Capsim Situation Analysis

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A company situation analysis can be defined as “matching the company’s strategy to external market circumstances and to internal resources and competitive capabilities.” We believe that our company, Chester Electronic Sensors, is currently in a position to spring ahead in the Electronic Sensor market. The industry in 2011 (round 0) consists of six competitors in very similar positions, holding virtually equal market share. We will use indicators in the industry to help determine our position and build our marketing, production, R&D and financial strategy. The situation analysis, as outlined by Capsim, will help provide us with a picture of the current conditions of the market and how it will develop in the next 8 years (rounds). This analysis will include five elements; 1) Perceptual Map, 2) Industry Demand Analysis, 3) Capacity Analysis, 4) Margin Analysis, 5) Consumer Report.

The perceptual map will assist in determining each step of our research and development, to help us plan how best to grow and develop our products over time based on customer expectations for product size and product performance. Table 1 includes the starting position and development changes for each year for each of our starting five products, each one in a different segment – Traditional, Low End, High End, Performance and Size.

The figures in Table 1 indicate the placement of each product segment at the beginning of each year (round) and the planned size and performance increases based on market demand. The market demand is determined based on the Industry Conditions Report which indicates the locations and drift rates as seen in Table 2.

The Demand Analysis is a tool for marketing and production to evaluate and forecast the future market demand for each product in each segment. The Demand for the following year is calculated based on the initial growth rate given for the segments in the industry. Table 3 shows the results of calculating the annual demand based on this year’s demand as given by the Courier for each segment.

The demand for year zero is then multiplied by the growth rates for each segment given in the Industry conditions Report as seen in Table 4.

The Capacity Analysis, as seen in Table 5, will allow our production and finance departments to understand the cost of additional production via adding capacity – through addition of shifts/labor – and through increasing automations. Both incur costs as illustrated in the table below for our specific products. The calculations used are as follows:

Cost to Double Capacity = First Shift Capacity x [$6 + ($4 x Automation Level)]

Cost to Increase Automation to 10.0 = First Shift Capacity x [$4 x (10 - Automation Level)]

The next indicator, the Margin Analysis, Table 6, gives us the current margin of each product based on the current price minus the material and labor costs. The margin potential chart gives us the ability to ascertain the upper limits of our profit potential, using the minimum material cost and minimum labor costs as compared to maximum price.

The current and potential margins analyzed here will guide our R&D department in understanding the material costs, and our production department in understanding the cost of labor, and the effect of increased automation. Our marketing department will benefit from understanding more optimal pricing, while the finance department will benefit from seeing the potential profits. Given the starting price of each of our products in this round, we see how our margins respond, and the margin percentage, and we can better asses

Our final indicator, the Consumer Report, is found in Table 7. This report will help us determine the needs of our target audience, thereby helping us to properly develop our products, set appropriate pricing, and promote our products more effectively.

By employing the situation analysis, we can learn much about our...
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