Policy CAPSIM Exam

The Courier displays

"Last Year's Results." - Successful companies will study the Courier to understand the marketplace and find opportunities.

Each inside salesperson costs...

$50,000 - The inside sales staff works the existing customer list. Each inside salesperson costs $50,000.

What are your company's options for raising money?

- Borrowing Long-term debt - Borrowing Short-term debt - Issuing Stock

True or False? The new contract that you negotiate with Labor will take affect starting January 1st of the year the contract is renegotiated.

False

True or False? Worker training is entered by the dollar.

False Hours are entered on the HR Screen. Training costs $20.00 per hour per worker.

Functional Manager

Functional Manager: - Responsible for R&D, Marketing, Production, or Finance. - includes R&D managers, marketing managers, production managers, and finance managers. - A Functional Manager's job is to optimize the efficiency of the assigned function and to coordinate strategy across functional boundaries.

MTBF Score

MTBF= Reliability. - MTBF requirements stay the same year after year. - Each segment sets a 5,000 hour range for MTBF (Mean Time Before Failure). - The number of hours a product is expected to operate before it malfunctions. - Customers prefer products towards the top of the range.

Prices are established by... which department?

Marketing Department

Market Share Report (courier)

The Market Share Report (page 10) details sales volume in all segments, reporting each product's actual and potential sales. - Did your company under produce? If the actual percentage for your product is less than the potential, you missed sales opportunities.

True or False? Your sales budget (place) builds "accessibility," the ease with which customers can work with you after they begin sourcing.

True

True or False? The Proformas are dynamic financial statements that recalculate based on your decisions.

True

Production Analysis (page 4 of courier)

The Production Analysis (page 4) reports detailed information about each product in the market, including sales and inventory levels, price, material and labor costs. - The Production Analysis also reports product revision dates. Does a competitor have a product with a revision date in the year after the year of the report? This indicates a long repositioning project that will possibly put that product into another segment.

Are your competitors investing in capacity and automation?

The Production Analysis reports capacity and automation ratings for the upcoming round. The Financial Summary reports the cost of plant improvements for all companies.

Segment Analysis Reports (part of courier)

The Segment Analysis reports (pages 5 - 9) review each market segment in detail.

Stocks & Bond Summaries (Courier)

The Stock and Bond Summaries (page 2) report stock prices and bond ratings for all companies. The page also reports the prime interest rate for the upcoming year.

Balance sheet (part of proforma and annual report)

The balance sheet lists the dollar value of what the company owns (assets), what it owes to creditors (liabilities) and the amount contributed by investors (equity). Assets always equal liabilities and equity.

What happens when a product generates high demand but runs out of inventory (stocks out)?

The company loses sales as customers turn to its competitors. This can happen in any month. - The Market Share Report of the Capstone Courier, can help you diagnose stock outs and their impacts.

Rough Cut Circle (perceptual map/Positioning Score)

The dashed outer circle defines the outer limit of the segment. - This area is far from the black dot (ideal spot). So that's not where you want to be. - Customers are saying, "I will NOT purchase a product outside this boundary." We call the dashed circle the rough cut boundary because any product outside of it "fails the rough cut" and is dropped from consideration. - Products placed in the rough cut area are between 2.5 and 4.0 units from the center of the circle. - Products here are poorly positioned and they will have reduced customer survey scores. The farther they are from the fine cut circle, the more the scores are reduced

True or False? As you raise automation, it becomes increasingly difficult for R&D to reposition products short distances on the Perceptual Map.

True

What are the 4 P's of marketing?

1. Product 2. Price 3. Place 4. Promotion

Capstone Courier

- Also known as the industry newsletter. - The Courier is an extensive year-end report of the sensor industry. It includes: - Customer buying patterns - Product positioning - Public financial records and other information that will help you get ahead. - In business, knowledge is power. If you want to evaluate your company's performance or analyze your competitors, the Courier is the place to start.

Sales budget

- Governs everything during and after the sale. - Sales budget drives accessibility. - The sales budget is spent on distribution, order entry, customer service, etc. - is about closing the deal via your salespeople and distribution channels.

promotion budget

- Persuades the customer to look at your product. - Drives awareness. - The former is about encouraging the customer to choose your product.

Annual Reports

- Proformas and annual reports are specific to your company. - Annual reports are the results from the previous year. - The annual reports will help you analyze last year's results.

Proformas

- Proformas and annual reports are specific to your company. - Proformas are projections for the upcoming year. The proformas will help you envision the impacts of your pending decisions and sales forecasts.

Segment Movement (perceptual map/Positioning Score)

- Segments move a little each month - Ideally products will be in front of (to the right of) the ideal spot in January, on top of it in June and trail behind in December.

Customer Survey Score

- The customer survey starts by evaluating each product against the buying criteria. - prices do not change throughout year. - A perfect customer survey score of 100 requires that the product: - Be at the ideal position (the segment drifts each month, so this can occur only one month per year). - Be priced at the bottom of the expected range. - Have the ideal age for that segment (unless they are revised, products grow older each month, so this can occur only one month per year). - Have an MTBF specification at the top of the expected range.

The maximum length of a strike is...

12 weeks

3. Which team(s) does labor see the opening offers from? A. One team B. All teams C. Two teams D. Only your team

B. All teams

There are two teams, Andrews and Baldwin. As a result of an earlier labor negotiation, Andrews workers earn $20.00. Baldwin workers earn $22.00. What will Labor demand? A. Andrews $22.00. Baldwin $24.20. B. Andrews $24.20. Baldwin $24.20. C. Andrews $24.20. Baldwin $22.00. D. Andrews $24.00. Baldwin $24.00 E. None of the above.

B. Andrews $24.20. Baldwin $24.20.

Proformas and annual reports include

Balance Sheet Cash Flow Statement Income Statement

Suppose workers earn $20.00 in the current contract. There are only two teams, Andrews and Baldwin. Labor demands $22.00. Andrews gives its negotiators a range of $23.00 to $25.00. Baldwin gives its negotiators a range of $20.20 to $22.20. Will Labor strike:

Baldwin

Capital can be acquired through

Capital can be acquired through: - Current Debt - Stock Issues - Bond Issues (Long Term Debt) - Profits - Acquiring the capital needed to expand assets, particularly plant and equipment.

What is the industry newsletter called?

Capstone Courier

The TQM report can be accessed from the ____________.

Capstone(r) Courier - The TQM information appears on the last page of the Capstone Courier.

Competitive Intelligence Officer

Competitive Intelligence Officer: - The Competitive Intelligence Officer's task is to see the market, and especially their company, through the eyes of the competitor. They study the Courier - Responsible for predicting the behavior of one or more of your competitors.

R&D Managers

R&D (research and development)- designs your product line. The department needs to invent and revise products that appeal to your customers' changing needs. Managers can explain the relationship between: - Age and positioning - Positioning and material cost - MTBF and material cost - Automation and project length - Number of projects and completion times

_________ are incurred when production runs increase and teams match hiring to Needed Complement.

Recruiting costs - Increasing production and then matching the Needed Complement will result in new hires, and therefore increase Recruiting Costs.

Products are invented and revised by which department?

Research and Development

Segment Manager

Segment Manager: - Responsible for one of the five market segments. - Segment Managers present recommendations to a panel (teammates) that sets overall company strategy. - Segment Managers have more freedom than Product Managers to make strategy and policy recommendations.

The Target Segment selection lets teams:

Select which segment their promotion efforts should be directed towards. - The Target Segment selection pertains exclusively to Promotion, and allows teams to select which segment their promotion efforts should be directed towards.

Generally, __________ will be incurred when production levels decrease and / or Automation levels increase.

Separation costs - The Needed Complement is determined by a combination of: a) the number of units ordered into production; and b) the Automation level of the assembly lines. Decreasing the number of units produced from one year to the next will decrease the Needed Complement. Similarly, increases in Automation will decrease the Needed Complement. If teams adjust the This Year cell to match the Needed Complement, Separation Costs will be incurred.

Decision Audit

The Decision Audit is a complete trail of all team decisions. It will help you identify your decision-making strengths and weaknesses.

Financial Summary (Courier)

The Financial Summary (page 3) surveys each company's cash flow, balance sheet and income statements. This will give you an idea of your competitors' financial health. In-depth financial reports for your company are also available (see Chapter 6).

True or False? Increasing Capacity tends to reduce the number of workers on Second Shift.

True - Increasing Capacity tends to reduce the number of workers on the Second Shift. As an example, a production order of 1,200 units on a line with a Capacity of 800 units (numbers in thousands) will require 400 units to be produced by the Second Shift. Increasing Capacity to a total of 1,000 units will result in 1,000 units manufactured by First Shift labor, and only 200 units produced by more expensive Second Shift labor.

True or False? The exact outcome of TQM efforts appear on the TQM Report, and as bar charts on the TQM spreadsheet. These results are for the previous round only, assuming no additional investment is made.

True - TQM investments take effect the year they are made, and are cumulative, paying off year after year.

True or False? Production runs can be scheduled in one or two shifts.

True - Up to twice the production line's First Shift Capacity can be scheduled for each individual product. Production runs that exceed the First Shift Capacity result in either Overtime and/or a Second Shift, depending on the Worker Complement.

Each additional advertisement increases customer awareness by _____________the first.

a lesser amount than. - Increasing the number of advertisements does not linearly increase Awareness. When the advertisement runs a second time, a percentage of people who saw it the first time will see it again. Those who see the ad twice do not become aware of the product when they see it the second time. Therefore, the second placement does not add as much Awareness as the first-- the result, diminishing returns apply.

what the company owns

assets

Teams _______________ Recruiting Costs if they wish.

can eliminate all but the $1,000 base cost per new employee. - Teams can choose to enter 0 in the Recruiting Spend cell on the Human Resources screen, however that number is in addition to a base Recruiting Cost of $1,000 per worker. A Recruiting Spend entry facilitates recruiting a better quality of worker.

Manufacturing too many units results in

higher inventory carrying costs.

Emergency loans are often encountered when

last year's sales forecasts were higher than actual sales or when the Finance Department failed to raise funds needed for expenditures like capacity and automation purchases.

As a general rule, stock issues are used to fund

long term investments in capacity and automation.

The dividend is the amount of...

money paid per share to stockholders each year.

Manufacturing too few units results in

stock outs and lost sales opportunities, which can cost even more

True or False? As a general rule, bond issues are used to fund long term investments in capacity and automation.

true

True or False? As a general rule, companies fund short term assets like accounts receivable and inventory with current debt offered by banks.

true

True or False? The proforma reports are only as accurate as the marketing sales forecasts. If you enter a forecast that is unrealistically high, the proformas will take that forecast and project unrealistic revenue.

true

Industry Conditions Report

- The information reported in your Industry Conditions Report will help you understand your customers. - Outlines the beginning business environment, including customer buying criteria. - The Industry Conditions Report lists market segment sales percentages and projected growth rates unique to your simulation.

Segment Accessibility

- The number of customers who can easily interact with your company. - Example - salespeople, customer support, and delivery. - Accessibility is built over time by the product's sales budget. Sales budgets fund salespeople and distribution systems to service customers within the product's market segment.

First-shift capacity is defined as

- The number of units that can be produced on an assembly line in a single year with a daily eight-hour shift. - An assembly line can produce up to twice its first-shift capacity with a second shift. - However, second-shift labor costs are 50% higher than the first shift.

Fine Cut Circle (perceptual map/Positioning Score)

- The solid inner circle defines the heart of the segment. - Customers prefer products within this circle. - Products inside the fine cut are within 2.5 units of the center of the circle. - So basically the area around the black dot (ideal spot). We want to stay in this area.

Product Awareness

-The percentage of people who know about your product. - Awareness is built over time by the product's promotion budget. Promotion budgets fund advertising and public relations campaigns.

Your Finance Department is primarily concerned with five issues:

1. Acquiring the capital needed to expand assets, particularly plant and equipment. 2. Establishing a dividend policy that maximizes the return to shareholders. 3. Setting accounts payable policy (which can also be entered in the Production and Marketing areas) and accounts receivable policy (which can also be entered in the Marketing area). 4. Driving the financial structure of the firm and its relationship between debt and equity. 5. Selecting and monitoring performance measures that support your strategy.

situation analysis

Completing the Situation Analysis, will enable you to understand current market conditions and how the industry will evolve in the next few years. It will assist you with your operational planning.

Buying Criteria

Customers within each market segment employ different standards as they evaluate products. They consider four buying criteria: - Price: Each segment has different price expectations. One segment might want inexpensive products while another, seeking advanced technology, might be willing to pay higher prices. - Age: Each segment has different age expectations, that is, the length of time since the product was invented or revised. One segment might want brand-new technology while another might prefer proven technology that has been in the market for a few years. - MTBF (Mean Time Before Failure): MTBF (Mean Time Before Failure) is a rating of reliability measured in hours. Segments have different MTBF criteria. Some might prefer higher MTBF ratings while others are satisfied with lower ratings. - Positioning: Sensors vary in their dimensions (size) and the speed/sensitivity with which they respond to changes in physical conditions (performance). Combining size and performance creates a product attribute called positioning.

In the Sales Budget Resource, the outside sales force meets with customers face-to-face. The cost of each salesperson includes which of the following? A. Salary and commission B. Travel and Support C. None of the above D. Both A and B

D. Both A and B - Each salesperson costs $125,000, which includes salary, commission, travel and support.

In the Promotion Budget Resource, teams can select which of the following media areas? A. Print Media and Television B. Email and Telephone Contact C. Trade and Road Shows D. Web Media and Direct Mail

D. Web Media and Direct Mail - The scenario utilizes business to business media outlets that reach Original Equipment Manufacturers (OEMs). Television, for example, is not an efficient way to reach OEMs.

Assuming the Productivity Index is greater than 100%, adding Overtime will ____________ the Productivity Index.

Decrease - While the Productivity Index can never fall below 100%, it is possible for teams to increase the Index by investing in a higher quality of worker (Recruiting Spend) and in education (Training Hours). However, scheduling Overtime will decrease the Index because workers will become tired and disgruntled.

True or False? Each market segment responds to different types of media (e.g. print, direct mail, etc.) to a varying degree. It follows that each product must be identified with its target segment. Product target segments are identified by their placement on the Perceptual Map.

False - The Marketing Budget Detail includes a combo box for each product that allows teams to define the product's target segment. If teams anticipate moving a product from one segment to another (perhaps an R&D project completes in mid year) they can define the target segment at the beginning of the year.

True or False? Forecasts are set on the Marketing Budget Detail spreadsheet.

False - When the Advanced Marketing Module is activated, marketing activities are divided between two spreadsheets. Prices and forecasts are entered on the Pricing & Forecasting spreadsheet.

perceptual map

Positioning is such an important concept that marketers developed a tool to track the position of their products and those of their competitors. (The map with the circles - low end, high end, traditional, performance, and size.)

Product Manager

Product Manager: - Responsible for one of the five sensors in your starting product line. - Product Managers concentrate on the specifics of their product, and how it relates to the segment. While they want their product to be supported to the greatest extent possible, they are not directly involved in Promotion and Sales decisions.

True or False? Changing the MTBF alone will not affect a product's age.

True

True or False? Finance can print the worst case and best case proformas, then compare them to next year's annual reports.

True

True or False? Labor costs increase each year because of an Annual Raise in the worker's contract.

True

True or False? According to the S-Shaped curve, diminishing returns for a single year budget become noticeable at $2,000,000.

True The S-Shaped curve predicts return on investment. Depending on the slope of the curve, the return on investment can be small or large. For example, suppose a project is budgeted at $500,000. This project might go through a planning stage that produces a set of recommendations, but there is no money left to implement the recommendations. At $1,000,000, sufficient funds are available to plan, and begin implementing the recommendations. At $1,500,000, the budget is sufficient to plan and put in place most of the recommendations. At $2,000,000, all of the recommendations have been implemented, and additional money beyond that level has little or no effect.

True or False? When you buy automation, you might want to determine the return on investment (ROI).

True. - The greater the ROI, the better the investment.

Front page of the courier?

Use the first page of the Courier to see a snapshot of last year's results. Be sure to compare your company's sales, profits and cumulative profits with your competitors'.

Which of these investments is NOT a function of the Production department? - Increasing Automation - Wage Increases - Creating new production lines

Wage Increases

It is possible for a product to go from an age of 4 years to 2 years. How can that be?

When a product is moved on the Perceptual Map, customers perceive the repositioned product as newer and improved, but not brand new. As a compromise, customers cut the age in half. If the product's age is 4 years, on the day it is repositioned, its age becomes 2 years. Therefore, you can manage the age of a product by repositioning the product. It does not matter how far the product moves. Aging commences from the revision date.

How can you be sure of a seller's market?

You can't, unless you are certain that industry capacity, including a second shift, cannot meet demand for the segment. In that case, even very poor products will stock out as customers search for anything that will meet their needs.

Finance Managers

- Your Finance Department makes sure your company has the financial resources it needs to run through the year. The department can raise money via one-year bank notes, 10-year bonds or stock issues. Finance Managers can explain the relationships between: - Stock issue or retirement and capital structure - Working capital and inventory - Dividend policy and stock price - Emergency loans and cash - Current debt and short-term interest rates - Bond issue and prepayment - All financial performance measures

Marketing Managers

- Your Marketing Department prices and promotes your products. It interacts with your customers via its sales force and distribution system. Marketing is also responsible for sales forecasts. Marketing Managers can explain the relationships between: - Price and contribution margin - Price and demand - Promotion budget and awareness - Sales budget and accessibility - A/R policy and demand

Production Managers

- Your Production Department determines how many units will be manufactured during the year. It is also responsible for buying and selling production lines. Production Managers can explain the relationships between: - Inventory levels and carrying costs - Carrying costs and opportunity costs (not having inventory to sell) - Capacity and second shift - Automation and labor costs - Second shift and labor costs - Idle plant costs - Consequences of buying/selling capacity or increasing automation

Accounts Receivable

A company's accounts receivable policy sets the amount of time customers have to pay for their purchases. - A company's accounts receivable policy sets the amount of time customers have to pay for their purchases. At 90 days there is no reduction to the base score. At 60 days the score is reduced 0.7%. At 30 days the score is reduced 7%. Offering no credit terms (0 days) reduces the score by 40%.

repositioning the product

A repositioning project moves an existing product from one location on the Perceptual Map to a new location, generally (but not always) down and to the right. - Repositioning requires a new size attribute and/or a new performance attribute. To keep up with segment drift, a product must be made smaller (that is, decrease its size) and better performing (that is, increase its performance).

Age (buying criteria)

Age preferences stay the same year after year

In the current contract, the workers wage rate is $20.00. Which of the following negotiation ranges would be outside the rules? A. $18.00 to $18.00 B. $15.60 to $16.80 C. $30.20 to $32.20 D. $30.00 to $32.00 E. Both B and C would be outside the rules.

E. Both B and C would be outside the rules.

True or False? Generally speaking, a team with high levels of automation would be inclined to Make a "low ball" offer to the unions in order to further lower costs.

False

True or False? Hiring the Needed Complement will always eliminate a Second Shift.

False - Hiring the Needed Complement eliminates all Overtime. The Second Shift workers are paid the same as workers on Overtime, however, Second Shift workers are more efficient and do not seek work elsewhere, therefore reducing turnover.

True or False? Management should strive to increase Turnover.

False - Lowering Turnover reduces Recruitment costs.

Ideal Spot (perceptual map/Positioning Score)

The ideal spot is that point in the heart of the segment where, all other things being equal, demand is highest. - The black dot on the circles is the ideal spot.

What is the difference between Awareness and Accessibility?

Think of awareness and accessibility as "before" and "after" the sale. Awareness and accessibility go hand and hand towards making the sale. - Awareness is about encouraging the customer to choose your product. - Accessibility is about closing the deal via your salespeople and distribution channels.

True or False? If a revision date has yet to conclude, the Courier will report the product's current performance, size and MTBF. The new coordinates and MTBF will not be revealed until after the completion of the project.

True

True or False? In a seller's market, customers will accept low-scoring products as long as they fall within the segment's rough cut limits. For example, desperate customers with no better alternatives will buy products just inside the rough cut circle.

True

True or False? It is not possible to produce new products prior to the revision date. A new product with a revision date of July 1 will be produced in the second half of the year. The capacity and automation will stand idle for the first half of the year.

True

True or False? Positioning affects material costs. The more advanced the positioning, the higher the cost.

True

True or False? Project lengths will increase when the company puts two or more products into R&D at the same time. When this happens each R&D project takes longer. Assembly line automation levels also affect project length

True

True or False? Sales budgets are less effective when products are not completely positioned in the fine cut circle, when prices rise above segment guidelines or when MTBFs fall below segment guidelines.

True

True or False? The Production Department must order production capacity to build the new product one year in advance. Invention projects take at least one year to complete.

True

True or False? Use the Customer Survey Score as a quick comparison tool when conducting a competitive analysis. Perfect scores are almost impossible. Scores of 50 or above are considered good.

True

True or False? Usually you want repositioning projects to finish in less than a year. For example, consider breaking an 18-month project into two separate projects, with the first stage ending just before the end of the current year and the second ending halfway through the following year.

True

True or False? Your promotion budget builds "awareness," the number of customers who know about your product before sourcing.

True

True or False? Segment price expectations correlate with the segment's position on the Perceptual Map. Segments that demand higher performance and smaller sizes are willing to pay higher prices.

True

True or false? As automation levels increase, the number of labor hours required to produce each unit falls. The lowest automation rating is 1.0; the highest rating is 10.0.

True

True or False? Distributors are a separate Sales channel.

True - Distributors place your product in their own showrooms. You pay each distributor $100,000 per year to stock your product line.

True or False? If a company with low automation wanted to invest in a single area that exclusively lowers labor costs, they would select QIT (Quality Initiative Training).

True - The TQM area allows teams with an established strategy to invest in areas, which will benefit them the most. For example, if a team formulates a strategy that sacrifices labor cost so it can complete R&D projects faster, it would want to invest in QIT, which reduces labor costs.

True or False? Increasing Training Hours tends to both increase and decrease the Needed Complement.

True - In the short term, increasing Training Hours will increase the Needed Complement-- Workers are taken off the production line and put in the classroom. However, as time goes on, investing in Training Hours increases worker productivity, and therefore tends to decreases the Needed Complement.

True or False? The Marketing Budget Detail asks teams to determine budgets by product and segment.

True - On the Marketing Budget Detail, the Promotion Budget Resource sections asks teams to assign budgets by product, but the section also asks teams to assign a target segment for each product. This facilitates products that might start the year in one segment, then as an R&D project completes, moves to another segment. Teams can begin promoting in the new segment prior to the move. The same holds true for a product that will have a new segment drift over it. In the Sales Budget Resource, Sales budgets are allocated by Segment. However, Sales budgets can be fine tuned with the Product Allocations box. For example, if teams have two products in one segment, the Product Allocations box can be used to prioritize one product over the other.

True or False? Diminishing returns will occur when investing in the same TQM Initiative round after round.

True - With sufficient investment, initiatives will improve processes and quality to the greatest extent possible, however, each initiative will reach a point where no further improvement is possible, therefore the investments create no additional returns.