Possible roles in the firm’s management team in the

Capstone Simulation

Product Manager

Product Managers live and breathe their assigned product— it is their “baby.” They must ensure their product meets the demands of the intended segment.

Product Managers ask…In R&D• is the product positioned correctly on the perceptual map?• Is the age correct?In Marketing• is the price within the segment's expected range?• Considering the expected demand for the segment and the

number of competing products, is the sales forecast appropriate?

In Production• is the schedule matching the sales forecast?• Has the schedule been adjusted to reflect unsold

inventory?• Do we have sufficient capacity to meet current and future

demand?

Product Managers concentrate on the specifics of their product, and

how it relates to the segment.

• While they want their product to be supported to the greatest extent possible, they are not directly involved in Promotion and Sales decisions.

Segment Managers are strategists. Their job is to answer these questions:

• Will new products enter or leave the segment this year?• Is there too much production capacity in the segment

(could lead to price competition)?• Is there too little production capacity in the segment

(could lead to a margin opportunity)?• How does the company's distribution system

("Accessibility" on the R&D spreadsheet) compare with competitors?

• What is the margin potential of this segment?• What should be done to gain competitive advantage for

the segment?• What will competitors do next year in this segment? In

two years?

Segment Managers…

… have more freedom than Product Managers to make strategy and policy recommendations.

For example, if they observe a capacity shortage developing, a Product Manager will request more capacity, but a Segment Manager might recommend bringing in a second product to serve the segment.

A Product Manager would never suggest "killing" their product…

but a Segment Manager might conclude that the segment should be abandoned. The Segment Manager might then recommend:

• a rapid retreat from the segment;• a phased withdrawal the segment; or• a hedging strategy where most of the

assets are recovered, but the product is kept in the segment as a contingency.

Segment Managers present recommendations to a panel (teammates) that sets overall

company strategy.

Functional Manager

A Functional Manager's job is to optimize the efficiency of the assigned function and to coordinate strategy across functional boundaries.

Functional Managers assume responsibility for an entire

department

• Research & Development (R&D)

• Human Resources

• Marketing

• Production

• Finance

Functional Managers are the authority for all rules that apply to

their area.

Efficiency Concerns

• R&D Managers should monitor project completion dates. Since the rules require that projects can only begin on January 1, projects that did not finish last year "lock out" a new project for that product this year. Similarly, a project that ends in June gives up six months of R&D "opportunity".

Efficiency Concerns

• Marketing Managers should monitor promotion and sales budgets. As these budgets increase, they experience diminishing returns. Price drives product margins, but it is also a segmentation variable with "rough-cut" aspects to consider.

Efficiency Concerns

• Production Managers should monitor inventory levels, plant utilization and overtime. These factors vary with automation levels. For example, an appropriate plant utilization for a product automated to 10.0 (the upper limit) is different than for an automation level of 1.0.

Efficiency Concerns

• Finance Managers should monitor cash positions, and, more broadly, the capital structure of the firm. Does the capital structure support the performance measures selected by the team? Is sufficient working capital on hand to weather a sudden surge in inventory?

Competitive Intelligence Officer

The Competitive Intelligence Officer's task is to see the market, and

especially their company, through the eyes of the competitor.

The “Intel” Officer answers these questions for the firm…

• How does this or that competitor measure success?

• What segments matter most to them?• What are they doing to achieve competitive

advantage?• What will they do with their product line next year?

In two years?• Is "our" company a threat to the competition?• What could the competition do that is not in "our"

company's interest?• How can "our" company influence the competition

to do what "we" want?

Each round, Competitive Intelligence Officers present a

competitive strategy in the form of, "If I were them, I would....“

They should then recommend tactics designed to counter or

neutralize their moves.

Coordination Concerns

R&D Managers can explain the relationship between:

• age and positioning;• positioning and material cost;• MTBF and material cost;• automation and project length;• number of projects and completion times; and• project length and proximity to other products.

R&D Managers coordinate with…

• Marketing when products are repositioned or introduced;

• Production when products are launched or material costs change; and

• Finance over their budget.

Coordination Concerns

Marketing Managers can explain the relationships between:

• price and contribution margin:

• price and demand;

• promotion budget and awareness; and

• sales budget and accessibility; and A/R policy and demand.

Marketing Managers coordinate with…

• R&D when products are launched or repositioned;

• Production in their unit sales forecast and contribution margin; and

• Finance with sales projections and their budget.

Coordination Concerns

Production Managers can explain the relationships between:

• inventory levels and carrying costs;• carrying costs and opportunity costs (not having

inventory to sell);• capacity and overtime;• automation and labor costs;• overtime and labor costs;• idle plant costs; and• consequences of selling capacity or buying

automation.

Production Managers coordinate with…

• R&D about new product introduction and material costs;

• Marketing about demand, scheduling, and inventory; and

• Finance about plant and equipment changes, inventory levels, and contribution margins.

Coordination Concerns

Finance Managers can explain the relationships between

• stock issue or retirement and capital structure;• working capital and inventory;• dividend policy and stock price;• emergency loans and cash;• current debt and short-term interest rates;• bond issue and prepayment; and• all financial performance measures.

Finance Managers coordinate with…

• R&D over budgets and product introductions;

• Marketing about sales projections, margins, and budgets; and

• Production about margins, plant and equipment changes and inventory levels.

Tactical Mistakes

In all cases, when the team makes a tactical blunder, at least

two functional managers are responsible. Following are some

common mistakes.

The company invents a product but forgets to buy plant and equipment for it. (R&D and

Production breakdown.)

The company takes an emergency loan because inventory levels increase.

(Marketing, Production and Finance.)

The company selects performance measures

inconsistent with their strategy. For example, a "niche" company

chooses to be measured by overall market share. (Marketing

and Finance.)

The company repositions a product from the High End segment to the Traditional

segment, but does not address their material and labor costs.

(Marketing, R&D, and Production.)

The Finance Manager makes decisions before knowing the budget demands of all R&D,

Marketing and Production decisions.