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Team Chester - Capsim Presentation

MMS 450 Capstone

Shelby Lee

on 5 April 2014

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Transcript of Team Chester - Capsim Presentation

Invest in our people through competitive recruiting spending and training hours
Invest heavily in total quality management to improve productivity
Engage in competitive labor negotiations, trying to find a balance between fair wages and company profitability
Be an ethical company despite the temptation for short-term benefits
Team Chester
Size (Cure & Cliff)
(Cake & Crypto)

Low (Cedar)
Caroline Jacobs, Scott Lamson, Shelby Lee, & Harry Rappaport
MMS 450 Business Review
Strategy: Broad Differentiation

Performance (Coat)
• Marketing and R&D-heavy approach with a smaller emphasis on automation
• End goal of high customer awareness, customer accessibility and customer survey score
Goals By Department
Research & Development
• Maintain a product in each segment to the best of our ability
• Offer customers products that match their ideal criteria for positioning, age, and reliability.
• Spend aggressively in promotion and sales in all segments
• “We want every customer to know about our superb designs, and we want to make our products easy for customers to find. We will price at a premium.”
Limitation of Capsim
• Grow capacity to meet the demand that we generate
• After our products are well positioned, we will investigate modest increases in automation levels to improve margins
• But never at the expense of our ability to reposition products and keep up with segments as they move across the perceptual map

• Finance our investments primarily through stock issues and cash from operations, supplementing with bond offerings on an as needed basis
• When our cash position allows, we will establish a dividend policy and begin to retire stock
• We are somewhat adverse to debt, and prefer to avoid interest payments
Learning & Growth
Produce a competitive edge by incorporating attributes and features that set a company's product/service offering apart from rivals in ways that buyers consider valuable and worth paying for.

Successful differentiation allows a firm to:
• (1) Command a premium price for its product
• (2) Increase unit sales (because additional buyers are won over by the differentiating features)
• (3) Gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products)”

Advantages of Broad Differentiation Strategy
Cake and Crypto's Conception
Market Share
Overall Traditional Market Share
Year 0 = 16.7%
Year 6 = 32.7%
Cake 18.5% and Crypto 14.2%
Year 5 and 6 = Recession
Overall growth in sales for both products
Source: McGraw-Hill
Years 0 - 2
Slow growth in market share
Segment price war began in Year 2
In Year 3, Digby introduced Dart
Instead of dropping prices and to prevent a drop in market share, we decided to introduce a new product
Goal - grow both products separately without sacrificing one for the other
Product differentiation with yearly R&D investments to stay in the ideal position
Cake (Year 0) - premium prices and higher MTBF
Crypto (Year 4) - lower prices and lower MTBF
We were confronted with a continual drop in market share because our R&D was off and the forecasting didn't reflect this discrepancy.
Dropped from 20% peak in Year 1 to 4% in Years 4 & 5

Since we knew that there was going to be a recession and Cid had a 4% market share in Year 4, we decided the best strategy to live by was "feed the winners and starve the losers". Unfortunately, Cid was one of those losers...

Dropping Cid also allowed us to gain significant capacity and devote more resources to marketing our two newer products, Cliff and Crypto
Average Market
Average ROS
Average Asset Turnover
Average ROE
Ending Stock
Ending Market
Average ROA
Major Events:
• Round 2: Aft takes outright lead in segment with 23% mkt share
• Round 4: Recession Looming
Dot drops out, 5 products left in segment
Based on HBSB Reading "How to Market in a Downturn", Chester opted to increase marketing in an effort to capture more market share
• Round 6: Coat leads segment with 28% market share

Challenges and Lessons Learned
Success Measures
High (Cid)
Limitations of Marketing
Broad Differentiation not as realistic with Capsim simulation
Possibly could have been saved, "Starve the losers"
Commit to strategy given environmental conditions
A/R and A/P
Ratcheted down to 45 and 30, respectively
Cover all bases to ensure maximum efficiency

R&D cycle time
Revision Date: 2/2/2016
Rds 1-2

Ideal Position
Lost market share

TQM improved Cycle Time
Huge Gains
Underproduction (Rds 4-5)

Monitor Marketing Budget

Cedar has been our anchor throughout the entire simulation

Cedar started doing well but once it started exiting the perceptual map in Year 6, we had to decide whether or not to update the R&D so we compromised and did really well last round
Game is only 8 rounds so it was a tough decision

Cedar is expected to undergo a drop in units sold this year since it was just revised in December of last year
Introduced in Rd 4
Daze (out) and Eagle (in)

$2,000 in marketing before introduction

Gradual gain in market share

Ethical decision
Capture large market share
Full transcript