What were the challenges with working remotely and how (or did) you overcome those challenges?

20200517223745stratsim_intro_slides_even.pptx

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INTRODUCTION

STRATSIMMANAGEMENT

In this computer simulation, your team will take over the management of one of five automobile manufacturing companies for up to 10 simulated years and make decisions in the areas of:

Marketing

Distribution

Manufacturing

R & D

Finance

Integrated, long-term, market-focused strategy, while managing for short-run outcomes.

Goals and

Objectives

Financial

Projections

Strategy

Business

Tactics

THE STRATEGIC PLANNING PROCESS

Variable Costs

Business Fixed Costs

Discretionary Expenditures

Breakeven, ROI, CLV, etc.

Reasonableness of Sales Forecast

Goals and

Objectives

Financial

Projections

Strategy

Business

Tactics

STRATSIM ENVIRONMENT

Based on the Automobile Industry.

Consumer market sold via dealerships

Currently, low GDP and inflation growth rates.

Demand sensitive to GDP, interest rates, and decisions that you make as an industry.

Maximum of 10 yearly decision periods.

STRATSIM ENVIRONMENT

Vehicle Class

Size

Engine / Performance (“HP”)

Interior, Styling, Safety, Quality (“ISSQ”)

AND…

Price (from consumer perspective)

Cost (from manufacturer perspective)

Principle Characteristics

THE PRODUCTS: CARS & TRUCKS

STRATSIM ENVIRONMENT

3 Product Classes with Existing Vehicles:

(E)conomy

(F)amily

(T)ruck

Plus potential new classes if developed

(S)ports

(L)uxury

(M)inivan

THE PRODUCTS: VEHICLE CLASSES

(U)tility

(A)EV

STRATSIM ENVIRONMENT

Up to 7 Firms (A-G), each with the same 3 vehicles on the market.

Firm A . . . . . . . . . . . . . . . . . . Alfa ( F+ ), Alec ( E ), Ace ( T )

Firm B . . . . . . . . . . . . . . . . . . Boffo ( F ), Buzzy ( E ), Boss ( T )

Firm C . . . . . . . . . . . . . . . . . . Cafav ( F ), Cameo ( E ), Crash ( T )

Firm D. . . . . . . . . . . . . . . . . . Defy ( F ), Delite ( E ), Dusty ( T )

Firm E . . . . . . . . . . . . . . . . . . Efizz ( F ), Echo ( E ), Egad ( T )

Firm F . . . . . . . . . . . . . . . . . . Fantasy ( F ), Fish ( E ), Fast ( T )

Firm G . . . . . . . . . . . . . . . . . .Gas ( F ), Go ( E), Gone ( T )

All firms start with the same products.

The firms start from the same position in the market.

+Corresponds to Product Class.

THE COMPETITION

STRATSIM ENVIRONMENT

Starting positions for all teams on several key performance measures:

	MANUF. SALES ( M$ )	UNIT SALES ( 000s )	NET INCOME ( M$ )	STOCK PRICE ( $ )
Period 0	23,853	1,452	1.204	35
Period -1	22,801	1,403	.680	30

THE COMPETITION

INDUSTRY OVERVIEW

CLASS	POSITION	SEGMENTS	COMPETITORS	EXAMPLE
ECONOMY	Smaller Low Price	1, 2	All Firms
FAMILY	Mid Size Mid Price	2, 4	All Firms
LUXURY	Larger Expensive	4, 5
SPORTS	Mid Size Mid Price	3
MINIVAN	Larger Mid Price	2
UTILITY	Larger Mid-High Price	3, 5
TRUCK	Mid-Large Size Mid Price	1, 3	All Firms
AEV	Mid Size Mid Price	5

THE MARKET

Value Seekers (1)

Families (2)

Singles (3)

High Income (4)

Enterprisers (5)

5 segments (1-5) with different needs and class preference.

SEGMENTS

THE MARKET

Consumers have different needs and expectations with regard to vehicle characteristics.

Their “consideration set” is based on vehicle class, size, and price.

Consumers prefer a particular size vehicle.

Consumers prefer a specific engine horsepower (HP) due to the trade-off between performance and fuel economy.

Consumers prefer better (more) Interior, Styling, Safety, and Quality (“ISSQ”).

Consumers weigh this bundle of goods against the price charged.

HINTS: Consumers may have certain “hot buttons” or attributes that are particularly important to them, and some may be more price-sensitive than others.

PURCHASE PROCESS

RESULTS & DECISIONS MENU

Dashboard

Financial Statements

Product Contribution

Technology

Product Development

Marketing

Distribution

Manufacturing

Financing

Special Decision

Integrated, Long-Term, Strategic.

DASHBOARD

Net Income

Cumulative Net Income

Stock Price

Total Shareholder Return

These are the four default measures of performance, but more may be added using the Edit link.

FINANCIAL STATEMENTS

Income Statement

Balance Sheet

Cash Flow

Click on the Income Statement, Balance Sheet and Cash Flow buttons at the top of the screen for each statement.

PRODUCT CONTRIBUTION

Total (sums of all units)

Per Unit

Percent

Click on the Total, Per Unit, and Percent buttons at the top of the screen for each view.

Note: Some values not shown as this is an internal report not available to competitors.

TECHNOLOGY

Each firm has an overall technology capability with regard to Interior, Styling, Safety, and Quality (ISSQ) that can be improved through investment in technology.

For Example: If firm A’s technology profile is 4, 5, 4, 5, it can develop and/or upgrade vehicles to these maximum specifications.

A firm with greater technology capability can produce vehicles with better ISSQ features AND produce vehicles with the same features at lower per unit cost.

Weigh benefit against cost of investment.

IMPORTANT: Investing in technology does not automatically improve the specifications of your products, only your ability to do so through upgrades.

TECHNOLOGY

Cost of Investment and

Estimated Benefit.

(Estimated savings based on

current vehicles and volume).

Click here to change your Technology Capabilities.

PRODUCT DEVELOPMENT

All product development takes place in Development Centers.

New products begin as concepts and then may be moved into a development center once specifications are finalized.

Upgrades also take place in the centers.

Each firm starts with 2 development centers allowing concurrent development on two products (new products or upgrades).

New development centers can be added over time up to a maximum of five (one additional center per period).

DEVELOPMENT CENTERS

PRODUCT DEVELOPMENT

CONCEPTS

To introduce a New Product (new brand name, not an upgrade), a firm must first develop a product concept.

Your firm receives feedback on the projected base cost (unit cost @ 100K units), development cost, and time to develop.

Note the up-arrow icon (to move concept into development) and trash icon (to delete a concept) to the left of the concept name.

Your firm may also run a concept test to see how a potential market (“microsegment”) views your concept.

PRODUCT DEVELOPMENT

Improving existing vehicles is important as customer needs and competition change. This is done through Upgrades.

Three types: Cost Reduction (same specifications at a lower unit cost), Minor (small changes), Major (large changes). Both minor and major upgrades also will attempt to reduce costs.

These are done directly in your development centers and your firm will receive feedback on the upgrade’s unit cost, development cost, and time to develop.

Your team must specify the changes in the Minor and Major upgrades. Multiple attributes may be adjusted in the same upgrade.

UPGRADES

PRODUCT DEVELOPMENT

Cost Reduction: Based on existing product, uses 1 center for 1 decision period, prepare launch now (immediate impact after advance).

Minor Upgrade: Based on existing product, uses 1 center for 1 decision period, prepare launch now (immediate impact after advance). Inventory disposed now.

"tweak" – Max. change of 2 size, 5 HP, 1 other specs.

Major Upgrade: Based on existing product, uses 1 center for 2 decision periods, prepare launch next decision (1 year). Inventory disposed next year.

Max change of 10 size, 20 HP, 2 other specs + "tweak" next year

IN SUMMARY, 5 GENERAL APPROACHES:

PRODUCT DEVELOPMENT

New Product, Same Class: Based on concept, uses 1 center for 2 decision periods, prepare launch next decision (1 year).

New Product, New Class: Based on concept, uses 1 center for 3 decision periods, prepare launch in two years.

IN SUMMARY, 5 GENERAL APPROACHES:

Balance opportunities, speed to market, cost, and need for change.

PRODUCT DEVELOPMENT TIMELINES

Product Development Timelines

(From the

StratSim Case)

	CURRENT PERIOD	PERIOD +1	PERIOD +2	PERIOD +3
Cost Reduction $100-$200 Million in current year	Project in Dev. Center (no changes to specifications allowed)	In Market Retooling. Results impacted. (vehicle costs reduced)
Minor Upgrade $100-$300 Million in current year	Modify Specs In Dev. Center Adjust Marketing Mix Adjust Production (Inventory disposed)	In Market Results impacted. (Including sales, retooling, inventory write-off)
Major Upgrade $250-$750 Million Spread over 2 years	Modify Specs In Dev. Center Build Additional Capacity	Modify Specs In Dev. Center Adjust Marketing Mix Adjust Production (Inventory disposed)	In Market Results impacted. (Including sales, retooling, inventory write-off)
New Product (Existing class) $250-$1,500 Mill. Spread over 2 years	Create Concept Name Product Modify Specs In Dev. Center Build Additional Capacity	Modify Specs In Dev. Center Set Marketing Mix Set Production	In Market Results impacted. (Including sales, retooling)
New Product (New class) $500-$2,500 Mill. Spread over 3 years	Create Concept Name Product Modify Specs In Dev. Center	Modify Specs In Dev. Center Build Additional Capacity	Modify Specs In Dev. Center Set Marketing Mix Set Production	In Market Results impacted. Including sales, retooling)

General Rule:

A brand upgrade or new brand enters the market in the last year it is in a development center.

PRODUCT DEVELOPMENT

In the 1st decision period, a firm initiates a minor upgrade and a new product in a new class…

If, in the following period, the firm thinks it will want to initiate two more upgrades, what are its options?

Build a new development center in the 1st decision period so they would have 3 operational centers in the 2nd decision period.

Only choose one upgrade in the 2nd decision (because the new product would occupy one development center).

Choose to discontinue development of the new product to free a development center.

EXAMPLE

HINTS: Be sure to plan development time lines and development capacity.

PRODUCT DEVELOPMENT

EXAMPLE

Sample development screen showing an upgrade (Alfa), new product (Aphid), and a new development center:

Upgrade (Alfa)

New Product (Aphid)

New Development Center

MARKETING

Budget set by region (North, South, East, West) to create general firm preference and support dealerships.

Set corporate ad theme(s): Interior, Styling, Safety, Quality, Performance.

Social Media to stimulate interest in recent firm announcements.

Direct Marketing to particular consumer segments.

CORPORATE ADVERTISING

MARKETING

MSRP set per vehicle.

Dealer Discount % by vehicle.

Advertising Budget to build and maintain awareness.

Advertising Theme (performance, interior, style, safety, quality) to appeal to target segment

Promotion Budget to help spur sales during slow periods used for rebates, special financing, dealer incentives, attractive leases, etc.

Sales Forecasts for the coming year to use in pro-forma reports.

PRODUCT MARKETING

MARKETING

VEHICLE PRICING

MSRP = Manufacturer’s Suggested Retail Price used to position vehicle and set expected price in mind of consumer and dealership.

Dealer Discount (%) = Discount off MSRP to dealer

Dealer Invoice ($) = MSRP* (1 – Dealer Discount %)

Dealer Invoice ($) = Revenues to your firm

Retail Price (price to consumer) determined by dealer.

Retail Price ($) – Dealer Invoice ($) = Revenues to Dealer

MARKETING

Marketing Decision Screen

DISTRIBUTION

Dealerships make the actual sale to consumer.

Set up on a regional basis (North, South, East, West).

Decision is to open or close dealerships in each region.

Maximum of 10% change each year.

Changes in number of dealerships takes one year to take effect.

Dealer ratings (1-100 scale) indicate customer experience at dealership, impacted by:

Profitability and product offerings.

Training, education and support.

Dealer discounts and servicing.

Note Coverage

( = established / full)

… decision in the North region is to add 5

new dealerships resulting in coverage

of 62.5% once the

new dealerships

have opened.

DISTRIBUTION

MANUFACTURING

CAPACITY

Total vehicle production must be less than capacity or incur over-capacity charges.

Capacity may be increased, but takes one year to build and become available for use.

Entering the capacity increase will display the cost of the investment in capacity.

Capacity investment is depreciated over 10 years.

Maximum increase (or decrease) in a year is 50% of current capacity.

MANUFACTURING

PRODUCTION

Set production based on sales forecasts and inventory levels.

Retooling cost for initial or increased production.

Remember there is a cost to dispose of inventory of old vehicles if upgraded (minor or major).

Set flexible production (+/- 10%)

Adjusts production if > 120 days or insufficient to meet orders.

MANUFACTURING

Note Alfa inventory write-off (upgrade) and retooling costs…

...and over-capacity line with resulting charge.

FINANCING

Technology, product development, capacity, retooling, marketing, distribution, repurchase of bonds and stock, repayment of loans, dividends.

USE OF CASH

SOURCES OF CASH

Operations, selling bonds and stock, short-term borrowing.

Use Pro-Forma to see likely impact on cash position based on YOUR forecasts and decisions.

FINANCIAL DECISIONS

To repurchase stock, enter a negative value (in $).

Bonds are optionally callable after three years.

Inputs for CDs, stock and dividends, short-term debt, and bonds.

HINT: Implement a capital structure that is consistent with the nature of this business: cost of capital, financial leverage dynamics, amount of long-term fixed capital, new investment in long-term capital projects, sales volatility risk, technology change risk, inventory size and timing risk, competitive dynamics risk, etc.

SPECIAL DECISION

Check this menu option for one-time events that may require management’s attention.

Some events will have an impact on your results down the road, others may just require you to think about an issue and be prepared to discuss in class.

Often, there is not a right or wrong answer. Some responses may be better than others, but will likely depend upon your particular firm’s situation.

DECISION ANALYSIS

Check your decisions on the Decision Analysis: Review screen before the simulation is advances to the next period.

Timeline displays your major production events.

Use the Pro-forma to enter your forecasts and help you to determine your best course of action.

DECISION ANALYSIS: REVIEW

Check the Decision Review: Alerts section for warning messages before the decision deadline.

You may modify any decision other than purchase of market research and tools.

PRO-FORMA

Enter forecasts for each product then click on the Reports button to view pro-forma:

Product Inventory

Income Statement

Balance Sheet

Cash Flow

Product Contribution

Modify decisions and forecasts until the decision deadline or until your team is satisfied.

Industry News

Vehicle Sales

Consumer Segments

MARKET

MARKET ANALYSIS

Products

Technology

Marketing Communications

Distribution

Manufacturing

Financial Summary

COMPETITION

COMPETITIVE ANALYSIS

Sales by Segment ($)

Focus Groups ($)

Concept Tests ($)

Competitive Mapping ($)

Test Market ($)

Portfolio Analysis (Free)

TOOLS

TOOLS & MARKETING RESEARCH

NOTE: Tools available will vary based on customization selected.

LOGISTICS

All decisions are automatically saved on the server.

When one person makes a change, the whole team makes that change. In particular, when one team member purchases a tool, the whole team purchases the tool. In other words, organize your decision process!

All decisions other than the purchase of market research / use of tools may be modified until the decision deadline.

It is recommended that you review the decision summary and pro-forma income statement when your team is done entering its decisions.

Team leader may lock decisions (not required)

Decisions must be completed on time.

Results will be available at beginning of next meeting time.

FINAL CONSIDERATIONS

Your strategy drives your decisions – make sure you have one!

Focus on how to best serve your target markets through a total offering – product, marketing, service, and price.

Importance of team organization and process.

Manage your margins and understand the financial implications of decisions.

Understand fixed and variable costs.

Long term vs. short term.

Make wise investments.

Use the Pro-Forma for insights.

Try new approaches – apply concepts – experiment – have fun!