M A R K E T I N G

M A N A G E M E N T

Course OverviewThe Capstone Simulation Structure & Assignments Expectations & Grading

University of Alaska-Anchorage College of Business & Public Policy

Marketing Management-Semester 1 * 2008

M A R K E T I N G

M A N A G E M E N T

Professor Ed Forrest

• Telephone: – (O)786-4161 – (H) 694-4674

• Email: – EdwardF@cbpp.uaa.alaska.edu

• W3site: http://www.cbpp.uaa.alaska.edu/afef/

M A R K E T I N G

M A N A G E M E N T

After Graduation?

M A R K E T I N G

M A N A G E M E N T

What JOB?

M A R K E T I N G

M A N A G E M E N T

BA460

Gerbil Studies

Philosophy

Research

History

A

cB

A

A

Do Poorly in this course and ….

M A R K E T I N G

M A N A G E M E N T

“Yeah- she’s the one who got a C

in BA460”

M A R K E T I N G

M A N A G E M E N T

To date -your “study” of marketing has been piece-meal and in isolation!

M A R K E T I N G

M A N A G E M E N T

OVERARCHING COURSE OBJECTIVE

To “call-upon,” integrate & apply all the marketing,

finance & business

knowledge you have accrued to

date!

To “call-upon,” integrate & apply all the marketing,

finance & business

knowledge you have accrued to

date!

M A R K E T I N G

M A N A G E M E N T

Course Format

M A R K E T I N G

M A N A G E M E N T

Lecture-LearningLecture-Learning

‘Find-FactsStore FactsSpit facts

‘Find-FactsStore FactsSpit facts

Superficial short-term

knowledge

Superficial short-term

knowledge

M A R K E T I N G

M A N A G E M E N T

Ultimately- Real Learning

Occurs

Not from parroting information

gleaned from books & lectures!

….But from the consequences of your own actions

M A R K E T I N G

M A N A G E M E N T

M A R K E T I N G

M A N A G E M E N T

Course Format

CapstoneBusiness

Simulation

CapstoneBusiness

Simulation

M A R K E T I N G

M A N A G E M E N T

THE CAPSTONE SIMULATION

• Adopted by major Fortune 500 companies - General Motors, General Electric, Honeywell, Dell, John Deere, Citibank, Microsoft, Alcoa, BP, Allstate, Samsung, Goldman Sachs…

• Used by 100’s of colleges around the world

• w/ ~50,000 students/semester

Most widely used Business – Simulation Program in the World

M A R K E T I N G

M A N A G E M E N TAnd How Have

We Fared in this World-

Wide Competition

??

M A R K E T I N G

M A N A G E M E N T

 2001 Top Ten Teams, World-Wide, for Round 8

• Top Ten Teams, World-Wide, for Round 8 by success measurement There are currently 940 active teams that have played Round 8. For a team to make this list: Cumulative Profits above 0 Overall Market Share (in dollars) greater then 5.0% Asset Turnover less then 8.0 Profit for Round 8            Round 8 - Mean - $ 25,324,003

• Top Ten Active Teams   Professor School/Course Simid Team Value

• 1 Dr. Minu Afza College of Business - Bloomsburg University93 481 Business Policy & Strategy CAP1742 Digby $ 238,235,245 2 Mr. Bill Gardner Penn State University -Fayette CampusContemporary Business Seminar CAP1513 Andrews $ 193,853,427 3 Dawn DeTienne University of Colorado at BoulderSenior Seminar CAP1656 Andrews $ 184,258,599 4 Prof. Howard Feldman University of PortlandManagerial Decisions and Policy-Undergrad B CAP1787 Erie $ 181,422,390

5 Dr. Ed Forrest University of AlaskaMarketing Management CAP1611 Baldwin $ 163,281,864 6 Dr. Eric Wiseman University of Colorado at BoulderBusiness Senior Seminar CAP1818 Chester $ 157,930,382 7 Dr. Murrow Drury CollegeStrategy and Policy Formulation CAP1838 Erie $ 149,235,238 8 Dr. Pettus Millikin UniversityBusiness Policy CAP1748 Baldwin $ 147,967,873 9 Doug Mayer Hartwick CollegeManagement VII-secA CAP1811 Digby $ 137,339,216 10 Dr. Bruce A. Schooling Point Loma Nazarene UniversityStrategic Management CAP1794 Digby $ 121,289

5th

M A R K E T I N G

M A N A G E M E N T

 2003 Top Ten Teams, World-Wide, for Round 8

• For a team to make this list: Cumulative Profits above 0 Overall Market Share (in dollars) greater than 6% Asset Turnover less then 8.0 Your class was ranked: with 711 Capstone ® teams completing round 8 by Apr 12, 2003. teams per game of 6 Category: All

• URL: http://www.capsim.com/prof/viewtopten.cfm?round=8&simid=C4806&version=KDate/Time: 04/12/2003 10:07:35eNote:

• Text:Cumulative Profit for Round 8 - Mean - $ 125,355,000 Top Ten Active Teams   Professor School/Course Simid Team Value 1 natalie marsh Strayer UniversityBusiness Policy & Strategic Planning C4779 Baldwin $ 459,411,986 2 John Hall University of FloridaGlobal Strategic Management I2MBA 2002 C4923 Baldwin $ 386,472,583 3 natalie marsh Strayer UniversitySenior Seminar - Business Administration C4778 Erie $ 382,697,422 4 Peter Stanwick Auburn UniversityStrategic Management C5095 Chester $ 353,185,127 5 John Pearce Villanova UniversityPolicy Administration C5033 Ferris $ 348,535,130 6 Gavin Fox Georgia Southern UniversityBUSINESS SIMULATION C5041 Digby $ 343,761,703 7 Shirley Schooley Birmingham-Southern CollegeStrategic Management Senior Project Course Sec B C5356 Digby $ 341,865,002 8 natalie marsh Strayer UniversitySenior Seminar - Business Administration C4778 Ferris $ 339,568,171

9 Edward Forrest University of AlaskaMarketing Management C4806 Chester $ 333,620,198 10 Donald Kreps Kutztown Universitymba capstone C4797 Digby $ 327,188,363

9th

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M A N A G E M E N T

2005 - #12005 - #1

M A R K E T I N G

M A N A G E M E N T

2006-

5th

M A R K E T I N G

M A N A G E M E N T

and 8th and 8th

M A R K E T I N G

M A N A G E M E N T Last Year 3rd Last Year 3rd

M A R K E T I N G

M A N A G E M E N T

SHAKE UP IN SENSOR INDUSTRY

Management Teams Fired

“After poor results, lackluster sales and angry customer reports……….. New dynamic leadership teams needed to take industry into the future!”

M A R K E T I N G

M A N A G E M E N T

YOUR HIRED!

M A R K E T I N G

M A N A G E M E N T

You Da’

Boss of

~ $100m Corporation

M A R K E T I N G

M A N A G E M E N T

Your Product Line:

SENSORS:SENSORS:

SENSOR INDUSTRY ANALYST PROJECT ONGOING GROWTHSees the next 8 years as consistent growth. All 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 alone will be growing at a whopping 16%.”

I hope those companies out there are ready for that kind of expansion!”

0

10000

20000

30000

40000

50000

60000

70000

Year1

Year2

Year3

Year4

Year5

Year6

Year7

Year8

M A R K E T I N G

M A N A G E M E N T

YOUR JOB

• Take on key management positions w/in your corporation

• Make the myriad of intertwined decisions necessary to create, produce & successfully market your products…

• Take on key management positions w/in your corporation

• Make the myriad of intertwined decisions necessary to create, produce & successfully market your products…

M A R K E T I N G

M A N A G E M E N T

You will engage in:

• Marketplace analysis – incl: situation analysis, competitor

analysis, SWOT analysis & performance assessment.

• Strategic planning – develop your corp. mission, vision, core

competencies & competitive advantage • Cross functional integration – of Marketing w/ R&D, Production, HR &

Finance• Tactical execution of your decisions - measured against competitors– in class &

worldwide…

• Marketplace analysis – incl: situation analysis, competitor

analysis, SWOT analysis & performance assessment.

• Strategic planning – develop your corp. mission, vision, core

competencies & competitive advantage • Cross functional integration – of Marketing w/ R&D, Production, HR &

Finance• Tactical execution of your decisions - measured against competitors– in class &

worldwide…

M A R K E T I N G

M A N A G E M E N T

The Big Picture

•CCompanyompany

•CConsumersonsumers

•CCompetitorsompetitors

•CConditionsonditions• PESTPEST

Growth &Growth & Competitive Competitive StrategiesStrategies

Finance

HR

Production

R&D

Marketing

Functional Functional IntegrationIntegration

Profits Mrkt Share ROA ROS ROE Asset T/O Stock Mrkt Cap

Situation/SWOT Situation/SWOT AnalysisAnalysis

Strategic Strategic PlanningPlanning

Functional Functional IntegrationIntegration

Performance Performance AssessmentAssessment

M A R K E T I N G

M A N A G E M E N T

You are completely responsible for:

Planning, implementing & controlling your marketing

strategy

TargetTarget& &

PositionPosition

TargetTarget& &

PositionPosition

ProductProduct PlacePlace

PromotionPromotionPricePrice

M A R K E T I N G

M A N A G E M E N T

The Key Lesson for Marketing Majors

In order to successfully execute your

marketing decisions/strategy…

you must be in alignment w/ every decision made in

every other contributing

component of the corp./organization

M A R K E T I N G

M A N A G E M E N T

Must Coordinate Decisions w/ all Functional Areas

Marketing

Production

Finance

R&D

HR

R&D-re: Product

Development Quality Positioning

Marketing Must Coordinate w/: Marketin

g

Production

Finance

R&D

HR

Production- re: Market segment

growth- Buy or Buy or sell capacitysell capacity

Sales forecasts-Schedule Schedule productionproduction

Marketing Must Coordinate w/: Marketin

g

Production

Finance

R&D

HR

HR- re: Levels of

personnel training & support

Marketing Must Coordinate w/: Marketin

g

Production

Finance

R&D

HR

Finance-re: Overall

projections of sales, margins & profits

Marketing Must Coordinate w/: Marketin

g

Production

Finance

R&D

HR

Marketing Manager must become one- w/ Relationships betw

Price & demand Price & margin Promotion budget &

awareness Sales budget &

accessibility A/R policy & demand

Price & demand Price & margin Promotion budget &

awareness Sales budget &

accessibility A/R policy & demand

MARKETING MANAGERSSIMULATION

SPREADSHEET

Build customer awareness through promotion

Build customer awareness through promotion

Establish a sales force and distribution channels

Establish a sales force and distribution channels

Set price of your products in the marketplace

Set price of your products in the marketplace

Set Credit Policies AR/AP Set Credit Policies AR/AP

Set the sales forecast for our products

Set the sales forecast for our products

•Marketing also selects

media vehicles & message

weights

• AND determines

composition of sales/distributi

on staff ..and allocation of

their efforts by segment &

Brand

R&D MANAGERS

SIMULATION SPREADSHEET

Establish product positioning to meet customer demand Establish product positioning to meet customer demand

Build quality & reliability (MTBF) into products

Build quality & reliability (MTBF) into products

Ensure age of product meets customer demands Ensure age of product meets customer demands

Create new products Create new products

PRODUCTION MANAGERSSIMULATION

SPREADSHEET

Establish your workforce complement Establish your workforce complement

Buy or sell capacity of product lines Buy or sell capacity of product lines

Purchase machinery to automate our facilities Purchase machinery to automate our facilities

Schedule production for each line Schedule production for each line

M A R K E T I N G

M A N A G E M E N T

Human Resource Managers Responsible for:Human Resource Managers Responsible for:

• Recruitment, Recruitment, Hiring, Training & Hiring, Training & Firing of all laborFiring of all labor

• 2 groups:2 groups:– AssemblersAssemblers– TechniciansTechnicians

WagesWagesBenefitsBenefits

SIMULATION SPREADSHEET

M A R K E T I N G

M A N A G E M E N TAcquire CapitalAcquire Capital– Issue StockIssue Stock–Short Term DebtShort Term Debt– Issue Long Term BondsIssue Long Term Bonds

Set DividendSet DividendRetire Long Term BondsRetire Long Term BondsRetire StockRetire Stock

• Responsible for Emergency Responsible for Emergency LoansLoans Big AL

The Loan Shark

Finance Managers Responsibilities:Finance Managers Responsibilities:

M A R K E T I N G

M A N A G E M E N T

FINANCIAL MANAGERS

SIMULATION SPREADSHEET

BA460 Marketing Management Spring 2008

1st Reorganize Company:

& Re-allocate responsibilities:

Marketing Production R&D Finance HR

M A R K E T I N G

M A N A G E M E N T

3 Co-CEO’s

M A R K E T I N G

M A N A G E M E N T

Incorporate- register w/ your assigned Capstone:

Sim ID#’s:

Incorporate- register w/ your assigned Capstone:

Sim ID#’s:

C23256 or

C23257

M A R K E T I N G

M A N A G E M E N T

Begin Business Plan R&DBegin Business Plan R&D

Capstone-Developing a Business Plan SBA-Writing a Business Plan Business Plan Software, Samples, and Strategy Center for Business Planning

M A R K E T I N G

M A N A G E M E N T

(I) Mission & Vision Statement

(II) Situation Analysis Market Structure:

•Consumer Segments & Product Attribute Preferences •Consumer Pricing & Positioning Expectations•Consumer Demand

Company Situation•Financials•Production•Marketing

(III) SWOT Analysis (IV) Strategic Planning Growth & Competitive Strategies Functional Strategy – Objectives & Tactics

• Marketing • Production • Financial

(V) Tactical Decisions FY2009 ……….

Situation & SWOT Analysis

Consumer

Company

Competitors

Conditions

Initial Situation

Step #

1

Situation AnalysisTeam Member Guide- Chapter 4Help > Managers Guide > Situation Analysis

Situation Analysis Goals:

1.Discern marketplace dynamics

2.Calculate base info necessary for strategy development

3.Become familiar w/ The Capstone Courier

1.Discern marketplace dynamics

2.Calculate base info necessary for strategy development

3.Become familiar w/ The Capstone Courier

To Do List:

Download starting conditions …

Open Capstone.xls -- print Capstone Courier & Annual Report.

Begin your Analysis of the Situation

Download starting conditions …

Open Capstone.xls -- print Capstone Courier & Annual Report.

Begin your Analysis of the Situation

TargetTargetMarketMarket

Product Place

PromotionPrice

TargetTargetMarketMarket

Product Place

PromotionPrice

TargetTargetMarketMarket

Product Place

PromotionPrice

Situation AnalysisSituation Analysis Strategic Strategic PlanningPlanning

•CCompanyompany

•CConsumersonsumers

•CCompetitorsompetitors

•CConditionsonditions• PESTPEST

The Marketing Mix:The Marketing Mix:

Marketing StrategyMarketing StrategyP’sP’s

Growth & Growth & Competitive Competitive StrategiesStrategies

Company

Competitors

•Economic Analysis (margins,, profitability, Fin. Structure)

•Company, goals, resources- production, HR…)

•Economic Analysis (margins,, profitability, Fin. Structure)

•Company, goals, resources- production, HR…)

Customers

•Market Potential (size, growth rate)

•Customer Behavior (needs & wants/ segmentation, price sensitivity)

•Market Potential (size, growth rate)

•Customer Behavior (needs & wants/ segmentation, price sensitivity)

Conditions•Political•Economic•Socio-cultural•Technological

•Political•Economic•Socio-cultural•Technological

•Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes)

•Competitor Response Profiles (capabilities, current and future actions)

•Industry Structure Analysis (entry/exit barriers, buyers, sellers, substitutes)

•Competitor Response Profiles (capabilities, current and future actions)

M A N A G E M E N T

M A R K E T I N G SWOT Analysis Identifies:

©South-Western College Publishing

SS

WW

OO

TT

Things the company does well.Things the company does well.

Things the company does not do well.Things the company does not do well.

Conditions in the external environment that favor strengths.Conditions in the external environment that favor strengths.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness.

InternalInternal

ExternalExternal

Specifically…determine

Strengths & weaknesses w/in & across all functional areas; Profile of current product portfolio…

How market is segmented; relevant factors

that influence consumer demand & purchasing decisions

Your competitors relative market positions..

Macro-E considerations especially technological trends …

Consumer

Company

Competitors

Conditions

Portfolio Analysis

Which Brands should receive more/ less/ no investment-Based on:

Product Position/ Potential

Profitability/ Margins

Market-Growth/Market-Share Matrix

Which Brands should receive more/ less/ no investment-Based on:

Product Position/ Potential

Profitability/ Margins

Market-Growth/Market-Share Matrix

Boston Consulting Group’s Growth-Share Matrix

HighHigh

Relative Relative Market ShareMarket Share

HighHigh LowLow

LowLow

DOGSDOGSCASH COWSCASH COWS

Pro

du

ct-M

arke

t P

rod

uct

-Mar

ket

Gro

wth

(%

)G

row

th (

%)

STARSTARSS PROBLEMPROBLEMCHILDCHILD

10x 4x 2x 1.5x 1x .5x .2x .1x

Capstone Exercises

Key Questions AnsweredKey Questions Answered

Perceptual Map

How technology will reshape customer expectations over next eight years

Demand & Capacity Analysis

How demand will increase & impact your investments in Capacity

Consumer Report

How customers perceive you …and your competitors

Situation Analysis Guides:•Margins•Working Capital •Financial Structure

•Wealth Creation •Productivity •Customer Satisfaction

Situation Analysis - Resources

Capstone

Exercises

Key Questions Answered

Perceptual Map

How technology will reshape customer expectations over next eight years

Demand & Capacity Analysis

How demand will increase & impact your investments in Capacity

Consumer Report

How customers perceive you …and your competitors

55

4422

33

11

PerformancePerformance

PERCEPTUAL MAP Drift

Demonstration

Cheaper too-$.50 drop in price/year

PERCEPTUAL MAP

Plot the drift of each segment circle as simulation proceeds thru 8 rounds

("Fine Cut" circles have a radius of 2.5 units,

"Rough Cut" circles have a radius of 4 units)

Capstone

Exercises

Key Questions Answered

Perceptual Map

How technology will reshape customer expectations over next eight years

Demand & Capacity Analysis

How demand will increase & impact your investments in Capacity

Consumer Report

How customers perceive you …and your competitors

Key Demand Consideration: Overall market

growing @ ~ 14%/yr

“Average” company should/could double - sales in 6 years

Key Capacity Consideratio

n:

Key Capacity Consideratio

n:

This analysis examines growth of customer demand as simulation proceeds thru 8 rounds.

For this exercise you need the Market

Segment Analysis pages (pages 5 - 9) of The Capstone Courier- Round 0

W/in Segment Statistics-Use the Industry Unit Demand - top left corner

DEMAND ANALYSIS

Demand Analysis

73877387

7387 X 1.092=80677387 X 1.092=8067

Page 30 TMG

Traditional StatisticsTotal Industry Unit Demand 7,387Actual Industry Unit Sales 7,387Segment % of Total Industry 32.4%Growth Rate 9.2%

Page 5 capstone Courier

CAPACITY ANALYSIS

This exercise requires the Production Analysis (page 4) of The Capstone Courier.

The analysis asks: What Would it Cost to Double

Capacity; What Would it Cost to Maximize

Automation?

CAPACITY ANALYSIS

To successfully manage your company--need to know the cost of increasing the number-of- units you can manufacture.

Need to decide how best to increase output:

1. Increase manufacturing capacity; or 2. Increase automation (which allows

you to profitably run a line on overtime).

CAPACITY ANALYSIS

#units * ($4 *(10 - Current Auto-level)= Cost

CostDC= (# unitsDC) * ($6 Floor + $4 autopt*Auto-level)

(X 6) (X 6) 4 $39.6m $43.2m

INTERNAL

EXTERNAL

S

T

OW

• What are the S & W’s w/ respect to your company’s production lines

capacities & efficiencies

•What are the O & T’s w/ respect the nature, direction and magnitude of consumer demand

Capstone

Exercises

Key Questions Answered

Perceptual Map

How technology will reshape customer expectations over next eight years

Demand & Capacity Analysis

How demand will increase & impact your investments in Capacity

Consumer Report

How customers perceive you …and your competitors

Your Consumers

Consumer Buying CriteriaDeterminant Attributes

Strive to meet customers preferences on top two criteria

Don’t spend limited resources (time & $) meeting lesser concerns

KEY POINT

•Traditional customers seek proven products using current technology

•Traditional customers seek proven products using current technology

•Low End customers seek old, simple & cheap tech.•Low End customers seek old, simple & cheap tech.

•High End customers seek cutting-edge sensors in both size & performance

•High End customers seek cutting-edge sensors in both size & performance

•Performance customers seek advanced tech., w/ high reliability

& performance

•Size customers seek advanced sensors that focus on small size

INTERNAL

EXTERNAL

S

T

OW

Evaluation Scheme:

Attribute Poor Fair Good

Price Top1/3 Mid1/3 Bttm1/3

Reliability Bttm1/3 Mid1/3 Top1/3

Age +1yr .6-1yr ~.5yrs

Position +1.5 units

.6-1.5 w/in .5

Awareness

<50% 50-80% 80%+

Access <50% 50-80% 80%+

Overall How Rate On Top 2 Attributes

Customer Satisfaction

INTERNAL

EXTERNAL

S

T

OW

From results… can determine Strengths & Weaknesses of current marketing mix:

Product -Product - Positioning; age & quality (reliability)--

Current levels of support w/ respect to: • PromotionPromotion• DistributionDistribution (accessibility)• PricingPricing - - policy/competitiveness

Compare your results w/ the December Survey…December Survey…

Wherein: <25 = Poor 26-50= Fair 50+ = Good

Evaluation results Classifications:

Finally-evaluate your Current Financial Structure and levels of success

Key MeasuresKey Measures

Cumulative Profits Market Share ROA ROS ROE Asset Turnover Stock Price Market Capitalization

M A R K E T I N G

M A N A G E M E N TQuestions?