Marketing Capstone – Capsim Exam

Contribution Margin
The percentage of each sales dollar available to fixed cost and hopefully profit
Product
A bundle of attributes
Markets
By market share: Traditional, Low End, High End, Performance, Size
Two Stage Purchase Decision
1. Match product to market
2. Rank best product
Match Product to Market
1. Product must plot within the segment
2. Product must fall within price guidelines
3. Products must fall within quality guidelines
Rank Best Product
Ranked on:
1. Positioning (Size and Performance of Graph)
2. Age
3. Quality (Mean Time Before Failure)
4. Price
Traditional
1. Age
2. Price
3. Positioning
Low End
1. Price
2. Age
3. Positioning
High End
1. Positioning
2. Age
3. Quality
Performance
1. Quality
2. Positioning
3. Price
Size
1. Positioning
2. Age
3. Quality
Four Functional Areas
1. R&D
2. Marketing
3. Production
4. Finance
R&D
1. Set product positioning
2. Set MTBF
3. Drive age
4. Drive breadth of product line
R&D Cycle Time
Affected By:
1. Automation level
2. Number of projects underway
3. Distance moved on graph
New Product Development
1. Takes at least 1 year
2. Development time driven by distance from existing products
3. Requires new production capacity
Marketing
1. Set price
2. Set promotion budget
3. Set sales budget
4. Set sales forecast
5. Set AR/AP
Production
1. Set automation level
2. Buy or sell capacity
3. Schedule production
4. One year lag to add capacity or automate
Finance
1. Acquire capital
a. Issue stock
b. Short term debt
c. Issue long term bonds
2. Set dividend
3. Retire long term bonds
4. Retire stock
5. Emergency loans
The situation Analysis
Provides an overview of the forces at work within the Capstone marketplace
Basic Strategies
1. Overall Cost Leader
2. Cost Leader with Focus (Low tech or product life-cycle)
3. Differentiator
4. Differentiator with focus (high tech or product life-cycle)
Overall Cost Leader
1. They attempt to be the low cost-cost producer in every market
2. They have good profit margins on all sales while keeping prices low
3. More Likely to re-position products than introduce new ones
4. Capacity improvements are unlikely – Overtime more likely
5. Automation used to increase margins
6. Investments financed with debt and/or stock issues
7. Tend to spend less on promotions and sales
8. Focus on market share, profits, and stock price
Cost Leader with Low-Tech Focus
1. Seeks to dominate the price sensitive markets
2. Aim to set prices below all competitors and still be profitable
3. Multiple production lines in the low-tech segments (low and traditional)
4. Invest heavily in automation
5. Spend heavily on advertising to cost sensitive customers
6. Investments finance with debt and/or stock issues
7. Focus on ROS, ROE, and Profits
Cost Leader with Product Life-Cycle Focus
1. Seek to minimize costs through efficiency and expertise
2. Products will be allowed to age and change in appeal from high-tech, to traditional, and eventually low end buyers
3. Minimum presence in “specialty” segments (size & performance)
4. Low R&D spending (Very little re-positioning & new product ever 2-3 years)
5. Invest in automation early in the products life-cycle
6. High spending on promotion and sales
7. Focus on ROE, ROS, and Profits
Differentiator
1. Seek to create maximum awareness and brand equity
2. They want to be well known as makers of high quality/ highly desirable products
3. High R&D spending to keep products fresh
4. Maintain a presence in all market segments
5. Spend heavily on advertising and sales to create maximum awareness and accessibility
6. Prices tend to be higher
7. Focus on Market Share, Profits, and Stock Price
Differentiator With High-Tech Focus
1. Seeks to be known far and wide as the top producer of the best performing state-or-the-art products
2. Multiple product lines in high-tech segments (High, performance, size)
3. Minimum focus in other segments
4. High promotion and sales investments to create maximum awareness and accessibility
5. High R&D expenditures to continually introduce new product lines and keep existing products fresh
6. Unlikely to invest in increased automation or production capacity
7. Focus on ROA, Asset Turnover, and ROE
Differentiator With Product Life-Cycle Focus
1. Seeks to be well-known as a top producer of good performing products in each of the targeted segments
2. Multiple product lines in targeted segments (High, Traditional, Low)
3. Minimum focus in other segments
4. High promotion and sales investments to create maximum awareness and accessibility
5. High R&D expenditures to continually re-position product lines and keep existing products fresh
6. Unlikely to invest in increased automation or production capacity
7. Focus on ROA, Stock Price, and Asset Turnover