FOUNDATION BUSINESS SIMULATION

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					         SENSOR
         INDUSTRY
         OVERVIEW




FOUNDATION BUSINESS
SIMULATION
    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
Applications
       The Marketplace

 Large                                                      • Customers (OEMs) need
                                                            sensors for their products
                                                            • Initially one segment, now
                                                            breaking into two
                                                            • Very different customer
Size            Low Tech                                    demands between the two
                                                            segments
                                                            • Diversification in the use
                                                            and utility of the sensors

                                         High Tech
 Small

         Slow                                        Fast
                           Performance
The Marketplace
                  • In our industry we track the
                  changing customer demand on
                  a perceptual map
                      • Perceptual maps are used
 Low                    to plot customer
 Tech
                        preferences for two
        High
        Tech
                        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
Each Segment has an Ideal Spot

    Large
                                            Perceptual Map

                                               Ideal Spot is that
   Size            Low                         point where, all
                   Tech                        other things being
                                               equal, customer
                                High Tech      demand is highest


    Small

            Slow                              Fast
                          Performance
 Low Tech Customers
                                             You’re
                                           not giving
                                           me 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.”
  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.”
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.

                           8000
“I see the entire market   7000
growing at around 14%
                           6000
or 15% per year. The
                           5000
High Tech market will be
growing at a whopping      4000
20%.”                      3000
                           2000
I hope those companies     1000
out there are ready for      0
that kind of expansion!”          Year 1   Year 2     Year 3        Year 4   Year 5

                                                Low Tech       High Tech
                                   COMPANY
                                   OVERVIEW
  The Competition


ANDREWS     6 Companies                  DIGBY

            $40 Million in Sales
BALDWIN                                  ERIE
            1 Product Line
CHESTER                                  FERRIS
            Closed Marketplace
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!
                   WELCOME TO
                   YOUR NEW
Functional Areas   COMPANY!
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      “Our product
     product meets customer               straddles both
     demands                              market segments.

                                          It isn’t a great
    Create new products to meet          low tech product,
     the changing marketplace
                                          or a great high
                                          tech one.”
                         Marketing

                             Set the price of our products in the
                              marketplace

                             Build customer awareness through promotion

“Our product                 Establish a sales force and distribution
isn’t priced optimally        channels
for either market.
                             Set the sales forecast for our products
And many of our
customers don’t
even know our                Set Credit Policies AR/AP
product exists.”
                 Production

                      Purchase machinery to automate our
                       facilities

                      Buy or sell capacity of product lines
“We are paying
too much for
labor costs.          Schedule production for each line

Very soon we
will run out
                      Manage the majority of the companies
of capacity to         fixed assets
meet demand.”
                      Establish workforce compliment
Finance
   Acquire capital to fund capital
    expansions
     Issue Stock
     Short Term Debt
     Issue Long Term Bonds
                                         “We have poor
   Issue dividend to our shareholders   cash flow and
                                         substandard
                                         financial ratios.
   Balance our debt portfolio
                                         We have no
   Manage our Proforma                  financial policy
                                         statement.”
Proformas

A great management tool driven by forecasts
and projections.
 Allows “What if” Scenarios by the company.
   Balance Sheet
   Profit & Loss
   Cash Flow
   Financial Ratios
Scoring the Simulation
1.   Analyst Report
2.   Round Analysis
3.   Balanced Scorecard
        Balanced scorecards allow companies
         to gauge their performance by
         assessing measures in four categories:
         1.   Financial– includes profitability,
              leverage and stock price;
         2.   Internal Business Process– ranks,
              among other measures, contribution
              margin, plant utilization and days of
              working capital;
         3.   Customer– examines the company's
              product line, including how well it
              satisfies buying criteria and
              awareness/ accessibility levels;
         4.   Learning and Growth– evaluates
              employee productivity.
Good Luck and Enjoy!

				
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posted:10/4/2012
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