Capsim Cheat Sheet. CAPISM FOR: Research and Development, Marketing, Production, Finance.

capsim cheat sheet draft 1. Avoid loans at all costs during the initail rounds. These will weigh your company down in later rounds and destroy your future margins. 2. Release products in low tech segments such that th ...

capsim cheat sheet draft 1. Avoid loans at all costs during the initail rounds. These will weigh your company down in later rounds and destroy your future margins. 2. Release products in low tech segments such that they form a horizontal perceptual map of high tech and low tech products. Ideally, one product should be launched before year 3 and 2 after that. 3. Low tech products launched initially would move to low tech segments. Keep revising old products to hold market share 4. Production automation - AVOID!!! this is a waste of money because the simulation does not allow for a long enough time period to offset the costs of further automation 5. Target 75% awareness, this will provide you with the greatest cost to awareness ratio, and the additional awareness will not benefit you adequately. Round when the product is launched - 900 Subsequent rounds till awareness reaches 75% - 1200 After awareness reaches 75% - 1800 to maintain dominance Target 75% accessibility and keep spending on sales till you reach this stage. The spending could follow this Round when the product is launched - 3000 Subsequent rounds till awareness reaches 75% - 3500 After acessibility reaches 75% -3000 to maintain 75% 6. 1500-1800 is the maximum market share for a product in a competitive market. 7. Sales forecast can be determined by taking the total of potentials for each segment of your product * 2 (this is the secret to winning because you cannot underrate the amount of product that you will sell. It will hinder you in early rounds and you will not be able to catch up) 8. Give dividends immediately, this will keep shareholders happy and provide you a positive boost to your initial stock prices which will allow it to be sold for a high price. 9. Whenever cash available, give additional dividends. These are key to getting a high score on this simulation. 10. At each round, keep an eye on Balanced score card proforma. Your target in each round can be Rounds 1-3 : 40+ Rounds 4-6: 70+ Rounds 7-8: 85+ READ THE TEAM MEMBER GUIDE I cannot stress the above more. Whether you follow my strategies or not, you NEED to read the team member guide because it provides you with invaluable information. A lot of capsim can be applied to real life business. Since you WILL need to learn those things, you may as well start now. 1) R&D R&D is the backbone of your company. Whatever strategies you use, you need to R&D something every year. If you're ever not R&Ding something, then you're doing something wrong. First of all, do NOT R&D your products according to the Capstone Courier. Why? Because Capstone Courier gives you the data for LAST YEAR's products. If you follow it, then your products are outdated. You should R&D the products to its ideal spots 1 or 2 year in advance, according to several factors. Invent new products in the least competitive segment. This is self-explanatory. At Round 1 or 2 you may not know which segment is the least competitive, but by Round 3 you should be able to with the help of Courier. The more products you have earlier, the greater advantage you'll be in in the future. However do NOT invent all 4 additional products in Round 1 because you won't have the budget for it. 2) Marketing This section is probable the most important aspect of Capsim. It deals with your pricing, marketing & sales budget as well as your sales forecast, which will be shown in Proforma Income Statement. Pricing: Price your Low End at the bottom third of the price range, your Traditional at middle range and your High End/Size/Performance at max price. Try not to get into price war early because it'll kill both you and your competitors. Lose-lose. Some of you may wonder why not simply set the lowest price for Low End, considering price is 47% of the Buying Criteria. During my simulations, I found out it is not decision. For example the price range is $10 - 20. My competitors set price at $10 while I set mine at $11.50. He sells 2800 units while I sell 2600 units. Yes his sales is bigger, but I rake a lot more profits than him. It is simply not worth to set the lowest price while getting only a bit more sales. This also works in reverse on why I said set max price for High End/Size/Performance products. By lowering the price you can sell a bit more, but your overall profit will go down. Promo & Sales Budget: Promo budget raises your product's awareness while Sales budget increase your product's segment accessibility. Noticed the difference? Promo budget is according to EACH product while Sales budget for each SEGMENT. If you've 4 products in Traditional segment, you may need to spend $1400 Promo budget for each product, but you can set $1000 Sales budget for a combined $4000 Sales budget in Traditional Segment. There is a diminishing amount for both budgets. Found out more in your Team Member Guide. I purposely do not include the figures to force you to read (you'll thank me). If Advanced Marketing module is activated, do not worry because it is essentially the same thing. Refer to the end of this entry for more info. Sales Forecast: NEVER EVER USE the computer prediction for your sales forecast, except may be in Round 1 but even then it is not reliable. How do you do a sales forecast then? This depends on so many variables that it's impossible for me to provide you with a magic formula. However there is one simple way to set a benchmark. Here's how: Read up Courier and scroll down to your product's segment. Look at "Total Industry Unit Demand". Get this number and multiply it by the 1+growth rate to know the demand next year. Now scroll down to "Market Share" report and look at your product's POTENTIAL market share. Sometimes it can have % in different segments, but just take the biggest number. This percentage multiply by the industry demand we calculated next year will give you a rough idea on how many units you will sell. Of course this depends if you can maintain the same percentage of buying criteria and whether your competitors improve or not. Why do you need to get the numbers right? 2 BIG reasons: Production & Proforma Income Statement. If you estimate you'll sell 1,000 units, you can tell Production to produce 1,000 units. If in fact the demand is only 500 units, you LOSE MONEYbecause you need to store those extra units somewhere. If it turns out the demand is greater than 1,000 units, you LOSE POTENTIAL MONEY. Either case is bad for you. The second reason is your Sales Forecast determine your PROJECTEDprofit/loss. One word of advice: if your projected profit is $10,000, expect your actual profits to be only 50% of that. You make financing decisions based on your projected profit/loss, hence why Marketing is the most important decisionfunction of Capsim. 3) Production Production is an extension of Marketing. You get Marketing right, Production is easy for most parts. You do a worst-best case scenario with Marketing and Production. If you expect to sell 1,000 units, but feel at worst you'll sell 800 units and at best you sell 1,200 units, you can enter both. Under Marketing, you input 800 units and under Production you produce 1,200 units. This way your projected profit/loss is the worst case. This section is self-explanatory. You take the amount of units you expect to sell and minus it by inventory on hand. The adjusted number is the actual number of products you'll get minus a few defect products, but it's only like 0.89% lower so don't bother yourself with the number. The big thing about Production is Capacity and Automation Rating. Remember you can employ 2nd shift workers to produce double your capacity. Having too much capacity is not an efficient way to run your company while having too many is also bad investment. Remember any additional Capacity and Automation Rating will take place NEXT ROUND AND NOT IMMEDIATELY. Plan ahead. Automation Rating is a complicated. The higher the rating, the more machines you use and the less workers you need. Less workers mean less wages, which means cost-savings on your part. However higher automation rating also means longer R&D cycle. You can safely set 10 for Low End and Traditional. However for High End/Size/Performance, 10 may or may not be a good thing, depending your strategy. Either way do NOT increase your automation to 10 right away from the start because it cost a lot of money. Refer to the end of entry for more help. 4) Finance Finance is all money related. If you are accounting major, this is a piece of cake for you. Simply put, raise as much money as you can through Issuing Stock, Current Debt and Long Term Debt for Round 1-3. Trust me, you'll need the extra money even if you think you don't. Stock: Issuing stock is a great way to make money. However if you use share price or market cap as one of your success measures, it gets complicated. One thing though: do NOT pay dividends ever. If you need to raise your stock price, simply buy back stock. You need to plan in advance though. Issuing stock is not free: it has brokerage fees. It doesn't make sense to issue $5m worth of stocks this year only to buy it back next year. You pay twice brokerage fees. Current Debt: There are 2 ways to use Current Debt. One is rolling it. If you borrow $10,000 Current Debt, then when it is due next year, you borrow that same amount. The result is $10,000 of free money minus the interests. However the interest is higher than the Long Term Debt, hence the 2nd way of playing it: Never use Current Debt unless in emergencies. With its higher interest rate, Current Debt will only hurt your Income Statement. How you play it is up to you. Long Term Debt: Greet your bestest friend in Capsim. Round 1-4, you should issue MAX Long Term Debt to fund your production improvements. Beyond that, you may need to issue even more. I've won several rounds while issuing max amount Round 1- 8. I've also won many simulations by having 0 Long Term Debt. It's a tough thing to balance whether to issue or retire. Refer to end of entry for more help. 4) HR & TQM Human Resource and Total Quality Management are additional modules. HR is easy. ALWAYS have 80 Training Hours. This will boost your Productivity Index and in turn will save you on employee cost. Recruiting Spend is set at $5,000 depending on its benefits. Try inputting $5,000 and see the benefits. Then try to set $0 and see if extra money is worth the benefit. Labor Negotiation is another advanced module. In this part, ALWAYS set your offers at its max. This way your employees will never strike and if the other teams don't follow your suit, THEIR employees will strike and you'll make more money off them. TQM is also easy, yet highly important. The optimal figure is $1,500 per category. Although you can set at $2,000, but I found that number is too much. Remember the benefits are cumulative. The first round TQM is activated, put $1,500 into categories that reduce your R&D cycle time and $750 in all other categories. Next round, do the same. However start putting $0 in one category and see if the benefits changes or not. After certain point, $100 can give you the same benefit as $1,500. 5) Reports You should always read up your Capstone Courier. It has a wealth of VITAL information. Also remember your Proformas are projected numbers and they WILL change once the round has been processed. Use them as benchmarks, but don't depend on them. That's all. This section is not really a guide, but just a reminder to read your reports. To win the competition:  Read and understand the “Team Members Guide!” Refer back to it often during the competition. The spreadsheet is based on the guide, the Industry Condition Report, the Situation Analysis guide, Analyst Report criteria, and a few added touches I found useful.  Pick a strategy and make consistent decisions that support the chosen strategy. Don’t change the strategy unless it is not working and you understand why it is not working.  Use a spreadsheet, or some other tool, to help organize the data. If you do not use my spreadsheet, make one yourself.  Download and use the CAPSIM Excel application from the CAPSIM website. After making your decisions, review the Proformas, the Balance Score Card, and the Annual Report against the Analyst Report criteria. The CAPSIM Excel application can save the team decisions to the hard drive. My spreadsheet is designed to import the saved file. This will save a lot of time reviewing and typing data from the CAPSTONE Courier into the spreadsheet.  Read the CAPSTONE Courier every round. Download it and save it for trend analysis.  Forecasting industry demand is critical. Every team in my competition, and the other class, struggled with forecasting. The guide states that the customer survey score drives demand. The higher the score the more demand for the product. Reading the guide and understanding how the score is increased will give the team a competitive advantage.  Understand how your team will be scored will give the team a competitive advantage. The Capstone Simulation Analyst Report evaluates your team in ten categories of management performance; (1) Margins, (2) Profits, (3) Emergency Loans, (4) Working Capital, (5) Market Share, (6) Forecasting, (7) Customer Satisfaction, (8) Productivity, (9) Financial Structure, and (10) Wealth Creation. Decisions should be evaluated against the scoring criteria. Decisions consistent with the team strategy, and which improve the scores on the Analyst Report should be made. Recommended Links: Quick Start for Capstone Round 1: http://www.youtube.com/watch?v=yjKTzfaR3No Capsim 2 - Research and Development Part I: http://www.youtube.com/watch? v=sDhrQmCGWPE Capsim 3 – Marketing: http://www.youtube.com/watch?v=VawiU4pllHs Capsim 4 – Production: http://www.youtube.com/watch?v=gUI4-QAQkxY Capsim 5 – Finance: http://www.youtube.com/watch?v=cQdjTC_YLPQ CAPSIM R&D: http://www.youtube.com/watch?v=WUgrYFfTbwY CAPSIM marketing: http://www.youtube.com/watch?v=RDWppBNPQ0w CAPSIM production: http://www.youtube.com/watch?v=W38fyQnnIZ4 It is important to invest in HR because productivity is measured in the Balanced Score Card and also this investment will reduce labor costs. Usually HR has a few options available are Recruiting Spending, Training Hours Aim for the maximum of $5.000 recruitment spending and 80 hours training every round. If you have limited funds, try $2.000 and 40 hours training. If the Labor negotiations are available, we can use half way, win – win strategy, between demanded and current contract. NOTE: when input number here, double check to make sure correct numbers and avoid labor strikes. We often use half way for negotiations, average of current contract and labor demands. If we can not complete all suggestion, try to come as close as possible. Try to use all the budget available in the first 3 rounds and more if possible The KEY to win Capsim is to control Automation as early as possible. The more automation is better. Round 1 – Production 1. Upgrade original Low End sensor from 5.0 to 6.7 automation 2. Upgrade original Traditional sensor from 4.0 to 5.0 automation 3. Create 500 capacity with automation 5.0 for the new Low End sensor 4. Add extra capacity for original Low End sensor NOTE: check the bottom right corner to see if we use close to total available budget. Round 2 – Production 1. Upgrade original Low End sensor from 6.7 to 8.4 automation 2. Upgrade original Traditional sensor from 5.0 to 6.0 automation 3. Create 500 capacity with automation 5.0 for the new Traditional sensor 4. Upgrade new Low End sensor from 5.0 to right 8.4 automation. 5. Add extra capacity for original Low End sensor NOTE: check the bottom right corner to see if we use close to total available budget. Round 3 – Production 1. Upgrade original Low End sensor from 8.4 to 10.0 automation 2. Upgrade new Low End sensor from 8.4 to 10.0 automation. 3. Upgrade original Traditional sensor from 6.0 to 7.0 automation 4. Upgrade new Traditional sensor from 5.0 right to 7.0 automation 5. Create 400 capacity with automation 3.0 for the new High End sensor 6. Add extra capacity for new Low End sensor 7. Add extra capacity for original Low End sensor NOTE: check the bottom right corner to see if we use close to total available budget. Round 4 – Production 1. Upgrade original Traditional sensor from 7.0 to 8.0 automation 2. Upgrade new Traditional sensor from 7.0 to 8.0 automation 3. (Optional) Reduce Capacity for segments that are being exited, such as Performance and Size 4. Upgrade original High End sensor from 3.0 to 4.0 automation 5. Upgrade new High End sensor from 3.0 to 4.0 automation 6. Add extra capacity for all needed sensors NOTE: check the bottom right corner to see if we use close to total available budget. Round 5 – Production 1. Upgrade original High End sensor from 4.0 to 5.0 automation 2. Upgrade new High End sensor from 4.0 to 5.0 automation 3. (Optional) Reduce Capacity for segments that are being exited, such as Performance and Size 4. Add extra capacity for new High End sensor 5. Add extra capacity for all needed sensors NOTE: check the bottom right corner to see if we use close to total available budget. Round 6 and 7 – Production 1. Add extra capacity for all needed sensors Round 8 – Production 1. Last round of the game, do not add any capacity or automation Note to check Workforce needed and Workforce complement, if the box is editable, make sure to match the needed with This Year to save money. Otherwise we waste money. We will increase automation every round. Traditional to 8.0 (4.0 – 5.0 – 6. 0 – 7.0 – 8.0) Low End to 10.0 (5.0 – 6.7 – 8.4 – 10) High End to 5.0 Performance to 6.0 Size to 6.0 SETTING PRODUCTION Production amounts should always be 112% of Sales Forecast. This allow some extra inventory to take advantage of competitors suffer from stock out. This often happens. When we calculate production, we need to take in to account inventory from previous round. We can use excel file to calculate PRODUCTION more conveniently – LINK If we see that year we have Stock out, we can increase production more than 112% to 120% or even 125%. If we see some inventory, we can reduce for that segment back to 112%. ADDING MORE CAPACITY Our goal is to keep our plant production at 150% (full first shift and 50% second shift). This allows more flexibility to deal with short term market changes. Remember that added capacity isn’t available until next round. So if we add capacity in round 2, it will be available in round 3. If we see any factory with more than 150% capacity, we can add more capacity to that, just simply multiple the excess over 150% with total capacity. For example 180% of 2.000 factory, we will add 30% surplus = 30% x 2.000 = 600 NOTE: We do not sell factories, even we are not using 100% at the current round. NOTE: We only reduce the segments we want to exit to 1. By doing so, we can still sell the rest of inventories in that segment at full price, not 50% price. Round 1 – Marketing 1. Leave A/R lag (Account Receivable) at 30 days, this will be increased later rounds to get higher demands when we have more profits and more cash available. 2. Leave A/P lag (Account Payable) at 30 days. This is always stay at 30 days for all 8 rounds 3. Set Promotion and Sales budgets both for $2.000 for Traditional and Low End sensors 4. Set Promotion and Sales budgets all for $1.500 for High End, Performance and Size 5. Lower all prices at least $0.50 as indicated in the excel table or check from Courier Report for max price for that segment last year 6. USE THE SALE FORMULA or EXCEL FILE to calculate sales forecast and production – LINK (Note: This round we create a new Low End sensor in R&D) Round 2 – Marketing 1. Expect the new Low End sensor to sell about 0.2 x original Low End sensor market share 2. Leave A/P lag (Account Payable) at 30 days. This is always stay at 30 days for all 8 rounds 3. Set Promotion and Sales budgets both for $2.000 for Traditional and Low End sensors 4. Set Promotion and Sales budgets all for $1.500 for High End, Performance and Size 5. Lower all prices at least $0.50 as indicated in the excel table or check from Courier Report for max price for that segment last year 6. USE THE SALE FORMULA or EXCEL FILE to calculate sales forecast and production – LINK (Note: This round we create a new Traditional sensor in R&D) Round 3 – Marketing 1. If we decide to exit a segment, such as Size or Performance, keep the Promotion and Sales budgets at $0. 2. What ever segments we decide to stay, increase Promotion and Sales to $2.000 3. Expect new Traditional sensor to sell about 0.3 x original Traditional sensor market share. 4. Lower all prices at least $0.50 as indicated in the excel table or check from Courier Report for max price for that segment last year 5. USE THE SALE FORMULA or EXCEL FILE to calculate sales forecast and production – LINK (Note: This round we create a new High End sensor in R&D) Round 4 – Marketing 1. Increase A/R Lag (Account Receivable) to 46 days, this helps to increase demands 2. Once 100% awareness is reached for a sensor, in any round, we can scale back to $1.400 but need to check if can that budget maintain 100% awareness. 3. Expect new High End sensor to sell about 0.75 x original High End sensor market share. 4. Lower all prices at least $0.50 as indicated in the excel table or check from Courier Report for max price for that segment last year 5. USE THE SALE FORMULA or EXCEL FILE to calculate sales forecast and production – LINK (Note: This round we exit segments because we have reduced Promo and Sales budgets to $0 also we have reduce Production capacity to only 1) Round 5 – Marketing 1. Increase A/R Lag (Account Receivable) to 61 days, this helps to increase demands 2. Note to add new market shares for new developed products, check in page 10 Capstone Courier. 3. Lower all prices at least $0.50 as indicated in the excel table or check from Courier Report for max price for that segment last year 4. USE THE SALE FORMULA or EXCEL FILE to calculate sales forecast and production – LINK Round 6 to 8 – Marketing 1. Note to add new market shares for new developed products, check in page 10 Capstone Courier. 2. Once 100% accessibility is reached for a segment (in any round) we can scale back the Sales budget t $1.650 for each segment to maintain 100% accessibility. Note to adjust and then check the graphs at the end of the market table. 3. Lower all prices at least $0.50 as indicated in the excel table or check from Courier Report for max price for that segment last year 4. USE THE SALE FORMULA or EXCEL FILE to calculate sales forecast and production – LINK