Running head: CAPSIM 1

CAPSIM Project

Strategic Management and Policy

Lori Haase

Southern New Hampshire University

Executive Summary

Progress of the company

In the start of the first year, the company entered the low-tech market with the product

named Able. The market share at this time was amongst the second highest in the industry to

almost 16.14%. There was no emergency loan taken in the first year. The return on equity was

15.1% and contribution margin was on the lowest side of 18.7% in the first year. We did not do

any investment in the research and development until the fourth year which was a major mistake.

Even when the investment was done, the production capacity was restricted because of the

limited financial capability and we did not raise funds through emergency loan or long-term debt

until then. This turned out to be a disastrous situation for the company because gradually the

losses increased and as there was no new product in the portfolio, the sales ceased due to which

we were unable to sell the old inventory that continued to depreciate at a massive rate.

When we reached the 6th year, the market share fell to a massive 7.88% with a huge loss

on sales to -20% and the lowest contribution margin in the industry of 11.8%. The competitors

were in profit, whereas, we were reaping huge financial loss. There were situations when it was

heart troubling to see the decline in the financial situation; however, we continued to hope to

bring changes in the operations in order to reduce the declining financial trend. In order to handle

this financial situation the emergency loan was taken in the fifth year that increased the debt

issue and did not massively help to restructure the company as we were unable to phase out the

old inventory out of the portfolio and bring in the new product in the market to increase the sales.
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Current Situation

Strengths

The strength of the company was that despite the turmoil situation, we remained focused

and continued to plan strategically despite the fact that we could do well. The first two years

were great for the company as we were reaping profits, however, slowly we witnessed financial

downturn.

Weakness:

Currently, there are many issues and weaknesses with the product. First, it is the lowest

performing product in the market with lowest market share and declined share price. There is

requirement of intense measures to be taken in order to bring investment, reduce the liabilities

and improve the TQM segment without having to increase the price drastically. As the losses

increased, the company witnessed high turnover rate and decline in employee productivity that

became another major issue for the company. The turnover rate was 13.4% in 8th year, which

was the highest in the industry. Whereas, the new employee were not interested to work with the

company as we could only recruit 6 new employees in the last year.

Opportunities:

Even though we could not perform well, but there are many business opportunities

available for the company. The product Able has reached its saturation point and the inventory is

still available so we need to sell out the left over inventory in order to free up the capital and

launch new products. There is an opportunity for continuous product innovation and as more

products are added in portfolio, it will decrease the product cost as the investment will increase

in Total Quality Management sector.

Threats:

The current market situation is an ultimate threat for the company because the

competition is performing well and we are not doing that good as compared to the competitors.

We have witnessed decline in market share, stock price, and high turnover rate. The main reason

is massive losses and the change in market trends meanwhile we have the old inventory at hand.

Future of the Company

As the financial turnaround occurs, the future of the company will be positive. We intend

to go global and expand the product portfolio meanwhile launching new products. The maximum

production capacity will be maintained in order to increase productivity, reduce costs, and

operate at full scale with economic returns. There will be more focus on the corporate social

responsibility and paying back to the investors in form of dividend which is not possible as of

how due to decline in the share value and loss in income per share. The plan is to stop the
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manufacturing process of Able and introduce more products that are advanced and of better

technology in order to serve the customers well.

We will be allocating more funds in the training and Total Quality Management. The

main aim is to increase the market share and profitability in the next 5 years and go ahead of the

competition. For this, it is important to take some strict measures and quick decisions that might

turn out to be tough for the company in the short-run but will have a strong value to build a

portfolio in the long-term.

Ethical, Legal, and Social Challenges

One of the major challenges that Andrew had to encounter in this simulation is the

development of sustainable business organization that primarily not only focused on the financial

perspective but social responsibility and social challenges. It is important that an organization

must consider all the stakeholders involved that are part of the company. However, in this

situation, most of the time was spend focusing on bring improvement in the financials that we

could not focus on many other aspects of the business operations. I believe that a company is

tested more with decline in the financial stability because the ethical standards are at stake. This

is the situation when the top leadership indulges in fraudulent activities in order to cover up the
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losses. We however, insured that no such activity should occur during financial turbulent

situation and all ethical code of conduct should be implemented.

Due to the financial issues, there was not much focus on the corporate social

responsibility, which is integral facet of every organization. The implementation of corporate

social responsibility is important so that organizations understand their social presence and

values. It is important that the same should be returned to the society so that the customer values

the company presence and good will is maintained. An organization that follows ethical code of

conduct and social responsibility is positively viewed by the customers and encourage the

purchase decision that positively affect the sales.

Global Considerations

As it is understood that Andrew did not perform well, so the financial position is not strong

enough to expand into the international market. However, with some recommended changes, the

overall loss did decline which means that company has the capacity to do well with some major

changes. Despite the fact, that global expansion would provide many opportunities to the

company with increased market share, however, there are many internal instabilities that the

company is facing currently which needs to be resolved first before considering global

expansion. We need to perform well in both the low-tech and high-tech business segments at a

competitive pricing. As the contribution margin declined over the years, it is important that

contribution margin should increase, with decline in the operational costs in order to increase the

profitability. This means that sale will increase resulting in local expansion and market share.

Currently at the end of 8th year the return on sales was -51.6% which is the really a difficult
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situation to handle and the market share declined to 2.77% which means there is no way that

Andrew can currently consider global expansion.

It is important that a strong financial position will make space for Andrew to bring

improvement in the local market and then consider global expansion strategy. As Andrew is in

the position, to expand, this option will be considered in order to bring improvement in the

market share and penetrate into new markets. The penetration into new markets would mean the

launch of more products that would help to expand the product portfolio and likewise increase

the return on sales. One important point to consider is that global expansion would result in

increase expansionary costs, which means that company would have to design the means to

either go for joint venture or franchising option to expand in international market.

Capstone 2: Professional Reflection

When I started CAPSIM, I was not familiar with how this simulation would work. I did

not know about various functions and how processes operated. The main reason being, I had

never completed a similar simulation before. The main issue occurred that rather than learning

about how this simulation operated and what changes would reflect how upon the overall result, I
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began the first year of the simulation. This was a wrong decision from my end because the

insufficient expertise and knowledge about the simulation resulted in weak decision-making due

to which the company began to make losses from Year 2.

Until now, I was not very sure of what was the main reason behind the operational

decline and why the losses had began to occur. Until now, I did not introduce any new product

and there was no new investment. Infact, I believe that I made some minor changes in the R&D

of the Able product and not much changes anywhere. I introduced a new product in Round 4,

which was non-cash generating product and it resulted in an overall loss of the previous product

which declined the product performance. I had to take out the emergency loan, which increased

my short-term debt. After this, the company was unable to recover from the losses, which

became heavy in year 6. However, I made some changes in the long-term debt situation,

increased the marketing and research and development expenditures, and decreased by capacity,

which resulted in almost 50% decline in my overall loss towards the end of the 8th year. No

matter, the company made losses because of the lack of expertise but it does happen in the real

world. This was certainly an excellent learning experience overall because it help me to analyze

the company business operations from many different perspectives and to find way to problems

so that declining impact could be reduced.

The loss that the company incurred was one of the major challenge for me throughout the

eight years which I was unable to overcome, but yes, some operational changes did result in

decline in the hefty loss in the last year, though I was unable to properly invest in a new product.

I did time to time analyze how my competitors were doing and I believe they all did great except

me. Later on in the game I realized that I should have used the Youtube tutorials that would have

helped me a lot to understand how it all worked in order to play a better game. As the course is
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near to end, I believe that I will go through a proper analysis of the CAPSIM so that I can do

well in the final CAPSIM exam. I will try to give my best to each stage so that I bring the result

to my advantage and perform well in the final exam.

References

Capstone rounds,

file:///C:/Users/kk/Downloads/CourierF113529_019R8TAK0CA.PDF

Capsim. Strategies for Ethical Reasoning.pdf. Retrieved December 15, 2019, from

https://ww3.capsim.com/modules/downloads/ethics/pdf/Strategies_for_Ethical_Reasoning.pdf