Project 3: Simulation as a Tool for Strategic Decision

Capsim Decision Record

Explain your decisions for each action item in your department. Be sure to update this form after each round and evaluate your prior decisions. 

Speed:

Example: For round 1, because my team chose a local niche differentiator strategy, I did not increase speed. Right now, speed seems to be in a good spot on the perceptual map. Next round, if the sweet spot changes more than 1 point, we might need to spend some money to improve speed.

Round 2, the spot on the round 2 perceptual map shifted but not enough (less than 1 point). So, we saved some money by not unnecessarily updating the speed.  I’ll keep it at this speed for one more round and see where this product is on the perceptual map.

Accuracy

Service Life

Chosen strategy: Niche Cost Leader

Research and Development

Able	Round 1	Round 2	Round 3	Round 4
Speed	5.8	6.3	4.5
Accuracy	5.8	6.3	6.3
Service Life	12,600	14,000	14,000
Region Kit	A - USA	A - USA	A - USA

Speed:

Round 1:

Round 2:

Round 3:

Round 4:

Accuracy:

Round 1:

Round 2:

Round 3:

Round 4:

Service Life:

Round 1:

Round 2:

Round 3:

Round 4:

Region Kit:

Round 1:

Round 2:

Round 3:

Round 4:

Marketing

Able	Round 1	Round 2	Round 3	Round 4
Price	$27.00	$28.00	$25.00	$28
Promo Budget	$1,200	$1,500	$3,000	$1500
Sales Budget	$1,200	$1,500	$3,000	$1500
Forecast	2100	2100	1450	1450

Marketing

· Regions Selected for Sales

For each region selected: USA

· Price

· Round 1: In round 1, as a niche cost leader, we wanted to enable the company to compete based on price before raising the price. The entry price was set at $27.00. The price range in the customer buying criteria is between $25.00-$45.00 for the low-tech segment. The plan was to test the market before we decide to increase or decrease the price to make a profit.

· Round 2, we had to raise the price of our product to $28 because we didn't make enough money in round one. Also, we increase the forecast to see if we can sell more products.

· Round 3, the product's price was drop to $25 because we still didn't make enough sales in round 2.

· Round 4, We had to raise the price to $28 because we were short of cash.

· Promotional Budget

· Round 1, we decided to keep the promo cost low at $1,200 because of the price of our product. We expect our product to be accessible at a low price, which will create awareness.

· Round 2, the promo was increased to $1,500. To keep up with speed and see how the demand would change this year if $300 more were added.

· Round 3, we decided to increase the promo budget to $3000 to create more awareness

· Round 4, we had to reduce the budget to $1500 since we had products left from the previous year.

· Sales Budget

· Round 1, our sales budget was set to $1,200. The sales budget should run concurrent to the promo budget because the sales budget determines the awareness customers have of the product.

· Round 2, In round 2, $300 was added to the sales budget at $1,200. This followed the same route as the promo budget.

· Round 3, the sales budget was increased to $3000 to help with the sales to raise the funds we have in hand

· Round 4, we decided to reduce the sales budget to $1500 since we had products left unsold from the previous year.

· Forecast

· Round 1, the forecast was set to 2100 units because this is a new product and since we don't know how the customer would respond to it. We also did not want to have excess inventory left over.

· Round 2, the forecast was dropped down to 2000 units because we had some products left from the previous year.

· Round 3, the forecast was again dropped to 1450 units because we didn't perform well in sales the previous year and had many unsold products.

· Round 4, we decided to stay with 1450 units to close the round.

Price:

Round 1:

Round 2:

Round 3:

Round 4:

Promotional Budget:

Round 1:

Round 2:

Round 3:

Round 4:

Sales Budget:

Round 1:

Round 2:

Round 3:

Round 4:

Forecast:

Round 1:

Round 2:

Round 3:

Round 4:

Production

Able	Round 1	Round 2	Round 3	Round 4
Schedule	2,225	2,000	725
Capacity	400	400	-1350
Automation	3.0	3.0	4.0

Plant Location:

Round 1:  Team Andrews selected a local niche strategy for product Able.  As such, we have chosen to start and keep our plant in the United States for all four rounds. 

Round 2:  Plant location remains the same.

Round 3:  Plant location remains the same.

Round 4:  Plant location remains the same.

Order:

Round 1:  We decided to choose to make 2,225 products the first year.  We implemented a 10% overage to our projection to avoid having any shortfall.  Furthermore, we were doing our best to balance our closing financial position in the first year so we did not want to build too few or too many products.

Round 2:  This round, we thought we were on a good route for production.  We decided to make 2,000 more units.  However, after this round, we only sold 1,330 and produced 1,920.  One complete, we were left with 891 units still in stock with our compounded overage from year one.  

Round 3:  Having a lessons learned debrief from round two, we decided to make a few changes.  We reduced our forecast to 1,450 for this round which allowed us to reduce our order to 725 units.  In doing so, we compounded the 891 units that were left on our shelves from round 2 so meet our projected sales numbers +10%.

Round 4:

Capacity:

Round 1: We decided to start with a capacity of 400.  We felt that it was a good start to the simulation to see how product Able would perform, coupled with our other decisions.  

Round 2:  Having a decent round one, we decided to keep capacity at 400 for this round.  Our labor costs were not outrageous and we had a good level of worker retention. 

Round 3:  For round three, we had to reexamine our choices.  The culmination of the first two rounds for product Able were less than optimal.  We were left with a significant number of leftover product and as such needed to produce much less this round.  We cut our capacity -1350 and as a result lost a significant number of employees.

Round 4:

Automation:

Round 1: For the first round, we kept automation at 3.0 to get a feel for how much of an impact, if any, it would make on our first year numbers.

Round 2:Our numbers at the end of round one were decent, so we decided to keep automation at a 3.0.  However, after round two, we saw that we needed to make some changes to save the company.  

Round 3:We had a surplus of inventory still on our shelves from round two.  The decision was made to significantly reduce our order number for round three.  In doing so, we cut our labor costs significantly and increased automation to 4.0 in hopes of having a great round four.

Round 4:

Finance

Able	Round 1	Round 2	Round 3	Round 4
Current Debt - Borrow	$0	0	0
Bonds - Issue (borrow)	$3,000	0	0
Bonds - Retire	$0	0	$3,000
Common Stock - Issue	$1,500	0	0
Buy Back	$0	0	0
Issue Dividend	$0	0	0

Borrow:

Round 1:

Round 2:

Round 3:

Round 4:

Issue (Borrow):

Round 1:

Round 2:

Round 3:

Round 4:

Retire:

Round 1:

Round 2:

Round 3:

Round 4:

Issue:

Round 1:

Round 2:

Round 3:

Round 4:

Buy Back:

Round 1:

Round 2:

Round 3:

Round 4:

Issue Dividend:

Round 1:

Round 2:

Round 3:

Round 4: