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FOUNDATION BUSINESS SIMULATION

FOUNDATION BUSINESS SIMULATION

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FOUNDATION BUSINESS SIMULATION

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  1. SENSOR INDUSTRY OVERVIEW FOUNDATION BUSINESS SIMULATION

  2. Foundation Simulation • $40 Million electronic sensor manufacturer. • Sensors are devices that observe physical conditions • New sensor businesses are created every day in diverse areas • Market dominated by six firms. • Sensors is a Business to Business market

  3. Applications

  4. The Marketplace • Customers (OEMs) need sensors for their products • Initially one segment, now breaking into two • Very different customer demands between the two segments • Diversification in the use and utility of the sensors Large Size LowTech HighTech Small Fast Slow Performance

  5. The Marketplace • In our industry we track the changing customer demand on a perceptual map • Perceptual maps are used to plot customer preferences for two product characteristics • Clusters show groups of customers with similar preferences • Over time, the customers will demand sensors that are faster and smaller • Market Segments will continue to diverge Low Tech High Tech

  6. Each Segment has an Ideal Spot PerceptualMap Large Ideal Spot is that point where, all other things being equal, customer demand is highest Size Low Tech High Tech Small Fast Slow Performance

  7. Low Tech Customers You’re notgivingme what I want “I want these sensors to be inexpensive” “I want them to have been around for a while – no Beta Testing!” “They have to be moderately reliable.” “The technology doesn’t have to be cutting edge.”

  8. High Tech Customers And I’m not getting what I want! “These sensors have to be small, like micro, and fast” “I need them to be right out of R&D, I’m talking ZERO years on the market” “I’ll pay more to get what I want.” “I like a pretty high reliability, but it’s not that important.”

  9. SENSOR INDUSTRY ANALYST PROJECT ONGOING GROWTH Sees the next 5 years as consistent growth. Both market segments increase at a nice “clip,” according to market analyst. “I see the entire market growing at around 14% or 15% per year. The High Tech market will be growing at a whopping 20%.” I hope those companies out there are ready for that kind of expansion!”

  10. COMPANY OVERVIEW The Competition DIGBY ANDREWS 6 Companies $40 Million in Sales 1 Product Line Closed Marketplace BALDWIN ERIE CHESTER FERRIS

  11. SHAKE UP IN SENSOR INDUSTRY Company Fires Management Team After poor results, lackluster sales and angry customer reports, the Chairman of the Board of Directors has announced the immediate termination of the Management Team. “This is a black day for our company,” said Chairman Patrick Nuss, “We need to hire a dynamic leadership group who will be able to take this company into the future!” “Due to this immediate need I have hired the “Dream Team” to start on January 1st. I expect to see great things from this Executive Team!

  12. WELCOME TO YOUR NEW COMPANY! Functional Areas R&D Marketing • Additional Modules • HR • TQM Production Finance

  13. Research & Development • Establish the specification of the products to meet customer demand • Build the quality and reliability (MTBF) into the products • Ensure the perceived age of the product meets customer demands • Create new products to meet the changing marketplace “Our product straddles both market segments. It isn’t a great low tech product, or a great high tech one.”

  14. Marketing • Set the price of our products in the marketplace • Build customer awareness through promotion • Establish a sales force and distribution channels • Set the sales forecast for our products • Set Credit Policies AR/AP “Our product isn’t priced optimally for either market. And many of our customers don’t even know our product exists.”

  15. Production • Purchase machinery to automate our facilities • Buy or sell capacity of product lines • Schedule production for each line • Manage the majority of the companies fixed assets • Establish workforce compliment “We are payingtoo much forlabor costs. Very soon we will run outof capacity to meet demand.”

  16. Finance • Acquire capital to fund capital expansions • Issue Stock • Short Term Debt • Issue Long Term Bonds • Issue dividend to our shareholders • Balance our debt portfolio • Manage our Proforma “We have poorcash flow and substandardfinancial ratios. We have nofinancial policystatement.”

  17. Proformas • Balance Sheet • Profit & Loss • Cash Flow • Financial Ratios A great management tool driven by forecasts and projections. Allows “What if” Scenarios by the company.

  18. Scoring the Simulation • Analyst Report • Round Analysis • Balanced Scorecard • Balanced scorecards allow companies to gauge their performance by assessing measures in four categories: • Financial– includes profitability, leverage and stock price; • Internal Business Process– ranks, among other measures, contribution margin, plant utilization and days of working capital; • Customer– examines the company's product line, including how well it satisfies buying criteria and awareness/ accessibility levels; • Learning and Growth– evaluates employee productivity.

  19. Good Luck and Enjoy!