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Welcome to Comp-XM

Table of Contents

1 Introduction . . . . . . 1

2 Scoring . . . . . . . 2

2.1 Board Queries . . . . . 2

2.2 Balanced Scorecard . . . . 2

3 Decision Summaries . . . . 2

3.1 Research & Development . . . 2

3.2 Marketing . . . . . . 3

3.3 Production . . . . . 3

3.4 Finance . . . . . . 3

3.5 Human Resources . . . . 3

3.6 Human Resources Entries . . . 4

3.7 TQM/Sustainability . . . . 4

Your Registration Number

If your instructor or school did not give you a Registration Number, you will need to register online using a credit card or checking account.

Welcome to Comp-XM®, an integrated evaluation tool that will allow you to demonstrate your business skills. Comp-XM has two sections: 1. A business simulation similar to the one you just completed and 2. A series of quizzes, called Board Queries, that ask questions related to your simulation environment.

The Simulation

You are the CEO of a new company, the Andrews Corporation. You will make four sets of decisions. Your competition, Baldwin, Chester and Digby, are run by computers. ������� ��� ���������������� ��������������� all participants go up against a standard set of competitors. As with your previous simulation, the quality of your decisions directly affects the position of your company. Performance is evaluated using a Balanced Scorecard, an analysis technique that gauges results across four areas. � ����������� � ������������ ��� ������ � ��� ����� � ������������������!��

Board Queries

Board Queries are web-based quizzes that relate directly to the results of your simulation. As CEO, you will report to the Board of Directors. The Board �� ���� "� ��������� �� ��#�$ � ���� %�������& ���� %� that are based on the results of your previous rounds. �����'�� ��%�����(�������������$ ������ �������� ��� a break-even analysis on an increase in production automation or calculate the effect additional (����!����!�������������� ����������������� )����� questions use standard true-false, multiple choice and essay formats.

All the information needed to answer the queries appears within the pages of The Comp-XM Inquirer, an industry newsletter similar to The Capstone®

�� �������������� �������®��� �����")������� *+/� you work as an individual, which means all success will be attributed to your efforts. This is your chance to show your strategic vision, tactical abilities and business knowledge. Best of luck!

4 Industry Conditions Report . . 5

4.1 Market Segments . . . . 5

4.2 Growth Rates . . . . . 6

4.3 Rough Cut / Fine Cut . . . 6

4.4 Seller’s Market . . . . . 8

5 Reports . . . . . . . 8

6 Website Instructions . . . . 8

6.1 The Comp-XM Spreadsheet . . 8

6.2 Dashboard . . . . . 8

6.3 Answering Board Queries . . . 9

6.4 Round Schedules . . . . 9

6.5 Self-Paced Exams . . . . 10

Round 1

Round 2

Round 3

Round 4

Final

Differences From Your Previous Simulation

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1 Introduction

You have just been recruited to head the Andrews Corporation’s newest spin-off, the Andrews Comp-XM Corporation. The unit concentrates Andrews’ biometric sensor efforts into a new, publicly traded company.

1.1 What Is Comp-XM?

Comp-XM is familiar, yet different from your experience in Capstone or Foundation. You are the CEO. You will be making decisions on your own; you will not be a member of a team. Like Capstone or Foundation, Comp-XM uses a spreadsheet and a web interface. “6 Website Instructions” discusses the mechanics.

There are two parts to Comp-XM: A four-round simulation, and a series of web-based quizzes called Board Queries. Board Queries are questions posed by your Board of Directors. They are drawn from the unique results of your simulation. You could appear before the Board up to five times to answer their questions about your company.

Comp-XM Inquirer and Industry Conditions All the information needed to answer the questions appears within the pages of The Comp-XM Inquirer, an industry newsletter that is similar to The Capstone Courier or The Foundation FastTrack. “4 Industry Conditions Report” summarizes the current state of the biometric market.

1.2 Workflow

Comp-XM has four decision rounds. Each round, you will enter a set of decisions via the Comp-XM Spreadsheet.

In the standard Comp-XM setup, each round you will also answer the Board Queries posed by the board of directors. At the end of the simulation, you will answer a fifth set of Board Queries, but no

decisions will be required (Table 1.1). Decisions and Board Queries require the Comp-XM Inquirer.

Table 1.1 Standard Comp-XM Schedule

Round Activities Material Needed

1 Round 1 Decisions Board Query 1

Round 0 Comp-XM Inquirer 

2 Round 2 Decisions Board Query 2

Round 1 Comp-XM Inquirer

3 Round 3 Decisions Board Query 3

Round 2 Comp-XM Inquirer

4 Round 4 Decisions Board Query 4

Round 3 Comp-XM Inquirer

Final No Decisions Final Board Query

Round 4 Comp-XM Inquirer

Your instructor can configure Comp-XM to have fewer

Board Queries.

1.3 Differences From Your Previous Simulation

Comp-XM has four market segments:

• Thrift • Core • Nano • Elite

Comp-XM TQM (Total Quality Management)/Sustainability and Human Resources Modules are active in Round 1.

The segment circles start the simulation in the middle of the Perceptual Map before drifting to the lower right (Figure 1.1 – Figure 1.3).

Figure 1.1 Segment Positions at the End of Round 0 and the Beginning of Round 1

Figure 1.2 Segment Positions at the End of Round 2 and the Beginning of Round 3

Figure 1.3 Segment Positions at the End of Round 4

Example! See your Industry Conditions Report for exact segment locations.

Board Queries

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3 Decision Summaries

Decision entries are made with the Comp-XM Spreadsheet, which is similar to the Capstone Spreadsheet and the Foundation Spreadsheet. Please refer to your Capstone or Foundation Team Member Guide for general information.

All Comp-XM simulations utilize the Human Resources and TQM (Total Quality Management)/Sustainability modules. Decisions made in these modules can have wide ranging effects, including influencing product demand, R&D cycle times, productivity, material costs, labor costs and administrative costs.

TQM and Human Resource drive the Learning and Growth section of the Balanced Scorecard.

Human Resources decisions are made in two locations:

• The Workforce Complement is entered at the bottom of the Production area;

• Recruit Spend and Training decisions are made in the Human Resources area.

All TQM/Sustainability decisions are made in the TQM/ Sustainability area.

3.1 Research & Development

3.1.1 Positioning Costs Material costs are also driven by positioning (Figure 3.1). The higher the technology, the higher the cost. At the beginning of the simulation, the trailing edge of the Thrift segment has the lowest cost, at $1.00; the leading edge of the Nano and Elite segments have the

2 Scoring

Scoring occurs in two parts, the results of your Board Queries, and the results of your simulation, which are assessed via a Balanced Scorecard.

Comp-XM has 1000 possible points, 500 for your Board Query results and 500 for your Balanced Scorecard.

2.1 Board Queries

Board Queries are unique to each participant, although each question covers the same content. If a question applies to a product, the question might be posed about any of the products in the simulation.

Each simulation generates different numbers, so each question containing numbers varies by participant. Furthermore, product names and competitor assignments vary from participant to participant.

Here’s an example of a Comp-XM Board Query: You are asked

to find the Net Margin for product Biff. Your classmate is

asked to find the Net Margin for product Bold.

Both questions have the same level of difficulty, but the

answers are based on different numbers.

2.2 Balanced Scorecard

Comp-XM uses a Balanced Scorecard for simulation scoring. A Balanced Scorecard is a common analysis technique that allows companies to gauge their current performance and formulate future goals. Balanced Scorecards are divided into four areas:

• Financial • Internal Business Process • Customer • Learning and Growth

Each Comp-XM Scorecard is built from criteria which are assigned a weight– a level of importance. Criteria, weights and results for each round, and criteria, weights and results for a final overall scorecard, are available from the Dashboard.

As you enter decisions in the Comp-XM Spreadsheet, projections of the Balanced Scorecard results for the upcoming year are available via the proforma menu. Scores from previous years are available on the website; login to your simulation then click the Results/ Scorecards link.

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Figure 3.1 Material Positioning Costs: These costs vary depend- ing on the product’s relative location on the perceptual map. For example, at the start of Round 1, products placed at the trailing edge of the Thrift segment would have a positioning component cost of $1.00; products placed at the leading edge of the two high technology segments would have a positioning component cost of $9.25. Material component costs drop 3% to 4% per year.

Human Resources

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Comp-XM uses a straight line depreciation method calculated

over fifteen years.

3.3.3 Second Shift/Overtime Labor costs increase 50% when a second shift is hired or when the first shift works overtime.

3.3.4 Automation Increasing automation has a linear effect on labor costs. Between an automation of 1.0 (lowest) to 10.0 (highest), labor costs fall approximately 10% for each point of automation.

3.4 Finance

3.4.1 Stock Stock issues are limited to 20% of the company’s outstanding shares. You pay a 5% brokerage fee to issue stock.

3.4.2 Current Debt These are one year bank notes. Bankers will loan current debt up to about 75% of your accounts receivable (found on last year’s balance sheet) and 50% of this year’s inventory. They estimate your inventory for the upcoming year by examining last year’s income statement. Bankers assume your worst case scenario will leave a three to four month inventory, and they will loan you up to 50% of that amount. This works out to be about 15% of the combined value of last year’s total direct labor and total direct material, which display on the income statement.

There is no brokerage fee for current debt.

3.4.3 Bonds These 10 year notes carry an interest rate 1.4% higher than the current debt rate in the year they were issued. Bondholders are willing to lend amounts up to 80% of the depreciated value of the company’s plant and equipment, that is, the assembly lines. You pay a 5% brokerage fee to issue bonds.

Companies with better Bond Ratings have lower

interest rates.

If your company runs out of cash, you will receive an

emergency loan, which carries a 7.5% penalty above the

Current Debt interest rate. Emergency loans convert to

Current Debt in the following year.

3.5 Human Resources

3.5.1 Recruiting Investing in recruiting a better quality employee increases productivity and decreases turnover, which will reduce your labor

highest costs, at $9.25. Positioning material costs decrease 3% to 4% per year.

3.1.2 MTBF (Mean Time Before Failure) Each 1,000 hours of reliability (MTBF) adds $0.30 to the material cost. A product with 20,000 hours reliability includes $0.30 * 20,000/1000 = $6.00 in reliability costs.

3.2 Marketing

3.2.1 Promotion Budget Promotion expenditures reach diminishing returns at $3,000,000 for each product. Promotion buys awareness. You lose one third of your old awareness each year. Your promotion budget replaces lost awareness, and if the budget is high enough, makes gains towards 100% awareness. When a product reaches 100% awareness, promotion budgets of about $1,400,000 are needed to maintain it.

3.2.2 Sales Budget Sales budgets buy segment accessibility. Although you budget by product, any product within the segment’s fine cut contributes to accessibility. Diminishing returns are reached at a budget of $3,000,000 for each product. Diminishing returns in the segment, however, are not reached until $4,500,000. You need at least two products in the segment’s fine cut to reach 100% accessibility. You lose one third of your old accessibility each year. Your sales budgets replace lost accessibility, and if the budgets are high enough, make gains towards 100% accessibility. When a segment reaches 100% accessibility, sales budgets of about $3,300,000 are needed to maintain it.

Sales budgets also allocate the time spent by the sales force selling the product. The higher the budget, the more time the sales force gives to the product. This can be useful if you wish to emphasize one product over another within the same segment. For example, if you are splitting a combined $4,000,000 sales budget between two products, you might spend $3,000,000 with one and $1,000,000 with the other. Your salespeople would emphasize one product over the other.

3.3 Production

3.3.1 Plant Purchases Floor space for each unit of capacity is $6.00. Add $4.00 for each point of automation. Additional capacity at an automation rating of 10.0 would cost $6.00 + ($4.00 * 10.0) = $46.00 per unit.

3.3.2 Plant Sales When you sell plant, you get $0.65 on each original dollar. Depending on the depreciated value of the plant, you could make a gain or a loss on the sale which will appear as a gain or loss on the income statement.

Human Resources Entries

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3.7 TQM/Sustainability

The TQM (Total Quality Management)/Sustainability Module allows companies to invest in several initiatives. Different initiatives return different benefits. For example, some initiatives will reduce labor and material costs, others will reduce R&D cycle time (allowing you to re-engineer products faster), and others will increase product appeal or decrease administration costs. You don’t have to invest in all initiatives.

Differentiators might want to reduce R&D cycle times, to ensure their products are newer and better positioned. Cost leaders might want to reduce material and labor costs, allowing them to reduce prices while maintaining their margins.

The return on investment follows an S-curve (Figure 3.2). If you spend too little or too much the returns on your investment are poor. If you spend less than $500,000 in any initiative in a single round chances are you will see little return. An investment of $1,500,000 in a single round produces a cost-effective impact, investments over $1,500,000 become dollar for dollar less effective. Finally, for each initiative, an investment over $2,000,000 in a single round produces absolutely no additional benefit.

For each impact, complementary initiatives combine together to increase the total effect. You should bundle your investments in multiple initiatives that have an impact important to your company’s strategy. By spreading your investment among complementary initiatives you can invest more in each impact than the limit of $2,000,000 for an individual initiative. For example, to reduce material costs, companies should consider investing in both CPI Systems and GEMI TQEM Sustainability.

Aggressive spending in each initiative would involve spending $1,500,000 in year 1, $1,500,000 in year 2, and $1,000,000 in year 3.

The Best Case/Worst case table gives an indication of the return on investment. The impact is cumulative so cost reductions will continue in future years.

Refer to the flags on the TQM/Sustainability spreadsheet for a thorough discussion of TQM/Sustainability entries.

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and HR Admin costs. The effect of investing in recruitment is cumulative. You can spend up to $5,000 per person to hire better talent. The amount is added to the automatic recruitment charge of $1,000 for every new employee.

3.5.2 Training Investing in training also increases productivity and decreases turnover. Each year, you can assign up to 80 hours of training per employee, which increases productivity. Each training hour costs $20.00. When employees are in training they are replaced with other employees, so the Needed Complement will increase as training hours increase. The effect of investing in training is cumulative.

3.6 Human Resources Entries

Workforce Complement entries are made in the Production area.

Workforce Complement controls the number of workers employed by the company. Once production schedules are complete, the spreadsheet will display a Needed Complement. Matching the Workforce Complement to the Needed Complement ensures the company will have sufficient workers.

Having more workers than needed drives up labor costs as workers stand around doing nothing. Having fewer workers than needed results in worker overtime, which cuts into the efficiency of the workforce. Having significantly fewer workers than necessary will result in serious production shortfalls because labor will not be available to manufacture the sensors.

Always review the Workforce Complement entry at the

bottom of the Production area after making changes to the

Production Schedule, Training Hours or TQM/Sustainability

initiative

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