Monday, March 06, 2017

Capstone - Round Wise Suggestions

Dear Readers,

Before I explain further on CAPSIM, hope you have read the previous posts (LINK1, LINK2) on CAPSTONE.

Remember the ground rules:
  1. Round 1 to 3 even if you make no profits its OK. But aim should be that from Round 4 you are steadily making NET and cumulative profits.
  2. The round where the market goes into recession could be changed so accordingly change your strategy
  3. The round where the labor goes on strike could change so always apply the round 7 details below for that specific round of yours.
  4. Always remember that long term loans are always cheaper to short term loans. Also this game is for 8 years only, while some loans will mature only after that.
  5. Always take loan and avoid emergency loan in any round. Never sell your shares too much into market. Never buy shares unless you have excess cash reserves.
  6. Any R&D and buying of plant capacity will take effect only at the end of the year !!
  7. If your R&D finished in August, then all pending units and future production units shall be as per that specifications free of cost.
  8. If the Total Industry Unit Demand for every segments is greater than total production capacity of all players, then you can charge higher and produce more to bridge the gap.
  9. Prices must be set high enough to allow reasonable revenue within the current cost structure.
  10. Avoid excessive inventory left overs in any round, especially in last 4 rounds (below 50 OK). Check out the oppurtunity cost against having inventory and take prudent decision.
  11. Every addition of automation will reduce the variable costs down and that will help you in round 7. Keep labor % in production page as 100% always.
  12. When you want to perform R&D and segment automation level is high, then it would take more time to prepare (R&D time increases) - invest in TQM

Round 1:
1. In this round you shall have R&D, Marketing, Production and Finance Modules enabled
2. Put the R&D numbers for Round 2 as much as possible.
3. In Marketing price it just 50 cents less than the highest price bracket for the round (Buying criteria). [ Price greater than Material Cost + Labor Cost. ]
4. Always spend 2 times on sales. So promotion could be 1.5K and sales at 2.5K for all. Never put more than 3000 in any round.
        - Inventory value should be as per the article "Inventory Estimation"
5. In Production, ensure you are using 100% plant capacity (i.e. capacity should be = inventory under production / 2). This way you shall utilize the plant fully.
        - Inventory value should be as per the article "Inventory Estimation"
6. Sell the extra capacity with you which are not required till Round 3.
        - Calculate the inventory to be produced for round 1 using growth rate etc
        - Use this round 1 estimate for round 2 calculation and round 2 estimate for round 3 calculations
        - Assume the same industry growth rate for each segment for next 2 rounds and SUM it.
        - The capacity you need to keep should be half of that total value (inventory of R1, R2 and R3)
7. Increase the automation of Traditional to 8, Low to 10, Others to 6 or 7 (6 enough for now). Read my capstone fundamentals to understand this.
8. Production: Never be on negative here (right side bottom), because if so the CAPSIM shall negate all your changes in this page. If required sell more, but remember to buy in next round.
9. Production units (inventory estimated) to be entered should be negated with inventory left overs before entering in the top part (per segment)
10. Try if contribution margin could be greater than 30%. If not its OK for this round. Contribution Margin is based on your pricing and variable cost.
11. In finance module: Take long term loan so that even if the sales do not happen you are in positive. Do not touch anything else
12. Check the proforma as suggested in "capstone fundamentals" and check projected ROA, ROE, Share Price etc

########### Good to go - Publish your inputs and wait for results.

Round 2 & 3:
1. In this round you shall have R&D, Marketing, Production and Finance Modules enabled
2. Put the R&D numbers for next round as much as possible. Ensure that difference of your performance / size with buying criteria is always around the drift value for that segment
        - Introduce the new products if any. Do not give same kind of names. Your name for new product should be very unique to avoid competitors from judging its segment
        - Set the size and performance to round 3 or 4 targets in advance, because production will start only from round 3, by that time other products will move ahead
        - Do not add products if you are not sure, if you want to play the all product safe zone game.
        - Round 2 or max Round 3 are the best times to add new products
3. Study the capstone courier and check what your competitors have done
        - Have they bought or sold capacity, how much inventory is left, why so much is left behind
        - Pricing, automation, any new products into market, If yes, in which segment?
        - How much did they spend on sales / promotion and what is the customer review %, what does Page 10 have to say about your competitors
        - What is the cash and loan status of your competitors and preempt their moves
4. Now onwards in marketing put the price based on competitors pricing strategy. Remember your price should be inversely proportional to buying criteria for price
        - Read point 8 from the "Remember the ground rules". Never put sales / promotion more than 3000 in any round.
        - Based on analysis increase the sales / promotion if required. But point 4 of Round 1 remains - spend 2 times of promotion on sales.
        - Inventory value should be as per the article "Inventory Estimation"
5. Production Page:
        - Inventory value should be as per the article "Inventory Estimation"
        - Do not sell anything now, estimate if the capacity is enough till next round end (that means in round 2, estimate till when round 3 capstone courier comes)
        - If its less, buy it now else when next round starts you shall have less capacity and less inventory to sell
        - Don't increase automation now, you shall need the money in next round for new products and respective automation
        - Add up inventory numbers and buy capacity for new products for next round perspective in advance
        - (For new products) Put higher automation numbers based on the segment where you are introducing the new products
6. Production: Never be on negative here (right side bottom), because if so the CAPSIM shall negate all your changes in this page.
7. Production units (inventory estimated) to be entered should be negated with inventory left overs before entering in the top part (per segment)
8. Try if contribution margin could be greater than 30%. If not its OK for this round. Contribution Margin is based on your pricing and variable cost.
9. In finance module: Take long term loan so that even if the sales do not happen you are in positive. If you are buying capacity you will need money.
        - This page should never show negative value. Take loan especially if you are bringing in new products.
10. Check the proforma as suggested in "capstone fundamentals" and check projected ROA, ROE, Share Price etc

** If HR module is added in Round 3, Add 80 hours training and 4000 or 5000 as extra expense for training.
** Round 4 could have 0% growth, hence do not buy capacity too much in Round 3 for round 4
        - Its luck, sometimes professors can change the rounds as well
        - Even if you land up buying more, ensure next few rounds you don't buy up

########### Good to go - Publish your inputs and wait for results.

Round 4:
1. In this round you shall have R&D, Marketing, Production, HR and Finance Modules enabled
2. Put the R&D numbers for next round as much as possible. Ensure that difference of your performance / size with buying criteria is always around the drift value for that segment
        - Do not add any new products from this round onwards. It could mess up your plans. Only focus on profits from hereon.
3. Study the capstone courier and check what your competitors have done
        - Have they bought or sold capacity, how much inventory is left, why so much is left behind
        - Pricing, automation, any new products into market, If yes, in which segment?
        - How much did they spend on sales / promotion and what is the customer review %, what does Page 10 have to say about your competitors
        - What is the cash and loan status of your competitors and preempt their moves
        - Your market positioning vs others and how much market share you have until Round 3 etc, find the reasons for your product not working out etc.
4. Now onwards in marketing put the price based on competitors pricing strategy. Remember your price should be inversely proportional to buying criteria for price
        - Read point 8 from the "Remember the ground rules". Never put sales / promotion more than 3000 in any round.
        - Based on analysis increase the sales / promotion if required. But point 4 of Round 1 remains - spend 2 times of promotion on sales.
        - Inventory value should be as per the article "Inventory Estimation"
5. If HR module was added in Round 3, Add 40 to 80 hours training and 3000 to 5000 as extra expense for training.
        - If this is the first round of HR, then add 80 hours training and 4000 or 5000 as extra expense for training.
6. Production Page:
        - Inventory value should be as per the article "Inventory Estimation"
        - Capacity will be excess for this round due to 0% growth, but its OK
        - Even if the utilization is not 100% its OK, just produce as per the estimations and your gut feeling and move on
        - Production: Never be on negative here (right side bottom), because if so the CAPSIM shall negate all your changes in this page.
        - Production units (inventory estimated) to be entered should be negated with inventory left overs before entering in the top part (per segment)
7. Finance: Take long term loan so that even if the sales do not happen you are in positive (only if you don't have cash reserve). If you are buying capacity you will need money.
        - Pay off any loan in advance if you have cash surplus, it will make your proforma better
        - This page should never show negative value
8. Check the proforma as suggested in "capstone fundamentals" and check projected ROA, ROE, Share Price etc


########### Good to go - Publish your inputs and wait for results.

Round 5 and 6:
1. In this round you shall have R&D, Marketing, Production, HR, TQM and Finance Modules enabled
2. Put the R&D numbers for next round as much as possible. Ensure that difference of your performance / size with buying criteria is always around the drift value for that segment
3. Study the capstone courier and check what your competitors have done
        - Have they bought or sold capacity, how much inventory is left, why so much is left behind
        - Pricing, automation, any new products into market, If yes, in which segment?
        - How much did they spend on sales / promotion and what is the customer review %, what does Page 10 have to say about your competitors
        - What is the cash and loan status of your competitors and preempt their moves
        - Your market positioning vs others and how much market share you have until Round 3 etc, find the reasons for your product not working out etc.
        - Page 12: How much was the TQM in previous round and how that helped competitors, accordingly invest next time
        - How much did competitors spend on HR training and how did that help. have their productivity increased? Labor cost reduced?
4. Now onwards in marketing put the price based on competitors pricing strategy. Remember your price should be inversely proportional to buying criteria for price
        - Read point 8 from the "Remember the ground rules". Never put sales / promotion more than 3000 in any round.
        - Based on analysis increase the sales / promotion if required. But point 4 of Round 1 remains - spend 2 times of promotion on sales.
        - Inventory value should be as per the article "Inventory Estimation"
5. If HR module was added in Round 3 or 4, Add 40 hours training and 1000 to 3000 as extra expense for training.
6. Production Page:
        - Inventory value should be as per the article "Inventory Estimation"
        - Estimate if the capacity is enough till next round end (that means in round 5, estimate till when round 6 capstone courier comes)
        - Even if the utilization is not 100% its ok, just produce as per the estimations and your gut feeling and move on
        - Production: Never be on negative here (right side bottom), because if so the CAPSIM shall negate all your changes in this page.
        - Production units (inventory estimated) to be entered should be negated with inventory left overs before entering in the top part (per segment)
        - If you have not added new products, you can plan for increasing automation in primary segments
        - If you have new products, based on competitor strategy plan to increase automation
7. TQM:
        - Do not invest in Green Programs and Bench-marking in any round
        - In rounds 5: invest 2000 in each other parameter
        - In rounds 6: invest 1500 in each other parameter
8. Finance: Take long term loan so that even if the sales do not happen you are in positive (if you have cash reserve, forget it). If you are buying capacity you will need money.
        - Pay off any loan in advance if you have cash surplus, it will make your proforma better
        - This page should never show negative value
9. Check the proforma as suggested in "capstone fundamentals" and check projected ROA, ROE, Share Price etc
10. Ensure all parameters are showing positive signs and fine tune your inputs - check if the results are better

* Remember by round 6 you should have very high cash reserve to play the labor strike game well

########### Good to go - Publish your inputs and wait for results.

Round 7:
1. In this round you shall have R&D, Marketing (General, Promotion & Sales sub-module), Production, HR (with labor strike), TQM and Finance Modules enabled (Learn about labor strike from guide)
2. Put the R&D numbers for next round as much as possible. Ensure that difference of your performance / size with buying criteria is always around the drift value for that segment
3. Study the capstone courier and check what your competitors have done
        - Have they bought or sold capacity, how much inventory is left, why so much is left behind
        - Pricing, automation, any new products into market, If yes, in which segment?
        - How much did they spend on sales / promotion and what is the customer review %, what does Page 10 have to say about your competitors
        - What is the cash and loan status of your competitors and preempt their moves
        - Your market positioning vs others and how much market share you have until Round 3 etc, find the reasons for your product not working out etc.
        - Page 12: How much was the TQM in previous round and how that helped competitors, accordingly invest next time
        - How much did competitors spend on HR training and how did that help. have their productivity increased? Labor cost reduced?
4. Now onwards in marketing put the price based on competitors pricing strategy. Remember your price should be inversely proportional to buying criteria for price
        - Read point 8 from the "Remember the ground rules". Never put sales / promotion more than 3000 in any round.
        - Based on analysis increase the sales / promotion if required. But point 4 of Round 1 remains - spend 2 times of promotion on sales.
        - Inventory value should be as per the article "Inventory Estimation"
        - Promotion Sub-Module: Based on the limits set, add the price or values to get at least 99% customer reach. Again it depends on whether which segment is working for you.
        - Pricing in this round is dependent on labor strike, so if you are sure others will face strike, increase the price and make a kill for last 3 months.
5. HR module:
        - Add 20 hours training and 1000 to 2000 as extra expense for training.
        - Add value for labors 150 % of current value expected by labor (i.e. max price) for all 4 categories.
        - Take up loan if required, but ensure Oct to Dec, all others have to face strike while you don't
6. Production Page:
        - Inventory value should be as per the article "Inventory Estimation"
        - Estimate if the capacity is enough till next round end (that means in round 7, estimate till when round 8 capstone courier comes)
        - Keep the utilization is 100% , Sell excess in this round or in round 8
        - Production: Never be on negative here (right side bottom), because if so the CAPSIM shall negate all your changes in this page.
        - Production units (inventory estimated) to be entered should be negated with inventory left overs before entering in the top part (per segment)
7. TQM:
        - Do not invest in Green Programs and Bench-marking in any round
        - In rounds 7: invest 1000 in each other parameter
8. Finance: Take long term loan if required (if you have cash reserve, forget it).
        - Don't pay off any loan in advance in this round
        - This page should never show negative value
9. Check the proforma as suggested in "capstone fundamentals" and check projected ROA, ROE, Share Price etc
10. Ensure all parameters are showing positive signs and fine tune your inputs - check if the results are better


########### Good to go - Publish your inputs and wait for results.

Round 8:  (Final Round)
1. In this round you shall have R&D, Marketing (General, Promotion & Sales sub-module), Production, HR (with labor strike), TQM and Finance Modules enabled
2. Put the R&D numbers for next round as much as possible. Ensure that difference of your performance / size with buying criteria is always around the drift value for that segment
3. Study the capstone courier and check what your competitors have done
        - Have they bought or sold capacity, how much inventory is left, why so much is left behind
        - Pricing, automation, any new products into market, If yes, in which segment?
        - How much did they spend on sales / promotion and what is the customer review %, what does Page 10 have to say about your competitors
        - What is the cash and loan status of your competitors and preempt their moves
        - Your market positioning vs others and how much market share you have until Round 3 etc, find the reasons for your product not working out etc.
        - Page 12: How much was the TQM in previous round and how that helped competitors, accordingly invest next time
        - How much did competitors spend on HR training and how did that help. have their productivity increased? Labor cost reduced?
4. Now onwards in marketing put the price based on competitors pricing strategy. Remember your price should be inversely proportional to buying criteria for price
        - Read point 8 from the "Remember the ground rules". Never put sales / promotion more than 3000 in any round.
        - Based on analysis increase the sales / promotion if required. But point 4 of Round 1 remains - spend 2 times of promotion on sales.
        - Inventory value should be as per the article "Inventory Estimation"
        - Promotion Sub-Module: Based on the limits set, add the price or values to get at least 99% customer reach. Again it depends on whether which segment is working for you
5. HR module:
        - Add 0 to 10 hours training and 0 to 1000 as extra expense for training.
6. Finance: Take long term loan if required (** Winner is based on net operational profit **).
        - Don't pay off any loan in advance in this round.
        - This page should never show negative value
6. Production Page:
        - Inventory value should be as per the article "Inventory Estimation"
        - Keep the utilization is 100% , Sell excess capacity if any in each segment
        - Production: Never be on negative here (right side bottom), because if so the CAPSIM shall negate all your changes in this page.
        - Production units (inventory estimated) to be entered should be negated with inventory left overs before entering in the top part (per segment)
7. TQM:
        - In rounds 7: invest 500 in each other parameter
8. Finance: Take long term loan if required (if you have cash reserve, forget it).
        - Don't pay off any loan in advance in this round
        - This page should never show negative value
9. Check the proforma as suggested in "capstone fundamentals" and check projected ROA, ROE, Share Price etc
10. Ensure all parameters are showing positive signs and fine tune your inputs - check if the results are better

########### Good to go - Publish your inputs and become the Winner. Best of Luck.

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