USER GUIDE

CapsimGlobal | User Guide | 1

Introduction
CapsimGlobal is Capsim’s newest international business strategy
simulation, focusing on introducing you to the numerous challenges that
come along with running a company in a global setting. Your company
creates and sells genetic testing devices to the medical industry. Your
Table of Contents devices can determine whether a particular gene, or combination of
genes, is present in the patient. The devices can even tell a physician
Introduction 1
whether the gene is switched on or off. They are useful in diagnosing
Training 2 diseases like cystic fibrosis, Crohn’s disease, and certain types of cancer.
Market Segments 2 The devices also determine risk profiles that help people avoid the
development of a disease towards which they might be predisposed.
Region Outlines 3
Business Environment 3
What is my goal? 4 CG
AT
Strategy 4
23

How do I make decisions? 9

R&D 9
The companies were created when the government split up one company
Marketing 13
which previously held a monopoly on the genetic testing device market
Production 17 into identical competitors. Due to the monopoly, some issues in the
Finance 20 company were left unresolved. Now that the market has opened and
competition will rise, your company must focus on four key areas of a
business. At the start of the simulation, each company in your industry
Scoring/Grading 22
will begin from the exact same financial position. You can view your
Balanced Scorecard 22 current status through the report, which is hosted under Reports on your
Debrief Tool 22 dashboard and in the simulation interface. In each round, which lasts
one year, you will need to make decisions in four areas: Research and
Where can I see my results? 22
Development (R&D), Marketing, Production, and Finance. In some cases,
you may have additional modules turned on. For example, HR (Human
Glossary/Formulas 23 Resources) and TQM (Total Quality Management).
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Research & Development (R&D) Market Segments
Your R&D Department designs your product line(s). The department The genetic diagnostic test market has two clear segments: Low Tech and
invents new products and revise existing ones to appeal to your High Tech.
customers’ changing needs. Low Tech Segment – Buyers are looking for a product that is inexpensive
but still fulfills their primary needs.
Marketing
Your Marketing Department prices and promotes your products. It High Tech Segment – Buyers in this segment are looking for the most
interacts with your customers via its sales force and distribution system. up-to-date, technologically advanced products and don’t mind paying a
premium to get what they need.
Marketing is also responsible for setting sales forecasts.

There are, however, other criteria on which customers also base their
Production
purchase decision. To see detailed buying criteria for each segment, you
Your Production Department determines how many units will be
will need to look at the updated Industry Report, published at the end of
manufactured during the year. It is also responsible for buying and
each simulation round.
selling production lines.
Market segments on the Perceptual Map in Round 1 vs Round 8
Finance
Your Finance Department makes sure your company has the financial
resources it needs to run through the year. The department can borrow
money or pay it back through a few different options.

At the end of each round, the simulation will process, and you will be
able to see how your company performed against the competition
through the Report which gets updated each time a round has been
processed.

Training
Throughout our training module, you will be introduced to various
consultants. Each consultant will walk you through the four decision
areas. This allows you pose various questions to the consultants in
order to better understand the company that you are taking over.
In addition to asking the consultants questions, you will be able to
begin practicing making decisions in the simulation. After completing
the training module, you can refer to each exercise through your
dashboard.
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Regional Outlines
Within the simulation, there are three geographical regions:
USA, Germany, and China. For the period of the simulation, the following Low Tech Segment Demand
assumptions about the cultural and economic landscape in each country
USA Germany China
apply:
Growth Rate
USA | Currency - $ 6% 20% 45%
This is where your company is headquartered and Round Demand
managed. In CapsimGlobal, this country represents a 0 5,838 911 823
mature economy with a stable political environment. As 1 6,188 1,093 1,193
the genetic diagnostic testing industry is well established, the Americas 2 6,560 1,312 1,730
are considered a saturated market moving forward.
3 6,953 1,574 2,509
4 7,370 1,889 3,638
Germany | Currency - €
In CapsimGlobal, Europe represents a highly developed, 5 7,813 2,267 5,275
technologically advanced and relatively high-income 6 8,281 2,720 7,649
economic country. It is experiencing steady economic 7 8,778 3,264 11,091
growth that your company hopes to capitalize on. 8 9,305 3,917 16,082

China | Currency - ¥
This country includes emerging economies, constituting High Tech Segment Demand
relatively low income communities, increasing economic USA Germany China
growth, and significant demand for improved health care. Growth Rate
The country has a zero-tariff policy which makes it an attractive market 13% 35% 32%
moving forward.
Round Demand
0 3,195 747 263
Business Environment
The market for genetic diagnostic test equipment is expanding, but 1 3,610 1,008 347
in each geographical region there are different growth rates for each 2 4,080 1,361 458
market segment. These growth rates are specific to the industry, however, 3 4,610 1,838 605
and may not reflect the regional economy as a whole. Each year, the 4 5,209 2,481 798
two market segments will be demanding an improvement in the current 5 5,887 3,350 1,054
technology of your products. Addressing these demands will be vital to
6 6,652 4,522 1,391
maintaining a competitive edge.
7 7,517 6,105 1,836
Each year, the two market segments will be demanding an improvement 8 8,494 8,241 2,424
in the current technology of your products. Addressing these demands
will be vital to maintaining a competitive edge.
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What is my goal? The three questions you need to answer to determine your
In CapsimGlobal, your company will be evaluated based on the four pillars Strategy:
of the Balanced Scorecard. Your goal in the simulation is to outperform 1. Will your company be Local or Global?
the competition. A successful company will use the tools available to 2. Will your company be Niche or Broad?
analyze the market and implement a dominant strategy. Ideally, you will 3. Will your company be a Cost Leader or a Differentiator?
manage a healthy and profitable company.

The goal of the Balanced Scorecard is not only to ensure that you have Local strategies
a healthy company across all disciplines, but also to facilitate long-term
growth. It’s important to keep in mind that the implementation of a
strategy may take several years as the investments made by the company Local Broad Cost Leader
begin to pay off.

Local Broad Differentiator

Strategy
A business strategy creates a vision and direction for the whole
organization. It is important that all people within a company have clear
Local Niche Cost Leader
goals and are following the direction, or mission of the organization. A
strategy can provide this vision and prevent individuals from losing sight
of their company’s aims. Local Niche Differentiator

Global strategies

Global Broad Cost Leader

Global Broad Differentiator

Global Niche Cost Leader

Global Niche Differentiator

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Local Broad Cost Leader Local Broad Differentiator
To adopt a Local Broad Cost Leader strategy, the company will To adopt a Local Broad Differentiator strategy, the company will
maintain a presence in both segments of the market across only one maintain a presence in both segments of the market across only one
or two regions. Competitive advantage is gained by keeping R&D, or two regions. Competitive advantage is gained by distinguishing
production, shipping, and raw materials costs to a minimum, enabling products with excellent design, high awareness, and easy accessibility.
the company to compete on the basis of price. Prices are below R&D competency is developed to keep designs fresh and exciting.
average. The Plant Automation level is increased to improve margins. Products keep pace with the market, offering improved accuracy and
Any international selling must be done with an eye on margins, first and speed – and sometimes tailored region kits. Prices are above average.
foremost. Capacity is expanded as higher demand is generated.

Vision Statement
Low priced products for the local region: our brands offer solid value. Vision Statement
Our primary stakeholders are bondholders, customers, stockholders, Premium products for the local region: our brands withstand the
and management. test of time. Our primary stakeholders are customers, stockholders,
management, and employees.
REAL WORLD EXAMPLE
The Kroger company was the world’s largest REAL WORLD EXAMPLE
supermarket chain according to revenue in Vera Wang’s mission is to create a lifestyle
2019. Kroger’s mission is to become the United that goes beyond bridal and ready-to-wear
States largest distributor and merchandiser clothing and into publishing, fragrance,
of food, pharmacy, health, and personal care beauty, accessories, and home. Vera Wang
items. Kroger’s fulfillment centers are highly products are positioned at the highest end
automated, helping to minimize costs and of the luxury market all the way down to
allowing Kroger to compete on price. budget retailers. As of August 2021, all Vera
Wang stores are currently located in the
United States.
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Local Niche Cost Leader Local Niche Differentiator
To adopt a Local Niche Cost Leader Strategy, the company will To adopt a Local Niche Differentiation strategy, the company will focus
concentrate primarily on the Low-Tech segment across only one or two on the High-Tech Segment across only one or two regions. Competitive
regions. Competitive advantage is gained by keeping R&D, production, advantage is gained by distinguishing products with an excellent design,
and raw materials costs to a minimum, enabling the company to compete high awareness, easy accessibility, and new products – any of which may
on the basis of price. Prices are below average. Automation levels are be tailored to the local market’s needs. R&D competency is developed to
increased to improve margins. keep designs fresh and exciting. Products will keep pace with the market,
offering improved accuracy and speed. Tailoring products with the local
region kit is considered. Prices are above average. Capacity is expanded
as higher demand is generated.

Vision Statement
Reliable products for low technology customers in the local region:
our brands offer value. Our primary stakeholders are bondholders,
stockholders, customers, and management. Vision Statement
Premium, tailored products for technology-oriented customers in the local
REAL WORLD EXAMPLE region: our brands define the cutting edge. Our primary stakeholders are
Lefty’s mission is to provide the best selection customers, stockholders, management, and employees.
of left-handed products for left-handers. While
roughly only 10% of people are left-handed, REAL WORLD EXAMPLE
Lefty’s has found success by specifically targeting WeatherTech’s mission is to strive to
their products to this niche group of consumers. continually exceed their customer’s
While many larger retailers have discontinued expectations. By earning a reputation for
production of left-handed products, Lefty’s filled providing reliable vehicle accessories that
that void by manufacturing many of their own were built using high-quality materials,
products, cutting costs in the process. As of WeatherTech can price their products at a
August 2021, every Lefty’s physical store is in the premium relative to their competition.
United States.
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Global Broad Cost Leader Global Broad Differentiator
To adopt a Global Broad Cost Leader strategy, the company will To adopt a Global Broad Differentiator strategy, the company will maintain
maintain a presence in both segments of the market across all a presence in both segments of the market across all regions. Competitive
regions. Competitive advantage is gained by keeping R&D costs, advantage is gained by distinguishing products with an excellent design,
production costs, and raw materials costs to a minimum, enabling the high awareness, and easy accessibility. R&D competency is developed
company to compete on the basis of price. Prices are below average. to keep designs fresh and exciting. Products keep pace with the market,
Regional and product branding and sales efforts are below average. offering improved accuracy and speed – and sometimes tailored region
The Plant Automation level is increased to improve margins. kits. Prices are above average. Regional and product branding and sales
efforts are given a larger budget to work with. Capacity is expanded as
higher demand is generated.

Vision Statement
Low priced products for the industry across the globe: our brands
offer solid value. Our primary stakeholders are bondholders, Vision Statement
customers, stockholders, and management. Premium products for the industry across the globe: our brands withstand
the test of time. Our primary stakeholders are customers, stockholders,
REAL WORLD EXAMPLE management, and employees.
IKEA’s mission is to offer a wide range of well-
designed, functional home furnishing products REAL WORLD EXAMPLE
at prices so low that as many people as possible Apple’s mission is to bring the best personal computing
will be able to afford them. IKEA reduces costs products and support to students, educators,
by manufacturing many of their products while designers, scientists, engineers, businesspersons, and
outsourcing some production to China and other consumers in over 140 countries around the world.
Asian countries. As of August 2021, IKEA products Apple’s commitment to product development through
are currently sold in 52 countries around the world. innovation has positioned the company as a premier
provider in their target markets, allowing Apple to price
aggressively.
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Global Niche Cost Leader Global Niche Differentiator
To adopt a Global Niche Cost Leader strategy, the company will To adopt a Global Niche Differentiator strategy, the company will focus
concentrate primarily on the Low-Tech segment across all regions. on the High-Tech Segment across all regions. Competitive advantage is
Competitive advantage is gained by keeping R&D costs, production costs, gained by distinguishing products with excellent design, high awareness,
and raw materials costs to a minimum, enabling the company to compete easy accessibility, and new products – any of which may be tailored
on the basis of price. Prices are below average. Regional and product to the individual local market’s needs. R&D competency is developed
branding and sales efforts are below average. Automation levels are to keep designs fresh and exciting. Products will keep pace with the
increased to improve margins. market, offering improved accuracy and speed. Tailoring products with
specific region kits is considered. Prices are above average. Regional
and product branding and sales efforts are given a larger budget to
work with. Capacity is expanded as higher demand is generated.

Vision Statement
Reliable products for low technology customers across the globe:
our brands offer value. Our primary stakeholders are bondholders, Vision Statement
stockholders, customers, and management. Premium, tailored products for technology-oriented customers across
the globe: our brands define the cutting edge. Our primary stakeholders
REAL WORLD EXAMPLE are customers, stockholders, management, and employees.
Ties.com mission is to provide better service, better
quality, and better value. By working hand-in-hand REAL WORLD EXAMPLE
with their manufacturers to keep costs down and Rolls Royce’s mission is to deliver better power for a changing
by aiming to provide the best shopping experience world. By establishing a standard of exemplary engineering
possible to consumers, Ties.com has carved out a since its introduction in 1906, Rolls Royce has become a
very successful niche for themselves amongst larger global leader in producing aircraft engines, marine propulsion
retailers. systems, and power-generation systems. Rolls Royce’s
reputation for luxury, quality and performance allows them to
price aggressively compared to their competition.
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How do I make decisions?

In CapsimGlobal, you will be responsible for making
company decisions across four primary areas: Research &
Development (R&D), Marketing, Production, and Finance.
If you are working on the simulation as part of a team,
you may choose to divide up your work by department,
product line, or in some other way. No matter how you
divide up the work, it will be important that all members
know how decisions are made so they can better
work together and communicate across departments.
Every decision that you make in the simulation can
impact multiple areas of the business, so it is crucial to
understand each area. Below, you can read about the
most important things to consider when making decisions
in each area.

Research & Development

The R&D department page is where the following
decisions are made:
• Creating new products to meet customer demands
• Managing existing products to keep them relevant in
the marketplace
• Retiring products from the market that no longer fit
your strategic direction
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While making these changes, the following Creating new product designs in R&D is the start of your new product
release, but there are still a few more steps before you can formally launch
areas will need to be considered: your new product. In order to actually produce units of the product for
sale, you need to set a Capacity and Automation level in the Production
1. The Customer Buying Criteria department one year prior to the products release. If you forget to add
The Customer Buying Criteria represents the different product features
Capacity or Automation in that round, you will not be able to sell the
that customers consider when buying a product. Criteria include the
product the following year, because it takes one year for any investments
following: product price, positioning (Speed and Accuracy), perceived
into capacity and/or automation to be implemented.
Age and Service Life of the product.
3. Revision Date
Just as in real life, different segments place different levels of importance
Your revision date represents the day when your product is updated
on each factor. For example, an American customer seeking a High Tech
or released. At this point, all units of inventory are updated to reflect
product places positioning above all other things, however an American
the latest version of the product. The revision date is based upon three
customer seeking a Low Tech product considers the price and age of the
factors: how highly automated the production line is, how drastic of a
product above positioning.
change is being made to the product, and other product updates. It will
take longer for your company to make updates to a product line if they
For a detailed look into the Customer Buying Criteria, see the Customer
are drastic and/or if the automation rating is high. If you are making
data tabs on the R&D and Marketing pages, or the segment analysis pages
updates to multiple products, this can also impact your revision date as
in the report.
your R&D staff becomes tied up in other projects.

2. Create New Product 4. Speed

In CapsimGlobal, your company will start off with one existing product
The time it takes the device to analyze a sample and display results. The
line with the ability to create up to three additional products for a total of
speed of your product(s) is directly correlated to your material cost. This
four. To get started with creating a new product, click the ‘+ New Product’
represents the “X” axis of the perceptual map.
tab to open the new product development decisions. You can select the
name, specifications, and Region Kit(s) to best position your product.
5. Accuracy
A Region Kit is an upgrade that customizes the product to meet local
The likelihood of the testing device to provide a correct result. Devices
requirements making it more appealing to customers in that country.
with a higher Accuracy rating are less likely to give a false positive or false
negative result. The accuracy of your product(s) is directly correlated to
Considerations before starting a project:
your material cost. This represents the “Y” axis of the perceptual map.
• Where do I want my product positioned on the Perceptual Map
when the project ends?
6. Service Life
• What length of Service Life should my product have? Is it within the
Expressed in hours, as the average time before the device is likely to fail.
required range of the segment? How much do my customers care
Increasing Service Life increases material cost per unit. Decreasing Service
about service life in this segment/country?
Life decreases material cost per unit. The Service Life rating for existing
• Do I want to add any region kits to tailor my product to a specific
products can be adjusted up or down. Each 1,000 hours of Service Life
area?
adds $0.30 to the material cost. Customers prefer products towards the
top of the range.
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7. Region Kits 9. Perceptual Map
Region Kits are region-specific product additions that increase a product’s The Perceptual Map displays your products’ Accuracy and Speed
attractiveness to customers. Conceptually, our genetic diagnostic test coordinates and where your product falls compared to where customers
performs several genetic tests at once. For example, given a biopsy, it are located. On the Perceptual Map, there are two circles. Each circle is a
can test for several varieties of cancer. Since cancer incidence varies by market segment, (Low Tech and High Tech) which represents a group of
country, the genetic test can vary by country. However, it is possible to customers with similar preferences for Speed and Accuracy.
tailor your product to test for additional country-specific diseases. For
example, a cholera test may be considered for Chinese customers, but 10. R&D Expenditures
would not be relevant to European customers. View how much you are investing in creating new products and modifying
existing offerings.
In CapsimGlobal, adding a Region Kit boosts demand by 10% over your
competitors (i.e. adding a USA region kit will add 10% demand in the 11. Retire Product
USA). If your competitors choose to add a Region Kit, as well, then your Sometimes a product becomes obsolete and needs to be retired. Click
demand boost will be reduced. In the case that all six companies are the icon to eliminate the product from your portfolio and sell off the
offering Region Kits to a specific country, there will be no advantage in remaining units. Upon doing so, you will see the product’s specifications
customer demand for any team. and capacity levels, which will be sold off at 65% of the original purchase
price. Any inventory on hand is sold at 50% of the production value.
Adding a Region Kit to a product adds three months to the R&D project (Labor Cost + Material Cost) As you must remain selling at least one
timeline as well as a 15% material cost increase in the country where the product to remain in the industry, you cannot retire all of your products at
product is sold. For example, team Andrews decides to put a German once.
Region Kit on the Able product. There will be a 15% increase in material
cost for all products that are shipped to Germany. However, no products 12. R&D Charts
in the USA or sent to China will incur any additional material costs. You Additional information regarding the company and business environment,
can have up to three Region Kits on each product. including your investments, material costs and perceived age of products
in the market. These will update as you make changes so you can track
8. Age how the age and material costs of your product(s) will change throughout
A new product starts with an age of zero. However, modified products are the year given your updates.
considered to be new and improved, which cuts the perceived age of the
product in half. Only decisions changed for Speed or Accuracy cut the 13. Segment Movement
age in half. Changes to Service Life and Region Kits have no impact on Customers in each market segment — Low Tech and High Tech —
the perceived age. The perceived age is constantly changing; a product continuously expect faster and more accurate products, but at different
that was released in January will be perceived as an older product in each rates of change. Therefore you will find that there is a great deal of
month following its release. overlap between the Low Tech and High Tech segments at the start of
the simulation, but this will shrink each round. We map those increasing
demands on the Perceptual Map. The circles defining the product
segments will move a little each month, drifting towards the top right-
hand corner of the map as customers look for faster and more accurate
devices.
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Each company must innovate and update products to keep up with
segment movement and remain competitive.

Within each segment there is an ‘ideal spot’. These are the coordinates for
the customers’ desired Speed and Accuracy of the product at that point
in time. The ideal spot drifts an equal distance each month, but is different
for each segment. The Low Tech segment moves slower, and customers
do not expect frequent changes to their products. The High Tech
segment, however, moves at a faster pace so customers expect frequent
updates to their products.

14. Drift Rates

In the simulation, the rate that the segments move is called ‘drift rate’,
and it is different for each market segment. Drift rates reflect what we
experience in real life — the next version should be faster and more
accurate. See Market Conditions Report for the actual drift rate in each
segment.

15. Ideal Spot

As you know, the ideal spot is that point in the segment where, all other
things being equal, demand is highest. In the example to the right, it’s
represented as the black dot within each segment circle. The perceptual
map helps you to calculate the Ideal Spot for each round of the Perceptual map
simulation.

IDEAL SPOT
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Marketing
The Marketing department is responsible for forecasting
sales, promoting both the products and brand, as well
as pricing and selling your products. Forecasting sales
for each product is critical because your Production
Department uses these forecasts to determine how much
of each product line to manufacture. Additionally, your
Finance Department uses these forecasts to generate a
projected cash position.
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While making these changes, the following You can view your estimated Awareness within the Marketing department
interface. However, you can calculate exactly what your Awareness will be
areas will need to be considered: through the following calculation.

1. Product Decisions Starting Awareness + Additional Awareness from Promo Budget Curve =
This is where product level forecasts and marketing investments are
New Awareness
made. As new products are invented, you can click the product tabs. Click
the product tabs to move to the next product decisions, while viewing a
summary of all Marketing decisions in the table below the product area. Promo Budget Awareness Curve

2. Country Tabs 50%

The importance that customers place on each aspect of the product

is different in each country, reflecting the subtle influence of culture. 40%
Decisions are made on a regional basis and clicking on a new country will
display the products and information for that country.
30%

3. Marketing Charts
This section contains additional information regarding the company and 20%
the business environment.

4. Price 10%

In the Products panel, you set the price per unit in local currency while
viewing the conversion to dollars. The price range listed in the customer 0%
buying criteria reflects local currency, so be aware of the impact of $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000

currency fluctuations over time.

5. Promotion Budgets And Awareness Finally, new products are newsworthy events. The buzz creates 25%
Each product’s promotion budget determines its level of awareness. A
awareness at no cost. The 25% is added to any additional awareness you
product’s awareness percentage reflects the number of customers who
create with your promotion budget.
know about the product.

An awareness of 50% indicates half of the potential customers know it

6. Sales Budget And Accessibility
exists. While your product can still sell to potential customers that are
Each product’s sales budget contributes to segment accessibility. A
unaware of it, a product’s awareness is directly correlated to its demand.
segment’s accessibility percentage indicates the number of customers
From one year to the next, a third (33%) of those who knew about a
who can easily interact with your company via salespeople, customer
product forget about it. This creates the formula below:
support, delivery, etc. Like awareness, if your sales budgets drop to zero,
you lose one third of your accessibility each year. Unlike awareness,
Last Year’s Awareness - (33% * Last Year’s Awareness) = Starting
accessibility applies to the segment, not the product. If your product exits
Awareness
a segment, it leaves the old accessibility behind. When it enters a different
segment, it captures that segment’s accessibility.
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Your accessibility calculation is exactly the same as the awareness 7. Forecasts
calculation. However, the contributions for Sales and Promo budgets The sales forecasts are used by the Production department to set
differ. You can view the estimated Accessibility within the Marketing production levels for the year and the Finance department to calculate
interface, but if you want to calculate Accessibility use the following the Proformas, or projected cash position. Accurate sales forecasting is a
calculation: key element to company success.

Starting Accessibility + Additional Accessibility from Sales Budget Curve = There are two different primary methods to forecast in the simulation:
New Accessibility
• Use last year’s actual sales and multiply by 1 plus the segment’s
Sales Budget Accessibility Curve
current round growth rate

40% • Use last year’s potential sales and multiply by 1 plus the segment’s
current round growth rate
30%

20% Here is an example:

Last Year’s Low Tech Sales: 541
10%
Low Tech Growth Rate: 10%
0%

Forecast = 541 x (1+.10)

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000

Forecast = 595

In the case of your Sales budgets, products in the same segment will Potential Sales represents the number of total units you would expect to
have the same Accessibility. This is because your field specialists selling sell in a perfect market. This takes into account product stock-outs from
your products focus on specific segments rather than individual products your company and your competitors. Keep in mind that the forecasting
selling to that market. For instance, if you have two products selling to the methods outlined above assume demand is consistent. Be sure to account
German Budget segment, your contributions to the Sales Budget for each for changes you’re making to your products as well as what changes you
product will both contribute to their Accessibility. For example: if each of anticipate your competition to make.
these products have a sales budget of $1,500 they would receive a boost
in accessibility as though you had spent $3,000. (The sum of both sales 8. Customer Satisfaction Score (CSS)
budgets) The customer satisfaction score starts by evaluating each product
against the buying criteria. Next, these assessments are weighted by the
Think of awareness and accessibility as “before” and “after” the sale. The criteria’s level of importance. For example, the German High Tech segment
promotion budget drives awareness, which persuades the customer to assigns a higher importance to positioning (43%) than the German Low
look at your product. The sales budget drives accessibility, which governs Tech segment (21%). A well-positioned product earns a higher score in
everything during and after the sale. The promotion budget is spent on the Customer Satisfaction Score in the High Tech than in the Low Tech
advertising and public relations. The sales budget is spent on distribution, segment. From there, the Customer Satisfaction Score takes into account
order entry, customer service, etc. Awareness and accessibility go hand your product’s Awareness and Accessibility.
in hand towards making the sale. The former is about encouraging the
customer to choose your product; the latter is about closing the deal via
your salespeople and distribution channels.
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9. Price & Currency Fluctuations
What is the right price for your product? Well, it depends.
Customers in each market have a different view of price as you can
see in the customer buying criteria. To the Low Tech buyer, price is the
most important thing. For a buyer looking for top quality, however, it is
less important. Even if your products are very reasonably priced, if all
other things are equal, you will lose market share to a competitor with
lower prices.

Be sure to pay attention to what your customers want and what the
competition is delivering in order to price your products effectively.

It’s important to know that in each country, Price listed in the Buying
Criteria reflects Local Price. Local Price is your translated sales price
after currency exchange rates.

In Germany and China, the price you enter will translate into Local
Price based on the current exchange rate to US dollars. You can find
the exchange rate at the beginning of the year in the top right of the
Marketing interface under the Regional tab or in the segment pages.

10. Effect Of Exchange Rate

There is a 1% transaction fee assessed for converting foreign currencies
to US Dollars, which appears on the Cash Flow Statement as the line
item ‘Effect of Exchange Rate Changes.’ At year’s end, all income is
converted automatically into US dollars for the financial statements.
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Production
Your Production Department is responsible for
manufacturing enough products to meet customer
demand, as per your marketing forecasts for each
country. In addition, Production determines the level of
capacity and automation on your production lines and
must manage the cost of upgrading the plant.

Production Plant Move

Your first decision running your company will be a big
one. Recent world developments have opened the
genetic testing device market, and your company will
now be able to operate in additional countries outside
of the USA – Germany and China. Due to this, you will be
given the option to move your production facility to one
of these foreign nations or to stay put in the USA.

You will have access to information that will help you

make this decision, and ultimately you must choose
whether to move your plant or stay put. This decision is
only available to your company in Round 1, and you will
see the option at the top of your Production Department
page.

If you choose to move your plant from America to

Germany or China, your company will incur a relocation
fee of $2 million. This will cover all costs related to
hiring/firing employees, shipping equipment, plant
and equipment assembly, and the property lease. Your
capacity and automation levels will remain the same after
the move, as you will ship all your equipment to the new
plant location.
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The move will occur on January 1 of Round 1.

Each location offers different pros and cons; for instance,
moving your plant to Germany may take advantage of lower
product defect rates, but could also cost more; due to higher
average hourly wages for workers. Alternatively, staying
in your current production facility will allow you to avoid
additional costs of terminating employees, but may not
provide long-term benefits for your company’s strategy.

Wherever you choose to manufacture your products, make

sure you have done your research. Your decision will take
place in Round 1 and last through the entire simulation.
 CapsimGlobal | User Guide | 19

While making these changes, the following 4. Actual

This is the actual number of units produced. It will always be slightly less
areas will need to be considered: than your production schedule to accommodate any defective products.

1. Plant Information
Plant information displays each product’s capacity and automation level.
You can purchase additional capacity and raise your plant’s automation
level to produce more units at a higher efficiency, but this comes at a cost.
Keep in mind that any changes to your plant capacity and/or automation
take one year to go into effect. Each year, you have a maximum allotted
investment that you cannot exceed.

2. Capacity
Capacity determines how many units the plant can produce. Each new
unit of capacity costs $6.00 for the floor space plus $4.00 multiplied by
the automation rating. For each unit of capacity, you can schedule second
shift workers work equal to 100% of your Plant Capacity. With the 2nd
shift, you can produce double your capacity. The second shift labor costs
are 50% higher than producing in your first shift. Your product starts with
1,700 units of capacity, meaning you can produce 1,700 units in your first
shift and an additional 1,700 units in second shift.

3. Automation
Automation refers to the level of production processes for the machinery
that can be done without manual human labor – the higher the
automation rating, the fewer workers are needed to operate the plant.

As automation levels increase, the number of labor hours required to

produce each unit falls. The lowest automation rating is 1.0; the highest
rating is 10.0. At an automation rating of 1.0, labor costs are highest. Each
additional point of automation decreases labor costs approximately 10%.
At a rating of 10.0, labor costs fall about 90%. Automating comes at a
cost, however. The higher your automation level, the longer it takes your
products to be revised by Research & Development. Due to the massive
costs of tailoring product development to robotic manufacturing, at an
automation level of 10.0, any changes to your product(s) in R&D will take
at least one year to complete. For each point that automation is changed,
there is a $4 charge per unit of capacity. At 1000 units of capacity,
increasing automation by 1 point will cost $4,000.
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Finance
Your Finance Department is primarily concerned with four
issues:

1. Acquiring the capital you need to expand your

company’s assets

2. Driving the financial structure of the firm and its

relationship between debt and equity

3. Selecting and monitoring performance measures that

support your strategy

4. Establishing a dividend policy to maximize the return

to shareholders

Finance decisions should generally be made after all

other departments have entered their decisions. After the
management team has decided what resources it needs in
Marketing, R&D and Production, the Finance Department
determines where and how to find the funds.
 CapsimGlobal | User Guide | 21

While making these changes, the following 5. Stock Price

Stock price is a function of four things:
areas will need to be considered: • Book value, defined as total equity.
• Earnings per share (EPS), defined as profits divided by shares
1. Add Funds/ Raising Capital
outstanding.
There are three ways to acquire capital, each with advantages and
• Dividends per share, set directly by you. Dividends set higher than
disadvantages. Capital can be acquired through:
the year’s EPS negatively impact stock price.
• Emergency loans also negatively impact the stock price.
Current Debt (Bank Loans) – these are one-year loans that are paid off on
January 1 of next year. The yearly interest rate applies to current debt.
6. Effect of Exchange Rate
Stock Issues – selling common stock to the public. There is a 1% transaction fee assessed for converting foreign currencies
to US Dollars, which appears on the Cash Flow Statement as the line item
Bond Issues (Long-term Debt) – the amount of money that the bond
‘Effect of Exchange Rate Changes.’ At year’s end, all income is converted
markets will issue you. You are capped at having up to 80% of last year’s
automatically into US dollars for the financial statements.
fixed assets in Long-term debt.

2. Subtract Funds/ Retiring Debt Or Stock

If you’re flush with cash you can choose to retire stock or bonds.

Retire Stock – You can buy back up to 5% of your outstanding shares

each round.

Retire Bonds – You can retire any of your long-term debt, or bonds,
earlier than the 10-year period if you want to. You must pay a small, 1.5%,
brokerage fee to retire bonds early, and these will be settled at the closing
price listed in the Outstanding Bonds box in the Finance interface.

3. Issuing Dividends To Shareholders

Sometimes the owners of a company like to see some return on the
money they invested in the enterprise. You do that by paying dividends.
Paying dividends can impact the stock price. A healthy stock price
increases your ability to raise capital for investments, which in turn can
return further profits, these profits can be passed onto shareholders as
further dividends.

4. Emergency Loans
An emergency loan is a one-year loan from an emergency lender. If your
company runs out of cash during the year, you will require an emergency
loan to keep your company afloat. Because of the “quick fix” nature of the
emergency loan, interest rates to repay emergency loans are extremely
high (7.5% above the current interest rate). Try to avoid these at all costs!
 CapsimGlobal | User Guide | 22

Scoring / Grading Debrief Tool

The debrief tool is only available if your instructor has provided the class
Balanced Scorecard with access. The debrief tool provides a concise overview of the industry
In CapsimGlobal your company’s performance will be evaluated based on and key performance indicators. This can be used to quickly identify areas
the four pillars of the Balanced Scorecard as given below. for improvement. If you have been provided access to the debrief tool,
you will find it broken up into six sections; Overview, Financial, Customer,
Internal Business Process, Learning & Growth, and Report. The four pillars
Financial
of the Balanced Scorecard encompass various metrics (as seen above)
Profit – 10 points
which are evaluated relative to the prior year’s performance. Areas for
Return on Assets – 5 Points strong performance, average performance, or needs improvement are
Market Cap Percentage – 5 Points highlighted.
Debt/Asset Ratio – 5 Points
Where can I see my results?
Customer When a round is processed, you can view your scoring results through
Product Design Score – 10 points your dashboard.
Awareness – 5 points
For more detailed analysis of your results, click the Reports tab within the
Accessibility – 5 points
dashboard or interface. Here, you can assess your performance, broken
Market Penetration – 5 points (Number of Region of Sales)
down in each area of the simulation.

Internal Business Process

Contribution Margin – 10 Points
Capacity Utilization - 5 points
Market Share - 5 points
Market Share Growth - 5 points

Learning & Growth

Employee Turnover - 10 points
Profit/Employee - 5 points
Market Price/Employee – 5 points
Sales/Employee – 5 points

Each round, new goals are set for each item that makes up the four
pillars. Points will be allocated based upon how close your company
came to those goals. The specifics for point allocation can be found
on the Balanced Scorecard section of the dashboard after selecting
your company name. Each metric that makes up the four pillars can
be selected in order to get a more detailed break-down of the point
allocation.
 CapsimGlobal | User Guide | 23

Glossary/Formulas
1. Ideal spot
These are the coordinates for the customers’ desired Speed and Accuracy
of the product at that point in time. The ideal spot drifts an equal distance
each month, but is different for each segment. The Low Tech segment
(represented by the black circle on the perceptual map) moves slower,
and customers do not expect frequent changes to their products. The
High Tech segment (represented by the blue circle on the perceptual
map), however, moves at a faster pace, and customers expect frequent
changes to their products.

2. Drift rate table

In the simulation, the rate that the segments move is called ‘drift rate’,
and it is different for each market segment. Drift rates reflect what we
experience in real life — the next version should be faster and more
accurate.

3. Segment growth rates

These are the rates at which each demand increases. Growth rates will
vary by segment and country.

4. Region Kits 6. Accessibility

A feature that tailors products to the specific country they will be Each product’s sales budget contributes to segment accessibility. A
sold in. Region Kits boost demand in an area by 10% compared to the segment’s accessibility percentage indicates the number of customers
competition, but add 3 months of development time to add/remove and who can easily interact with your company via salespeople, customer
15% in material cost per unit. support, delivery, etc. Like awareness, if your sales budgets drop to zero,
you lose one third of your accessibility each year. Unlike awareness,
5. Awareness accessibility applies to the segment, not the product. If your product exits
Each product’s promotion budget determines its level of awareness. A a segment, it leaves the old accessibility behind. When it enters a different
product’s awareness percentage reflects the number of customers who segment, it captures that segment’s accessibility.
know about the product. While your product can still sell to potential
customers that are unaware of it, a product’s awareness is directly
correlated to its demand. From one year to the next, a third (33%) of 7. Forecasting formula
those who knew about a product forget about it. There are two different primary methods to forecast in the simulation:
• Use last year’s actual market share and multiply by the current
round’s segment size.
• Use last year’s potential sales and multiply by the growth rate.
 CapsimGlobal | User Guide | 24
8. Service Life costs 12. Bonds
The Service Life rating for existing products can be adjusted up or All bonds are 10-year notes. Your company pays a 5% brokerage fee for
down. Each 1,000 hours of Service Life adds $0.30 to the material cost. issuing bonds. The first three digits of the bond series number reflects
Customers prefer products towards the top of the range. the interest rate. The last four digits indicates the year the bond is due.
The numbers are separated by the letter S, which stands for “series.” For
9. Buy/Sell capacity example, a bond with the number 12.6S2017 has an interest rate of 12.6%
Capacity determines how many units the plant can produce. Each new and is due December 31, 2017. Bond issues are used most often to fund
unit of capacity costs $6.00 for the floor space plus $4.00 multiplied by long-term investments in capacity and automation. Bondholders will lend
the automation rating. For each unit of capacity, you can schedule second total amounts up to 80% of the value of your plant and equipment (the
shift work equal to 100% of your Plant Capacity. Therefore, you can Production Department’s capacity and automation). Each bond issue pays
produce double your capacity. Second shift labor costs are 50% higher a coupon, the annual interest payment, to investors. If the face amount or
than producing in your first shift. Your product starts with 1,700 units of principal of bond 12.6S2017 were $1,000,000, then the holder of the bond
capacity, meaning you can produce 1,700 units in your first shift and an would receive a payment of $126,000 every year for ten years. The holder
additional 1,700 units in second shift. would also receive the $1,000,000 principal at the end of the tenth year.
When issuing new bonds, the interest rate will be 1.4% over the current
10. Perceived Age debt interest rates. If your current debt interest rate is 12.1%, then the bond
A new product starts with an age of zero. However, modified products are rate will be 13.5%. You can buy back outstanding bonds before their due
considered to be new and improved, which cuts the perceived age of the date. A 1.5% brokerage fee applies. These bonds are repurchased at their
product in half. Only decisions changed for Speed or Accuracy cut the market value, or street price, on January 1 of the current year. The street
age in half. Changes to Service Life and Region Kits have no impact on the price is determined by the amount of interest the bond pays and your
perceived age. credit worthiness. It is therefore different from the face amount of the
bond. If you buy back bonds with a street price that is less than its face
11. Automation amount, you make a gain on the repurchase. This will be reflected as a
As automation levels increase, the number of labor hours required to negative write-off on the income statement Bonds are retired in the order
produce each unit falls. The lowest automation rating is 1.0; the highest they were issued. The oldest bonds retire first. There are no brokerage
rating is 10.0. At an automation level of 1.0, labor costs are highest. Each fees for bonds that are allowed to mature to their due date. If a bond
additional point of automation decreases labor costs approximately 10%. remains on December 31 of the year it becomes due, your banker lends
At a rating of 10.0, labor costs fall by about 90%. Automation costs $4.00 you current debt to pay off the bond principal. This, in effect, converts
per point of automation. Raising automation from 1.0 to 10.0 costs $36.00 the bond to current debt. This amount is combined with any other current
per unit of capacity. Conversely, lowering automation from 10.0 to 1.0 also debt due at the beginning of the next year
costs $36.00 per unit of capacity. As you raise automation, it becomes
increasingly difficult for R&D to reposition products short distances on
the Perceptual Map. For example, a project that moves a product 1.0 on
the map takes significantly longer at an automation level of 8.0 than at
5.0. When you’re making a large move on the perceptual map, it will be
less affected by a higher automation level. You can move a product a long
distance at any automation level, but the project will take between 2.5 and
3.0 years to complete.
 CapsimGlobal | User Guide | 25
13. Bond Due Date score in April is 20 and your competitors’ scores are 27, 19, 21 and 3, then
Assume the face amount of bond 12.6S2018 is $1,000,000. The your product’s April demand is: 20 / (20+27+19+21+3) = 22%. Assuming
$1,000,000 repayment is acknowledged in your reports and spreadsheets you had enough inventory to meet demand, you would receive 22% of
in the following manner: Your annual reports from December 31, 2018 segment sales for April. What generates the score itself? Marketers speak
would reflect an increase in current debt of $1,000,000 offset by a of “the 4 P’s”– price, product, promotion and place. Price and product
decrease in long term debt of $1,000,000. The 2018 spreadsheet will list are found in the buying criteria. Together they present a price-value
the bond because you are making decisions on January 1, 2018, when relationship. Your promotion budget builds “Awareness,” the number of
the bond still exists. Your 2019 spreadsheet would show a $1,000,000 customers who know about your product before purchasing. Your sales
increase in current debt and the bond no longer appears. budget (place) builds “Accessibility,” the ease with which customers can
find and purchase your product. To the 4 P’s we can add one additional
14. Bond Ratings elements –availability. Availability addresses inventory shortages. These
Each year your company is given a credit rating that ranges from AAA are all considered to be part of the Customer Satisfaction Score.
(best) to D (worst). In CapsimGlobal, ratings are evaluated by comparing
current debt interest rates with the prime rate. If your company has no 16. Current Debt
debt at all, your company is awarded an AAA bond rating. As your debt- Your bank issues current debt in one-year notes. The Finance page in
to-assets ratio increases, your current debt interest rates increase. Your your interface displays the amount of current debt due from the previous
bond rating slips one category for each additional 0.5% in current debt year. Last year’s current debt is automatically paid off on January 1. The
interest. For example, if the prime rate is 10% and your current debt company can “roll” that debt by simply borrowing the same amount again.
interest rate is 10.5%, then you would be given an AA bond rating instead There are no brokerage fees for current debt. Interest rates are a function
of an AAA rating. of your debt level. The more debt you have relative to your assets, the
greater risk you present to debt holders and the higher the current debt
15. Buying Criteria And The Customer Satisfaction Score rates. As a general rule, companies fund short term assets like accounts
The customer satisfaction survey starts by evaluating each product receivable and inventory with current debt offered by banks. Bankers will
against the buying criteria. Next, these assessments are weighted by loan current debt up to about 75% of your accounts receivable (found on
the criteria’s level of importance. For example, the High Tech segment last year’s balance sheet) and 50% of this year’s inventory. They estimate
considers product age and specs very important, while the Low Tech your inventory for the upcoming year by examining last year’s income
segment concentrates primarily on price. A well-positioned product in a statement. Bankers assume your worst-case scenario will leave three- to
segment where positioning is important will have a greater overall impact four-months in inventory and they will loan you up to 50% of that amount.
on its survey score than a well-positioned product in a segment where This works out to be about 15% of the combined value of last year’s total
positioning is not important. A perfect customer satisfaction score of 100 direct labor and total direct material, which is displayed on the income
requires that the product: • Be positioned at the ideal spot (the segment statement. Bankers also realize your company is growing, so as a final step
drifts each month, so this can occur only one month per year); • Be bankers increase your borrowing limit by 20% to provide you with room
priced at the bottom of the expected range; • Have the ideal age for that for expansion in inventory and accounts receivable.
segment; • Have a Service Life specification at the top of the expected
range. The customer satisfaction score drives demand for your product.
Your demand in any given month is your score divided by the sum of
all of the scores in a respective market. For example, if your product’s
 CapsimGlobal | User Guide | 26
17. Emergency Loans 21. Retiring Bonds Early
Financial transactions are carried on throughout the year directly from A bond with a face amount of $10,000,000 could cost $11,000,000
your cash account. If you manage your cash position poorly and run to repurchase because of fluctuations in interest rates and your credit
out of cash, the simulation will give you an emergency loan to cover the worthiness. A 1.5% brokerage fee applies. The difference between the face
shortfall. The loan comes from a gentleman named Big Al – a loan shark value and the repurchase price will reflect as a gain or loss in the income
who charges very high interest rates. Big Al lends you the exact amount statement’s fees and write-offs.
of your shortfall. You pay one year’s worth of current debt interest on the
loan and Big Al adds a 7.5% penalty fee on top to make it worth his while. 22. Segment Movement
For example, suppose the current debt interest rate is 10% and you are Each segment moves across the Perceptual Map a little each month. In a
short $10,000,000 on December 31. You pay one year’s worth of interest perfect world, R&D would use iterative design to position your product in
on the $10,000,000 ($1,000,000) plus an additional 7.5% or $750,000 front of the ideal spot as many times as possible throughout the year.
penalty. You do not need to do anything special to repay an emergency
loan. However, you need to decide what to do with the current debt (pay 23. Service Life Fine Cut
it off, re-borrow it, etc.). The interest penalty only applies to the year in Within the segment’s Service Life range, the customer satisfaction score
which the emergency loan is taken, not to future years. Emergency loans improves as Service Life increases. However, material costs increase $0.30
are combined with any current debt from last year and automatically for every additional 1,000 hours of Service Life. Customers ignore Service
taken out of your projected closing cash position. Emergency loans Life above the expected range — demand plateaus at the top of the range.
depress stock prices; even when profitable. Stockholders take a dim view
of your management performance when they witness a liquidity crisis. 24. Service Life Rough Cut
Demand scores fall rapidly for products with Service Life hours beneath
18. Excess Working Capital the segment’s guidelines. Products with a Service Life of 1,000 hours
Excess working capital is calculated as follows: Working Capital = Current below the segment guideline lose 20% of their customer satisfaction
Assets - Current Liabilities, 90 Days of Sales = 90/365 Sales, Excess score. Products continue to lose approximately 20% of their customer
Working Capital = Working Capital - 90 Days of Sales satisfaction score for every 1,000 hours below the guideline down
to 4,999 hours, where the customer satisfaction score is reduced by
19. Max Invest approximately 99%. At 5,000 hours below the range, demand for the
Max Invest is the maximum dollar amount you can invest in your product falls to zero.
production plant in a given year. This number is calculated depending on
your capital budget limit. The capital budget limit is determined by the 25. Stock
maximum amount that can be raised through stock and bond issues plus Stock issue transactions take place at the current market price. Your
excess working capital, minus the total amount of stock dividends to be company pays a 5% brokerage fee for issuing stock. New stock issues
paid in the current year. are limited to 20% of your company’s outstanding shares in that year. As
a general rule, stock issues are used to fund long-term investments in
20. Profit Sharing capacity and automation. Stock price is driven by book value, the last two
Your company shares 2% of Net Profit by country with your employees. years’ earnings per share, (EPS) and the last two years’ annual dividend.
 CapsimGlobal | User Guide | 27
26. Book Value
The calculation for book value is equity divided by shares outstanding.
Equity equals the common stock and retained earnings values listed
on the balance sheet. Shares outstanding is the number of shares that
have been issued. For example, if equity is $50,000,000 and there are
2,000,000 shares outstanding, book value is $25.00 per share.

27. Design Score

The design score evaluates the following: products positioning, reliability,
and age. This evaluates R&D decisions relative to the customer buying
criteria.

28. Defect Rate

This is the rate at which units ordered through the production schedule
show up defective. Each location for production plants have a different
defect rate.