Please note that these are the basic fundamentals behind Capstone, I tried to make it as easy to follow as possible, this guide will help you avoid the kind of mistakes that make your company tank. Let me know if you have any questions, feel free to send me a PM or check out the Spreadsheet Marketplace.
Happy Capsiming!
TQM
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TQM will mostly kick in Round 3 or 4, you want to spend $1500 on the first round its available, then $1500 on the second round, and then finally $1000 on the third round.
This expenditure would be for every single initiative, TQM will reduce your costs, increase your demand and decrease your R&D revision dates so its a big deal, do not cheap out.
R&D
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Change MTBF for all our products to the maximum allowed by each segment.
* Traditional to 19000
* Low End to 17000
* High End to 25000
* Performance to 27000
* Size to 21000
You will read somewhere that you should lower MTBF to reduce material costs, I advise you don't, MTBF while it might not be the most important criteria; its the cheapest way to get Customer Buying Criteria, any percentage of criteria you lose from MTBF; you will have to make it up with reduced price which in the end will be more expensive.
After MTBF, push your products as much as possible to their ideal positions without going into the following year. The most common mistake I see is students messing up their R&D for not calculating ideal positioning, to calculate it you will go into your Capstone Courier and look for the ideal position of Round 0 under customer buying criteria for each segment, to that position you will apply the drift rates below:
|
Segment
|
Performance Drift
|
Size Drift
|
|
|
Traditional
|
+0.7
|
-0.7
|
|
Low End
|
+0.5
|
-0.5
|
|
High End
|
+0.9
|
-0.9
|
|
Performance
|
+1.0
|
-0.7
|
|
Size
|
+0.7
|
-1.0
|
After applying your drift rates to ideal positions, you should be able to figure your ideal positions for each product, push your product to these positions and lower any products that their revision date go into next year (should happen for size and high end products).
**THE ONLY PRODUCT THAT DOES NOT MOVE, IT’S THE PRODUCT IN LOW END SEGMENT. LEAVE THIS PRODUCT AT ITS ORIGINAL SPECS UNTIL ROUND 4 OR 5**
I know I used to suggest June 28th revision date and you can still apply it but only for the first 2 rounds, after that you will have to push your products all the way to December or your products will fall behind.
MARKETING
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**PRICE**
Pricing is tricky, use your benchmark prediction to come up with your price equilibrium, a good way to find that number is to place all your prices at the highest allowed by each segment and from there start lowering the price in intervals of $0.50, each time you recalculate; check your Contribution Margin number, if that number goes up then its a good move, if it goes down then your reduction in price is not a good idea.
*Recommendation for round 1*
* Traditional at $29.5
* Low End at $21
* High End at $39.50
* Performance and Size at $34.50
After this you can just lower prices by $0.50 every year unless something goes wrong with your product or the segment gets disrupted for any reason.
**PROMO BUDGET & SALES BUDGET**
* Do not ever expend more than $2000 on promotion in any product in any give year. (diminish returns start at $2000) and no less than $1000 so you don't lose awareness year over year.
A good way to find out what would be the ideal spending in Promo and Sales is to place all your budgets at $2000 and just like in pricing; start lowering you budgets by $100 intervals, check your "Less Promo/Sales" number, if that number goes up; keep going, if it goes down, go back.
**FORECASTING**
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From the Market Share page in the Capstone Courier, take your last year’s potential market share and multiply it by the next year demand of each segment.
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To calculate Next Year Demand, you take current total demand and multiply it by the growth rate
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Multiply your Market Share by Next Year’s Demand and you should be able to have your next year forecast.
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You can also find how many units your product sold in their respective segment and multiply that number by the growth rate of the segment. Example: Your Traditional product sold 1500 units in the traditional segment last year, growth rate for that segment is 9.2%, so we take the 1500 and multiply it by 1.092 (growth rate) and that should give us a forecast of 1638 for next round.
[Check the Useful Formulas post for some guidance.]()
PRODUCTION
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**PRODUCTION SCHEDULE**
((Units Sales Forecasted) * (1.15) – Inventory on Hand))
We want to have cushion of inventory in case we sell more units than we forecasted and this way you take into consideration inventory in hand.
Example; we forecasted 1638 units for our Traditional product and we have 95 units of inventory, our production schedule would be 1638 * 1.15 = 1888 minus our inventory of 95 so 1793 total.
**AUTOMATION RATING**
* Traditional, increase its automation by 2 points each round until you reach 10
* Low End, you want to reach 10 as soon as possible (first round you can move to 8 or 9, and make sure you have 10 by the 2nd round)
* High End, increase by 0.5 or 1 point each round, you do not want to go over 6.
* Performance, increase by 1 or 1.5 each round, until you reach 7
* Size, increase by 0.5 or 1 point each round, until you reach 7
**WORKFORCE COMPLEMENT**
Always at 100%
**BUY/SELL CAPACITY**
* You want to keep 2nd Shift Production % below 80% to score green on your balance scorecard
* If you have less than 20%; you have to sell capacity
* If you more than 50% you have to buy capacity
A good way to maintain your capacity in check would be to match your capacity with your sales forecast, for example we forecasted 1638 for our traditional product and our current capacity its 1800 for this product; 1638 - 1800 = -162. Under this scenario we would sell 162 units of capacity.
*After you make you decisions on production, check how much capital investment you have;*
* If you have capital investment leftover, try to spend it in Automation or Capacity
* I highly recommend that you sell some capacity on the first round so you can finance Automation, sell on the traditional, high end, performance and size products.
HUMAN RESOURCES
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You want to spend as much as possible in human capital, therefore you want to invest the maximum on recruiting and the maximum of training hours.
* Recruiting Spend; $5000
* Training Hours; 80 Hours
FINANCE
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You want to have between $10,000 and $15,000 in December Cash Position just to make sure you do not enter an Emergency Loan
We will source money until we reach this $15,000 Cash position in the first year in the following way:
Calculate how much money you need, lets assume you cash position its negative $15,000, we would then need $15k to cover the negative and another $15k to get to our goal for a total of $30k.
You will take that money you need and source it from the 3 ways you can get money
We do this to balance our ratios, a lot of students tend to abuse Long Term Debt under the belief that you don't have to pay it, you do, you are paying high interest on it and it will hurt your ratios and your bottom line.
* Retire stock it’s for when you have a good cash position and you have some money left over to purchase stock back from the market
* Dividends per share it’s for when you have cash leftover in capital investment to give back to your shareholders
* Retire Long Term Debt it’s for when you want to pay your debt early (This usually decreases your interests expense)
Finance its very tricky if you are focusing in Maximizing your scorecard score, these recommendations are just for your first round, for the rest of the simulation I highly recommend you that you check out the
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Important: DO NOT GET SCARED IF YOU DO NOT MAKE MONEY ON THE FIRST ROUND. COMPANIES RARELY MAKE MONEY ON THE FIRST COUPLE OF YEARS, TAKE YOUR FIRST YEARS AS INVESTMENT AND TO LAY DOWN YOUR STRATEGY.
Strategy Last Updated on: 03/09/2024
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