The learning journey from Capsim business simulation

1. 1 DIGBY
8 YEARS
16 LESSONS
Team | Preeti |Swapnil | Anshika | Ajinkya

2. LEARNING CYCLE

3. Key Learning 1:
Realise your true potential
and plan your capacity
accordingly

4. Problem:
O Suboptimal Utilization
Causes:
O Huge unused asset
O Capacity exceed industry demand
Effects:
O Higher depreciation
O Low plant utilisation
Digby
Plant utilisation
Depreciation
Ferris
70%
154.6%
9.7 Mil
5.6 Mil

5. Key Learning 2:
Your mistake = competitor’s profit

6. Problem:
O Conservative sales forecast and production
Cause:
O Underestimate our own products
Effect:
O Stock out
O Loss of potential profit

7. Produc Potential market Actual market
t
share
share
Pot-Actual MS
Total demand
Units not
produced
Price
Loss
Daze
17.90%
15.20%
2.70%
8067
217.809
28.00
6098.652
Dell
20.00%
16.30%
3.70%
10009
370.333
20.00
7406.66
Dixi
21.00%
20.00%
1.00%
2967
29.67
40.00
1186.8
Dot
22.70%
15.90%
6.80%
2294
155.992
34.00
5303.728
Dune
17.50%
17.30%
0.20%
2347
4.694
35.00
164.29
25684
778.498
20160.13

9. Key Learning 3:
Analyse the products and
cut off the tail

10. Problems:
O Products have low contribution margin
Causes:
O High variable cost
Effects:
O Low margin

11. O Performance segment – least profitable segment
O Net margin of Dot = (0.6) mil
O Baldwin realized this from round 1 and retired from this
segment to focus on other segments which are more
profitable

12. Key Learning 4:
Accurate sale forecasts will
lead to maximum profit

13. Problems:
O Over-stocking
Causes:
O Overestimating our products
O Underestimating our competitors
O Aggressive prediction
Effects:
O Negative cash flow from operating activities

14. Products
Daze
Dell
Dixie
Dune
Dude
Dexter
Dik
EXCESS STOCK
Inventory
1208
1025
88
13
98
146
431
3009

15. Key Learning 5:
Making profit does not mean
your business is doing well

16. Problems:
O Positive profits but Negative cash flow from operating
activities
Causes:
O Excess inventory due to poor sale forecasts
Effects:
O Your business is not making money

18. Key Learning 6:
Give the customers what they want

19. Problems:
O Dik did not sell in high segment
Causes:
O Over-engineering of product for high segment
Effects:
O Huge inventory
O Negative contribution margin
O Negative cash from operation

20. Performance
What customers
want?
What we deliver?
Products
Dik
Size
12.5-13.4
7.5-6.6
14.7
5.3
units sold
13
inventory production
431
444

21. Dik (,000)
Sale
$500
Total variable
$1710
Contribution margin
($1210)
Total Period cost
$4360
Net margin
($5570)

22. Key Learning 7:
Avoid Myopic Vision

23. Problem:
O Insufficient Automation as compared to competitors
Cause:
O Estimated cost of automation to be too high vs reduction in labor
costs
Effects:
O Higher labor costs and thus high variable costs in following
rounds

25. Key Learning 8:
Who’s Richer?
You or Ambani?

26. Problem :
O Paid off long term debt of $ 25 millions in Round 6
Causes:
O Conditioned to pay off long term debt as soon as possible
Effects:
O Emergency Loan of $ 22 millions
O Landed into trouble
Erie
Ferris
Total liabilities
4.8
19
Profit
24
31.5

27. ODon’t let Finance drive
your Business. Let your
Business drive your
Finance.

28. Key Learning 9:
Right Decision at the Right Time

29. O Ideal Age for Low Segment: 7 yrs
O Competitors did not reengineer low segment
products
O We re-engineered Dell in Round 3 to match
Round 6 specs
O Highest Market Share in Round 6: 31 %

30. Round 4
Round 6

31. Key Learning 10:
“Never invest in a business you
can’t understand”
~ warren buffet

32. Learning
• Never read the guide = lack of preparations lead to lack
of understanding of the game
• No rehearsal = one step behind competitors
• Man of principle = no cheating
• In reality, the more information you have, the more
cutting edge you have in the industry
O “Learn from other people’s mistakes”

33. 11.
Playing the blame game when things go wrong
O Everybody wants to be included for success
O But
O Nobody wants to be responsible for the failures
O FROM
WE TO YOU

34. 12.
In war everyone loses except…
O There is enough pie for everyone
O Going for a price war
O You earn lesser so ----- you lost
O competitors’ profit go down ----- they lost
O So who win?
OConsumers

35. 13.
Blinded by greed
O Problem:
O Pricing 4.50 $ above the normal price range on D Day.
O
O
O
O
Causes:
Wrong approximation of a Seller’s market
Greed to maximize profit in Low Segment on D Day.
Impatience to exploit Low Segment
O Effects:
O Very Low Sales (857 units)
O Market Share of 7 %

38. 14.
Are you working for Digby or the
Marketing Company ?
Problems:
High expenditure on sales and promotion wrt profit
Causes:
Lack of business understanding
Effects:
Wastage of resources in one segment , i.e. an Unprofitable
Product

40. Key Learning 15:
Exploit Seller’s Market

41. O In Performance Segment, we priced Dot higher than the
range by 4.49
O Made huge profits due to seller’s market
O We overestimated our competitors but they did not take
advantage of seller’s market

44. 16. Key Learning
O When your competitors team up
against you, remember they are
scared of you and your product.

45. O Problem:
Ferris & Erie go for a Cartel
O Causes:
Very good specs of our product
Poor age of their products
O Effects:
No major impact on us, but they won’t trust each other ever.

48. [

49. THANK YOU