.

Production Decision Summary Capsim Simulation project 5 MBA 670

Round Three

For Capsim Simulation project 5 MBA 670, Product Dome was available for the high-tech customers in Germany during round 3. The decision to introduce this product in the German market was in alignment with the niche differentiator global strategy, where we had to focus on the high-tech market across two to three countries. The price was set at €45 which was an above average price for this market segment, and with the same reasoning that pricing had little important in the buying decisions of customers within this segment.

The promo budget was set at €2,300 since this was a new market and the level of awareness for product Dome was generally perceived as low. The sales budget was set at €2,500, same level as that of product Daze in round 3 with the hope that it would help drive customer accessibility that matched that of product Daze. The speed and accuracy revisions that reduced the age of Dome and the addition of a region kit were anticipated to raise the demand of the product and thus the forecasted units were set at 1,000.

Round Four

During round 4, the price of product Dome was maintained at €45 which was an above average price for this market segment in line with the niche differentiator strategy. During the previous round, customer accessibility was particularly low at 28% although customer awareness performed reasonably well at 73%. In this round, it was decided to increase the sales budget to €2,600 with the hope that it would help drive customer accessibility close to 100%, which it did as it improved to 47% at the end of this round.

Since customer awareness had also not reached 100%, it was decided to increase the promo budget to €2,400 in this round, and had the effect of increasing customer awareness to 97%. The number of forecasted units was kept at 1,000 in this round same as the previous round despite an improvement in customer accessibility, customer awareness, and revisions of speed and accuracy. However, product Dome was expected to perform well in this round than Daze and thus production was set to 1,125.

Production

Decision Summary:

Round One

With Production in Capsim Simulation project 5 MBA 670, Team Digby was focused on the niche differentiator strategy.  Understanding that in this project we would branch off in the international market, we decided to locate our plant in the United States due to labor cost, shipping, and tariffs being lower compared to Germany and China. Coming out of Round 0, our agenda was to present ourselves strongly in the high-tech market in the U.S., therefore with an annual growth rate of 13%, we set our plant to produce 1750 units of product Daze. With this we increased our capacity by 200 to support this expected demand rate and set our automation to 3.0. Placing our plant utilization at 103% which we were comfortable with these settings as they kept our profit margin above 30%.

Round Two

Our first product, Daze, performed the best in the high-tech market moving out of Round 1 leaving us with 2% of our inventory.  Projecting that our sales would continue to increase based on our decisions in R&D and the demand growth rate, we increased our product order by 200 units. Being conservative in our spending to support the launch of a new product, we left our capacity and automation the same. The second product, Dome, was in development during this round but we needed to establish the expectations of this product being successful.

With the second product being sold exclusively in Germany, we considered the 35% demand growth rate and with only one other competitor in this market selling an average of 978 units, we set our scheduled production at 800 units and automation at level 1.  With the high-tech market being much smaller in Germany, we knew that our profit margin would be low therefore our strategy was to keep production cost low.

Round Three

Product Daze performed well coming out of the previous round by selling 597 units more than our potential in the U.S. high-tech market. With that we increased our scheduled production in Round 3 by 26% putting our plant utilization at 129% which also caused an increase in employees in the 2^nd shift and kept our overall cost low with the growth in demand. In this round, Team Digby was preparing to start selling a product, Dome, in Germany’s market. In reviewing the market report, it noted that in Round 3 at a growth rate of 35%, the high-tech market had the potential to sell 1838 units.

With Team Erie being our only competitor in Germany, we believed we had the potential to take up half the consumers with our product favoring its buyer’s criteria and therefore increased our scheduled production to 1150.  In this round we also increased our automation to 1.5 in hopes to further decrease our labor cost and in return see an increase in our profit margin.

Round Four

In the final round of Capsim Simulation project 5 MBA 670, our decisions were centered around continuing to increase growth with the demands in both markets and keep our plant operations steady to avoid having to lay off any employees. For Product Daze, we noticed a decrease in units being sold and were left with an inventory of 500 units, therefore in this round we decreased the scheduled production to 2250.  For Product Dome, it performed well in the German market, so we decided to increase the scheduled production to 1150.  With Dome, we were confident in this decision because we shifted our R&D to support the change of consumer criteria in speed and accuracy.

Finance

Decision Summary: Capsim Simulation project 5 MBA 670

Round One

Team Dibgy in Round 1, we agreed that due to our Niche Differnetiator market segment, and desire to create a new product and take it international we would assume a Long-Term Bond of $2,000 to provide a cushion for operational expenses. The unknown with the addition of two new companies meant that we were beginning with less market share than before, and required Team Digby to be more aggressive with our R&D and Marketing departments to ensure growth. Share price ending at $51.29 within the round.

Round Two

Within Year 2 – after gaining $15,501 in closing cash, it was decided to offer a cash dividend to investors at a $0.53 rate totaling ($1,060).  Within round 2 Team Digby led within the Net Profit at a $20,996 marker. We also increased from year 1 into year 2 as a AAA S&P rating, with a positive 7.53 P/E, share price at $79.02. Our second round, while the new product was being created within R&D operated only within the USA.

Round Three

Round 3 – Team Digby issued a $0.60 dividend payment to investors ($1,200) in total. As well as an early retirement of $3,000 in Long-Term bonds. This decision was based on the total owed, as well as closing cash available to strengthen our debt/income ratio and provide a stronger stance within the stock market and to shareholders. Through round 3 the S&P rating maintained a AAA Rating, and increased P/E to 10.01. within Round 3 – our closing stock price was $85.51 per share, we also began sales in USA as well as Germany. Germany total sales were $29,943 and USA $82,558, after all expenses the net profit for each USA – $16,398 and Germany- $683.

Round Four

Team Digby’s final Round 4, issued a dividend payment of $0.76 ($1,520). Within the final round, we noticed a decrease from starting cash position to our closing, and account this to the carry over inventory and depreciation as well as overall market share. Inventory costs on the Balance Sheet $32,708, with a depreciation for ($20,600). As a result our S&P rating maintained at a AAA ranking, however our share price did show a reduction to $79.63 and increased our P/E further to a 13.03. USA Sales were $61,341 with a Net Profit $7,846 and Germany total Sales $51,184 with a Net Profit of $4,376.

References

CAPSIMGlobal user guide. (n.d.). ww3.capsim.com. https://ww3.capsim.com/modules/

GIA/files/1_0/0/CapsimGlobal/EN/PDF/UserGuide.pdf, p. 9.