prisim business war games...• using the measures below, document how you want your company’s...
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Course Introduction
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Strategic FinanceCourse Introduction
The objectives of this class1. Maximize your ability to ID long-term, successful customers
2. Enhance your credibility with key decision-makers(speak their language), be a “trusted advisor”
3. Reduce potential loss exposure (management liabilityproducts)
Specifically…• “Walk a mile” in the owner’s shoes• How to read financial statements• Understand liquidity, solvency, and indebtedness• Understand quality of operations (e.g., efficiencies & effectiveness)• Use annual reports, if available, for risk AND opportunity
identification• See the impact of a company’s balance sheet on your ability to collect• See the connection between business decisions and financial metrics• Better understand drivers of Moody’s/credit ratings
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Agenda for Today’s Kickoff Webinar
• Welcome and Course Objectives
• The Business Challenge
• Communications during the Course⁻ Competition Web Portal⁻ Team CloudRooms™
• Pre-Work Q&A
• Team Introductions and Pop Quiz!
• Practice Period and SWOT Analysis
• End of Day Touch-Base and Q&A
Max
Dave
The Business Challenge
• You run a simulated company. A business “laboratory”• 4 to 5-person Teams• Competition with other Teams• You control:
⁻ Strategy⁻ Marketing⁻ Finance⁻ Operations⁻ Distribution
• 1 Decision Period = 1 Simulated Year• (If you haven’t already, watch the Course Intro Video and
Simulation Demo on the Pre-Work page)
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The “Setup”
• Your challenge: Turn around a strugglingmanufacturing company
• The Market⁻ Exhibits “normal” market behavior⁻ “Most” surprises come from competitors
• Demand sensitive to:⁻ GDP⁻ Interest rates⁻ Your decisions and your competitors’ decisions
• Decision Period = 1 Year
FIRM DECISIONS§ Sell Stock§ Issue Bonds§ Borrow / Repay Loan§ Purchase CD§ Distribute Dividends
Marketresearchreports
FIRM DECISIONS§ Dealer Openings / Closings
(By Region)§ Training and Support
PRODUCT DECISIONS§ Distribute in Market
FIRM DECISION§ Capacity Change
PRODUCT DECISIONS§ Schedule Production§ Distribute in Market
Decision Alerts!
FIRM DECISIONS§ Technology Investment (Interior, Styling,
Safety, Quality )
PRODUCT DECISIONS§ Vehicle Upgrade (Major, Minor, Cost
Reduction)§ New Vehicle (Create Concept, Move
to Development)FIRM DECISIONS§ Corporate Advertising (By
Region, Themes)§ Social Media§ Direct Marketing (Budget,
Target Segments)
PRODUCT DECISIONS§ Pricing (MSRP, Dealer
Discounts)§ Advertising (Budget, Theme)§ Promotion
The BusinessChallenge™
Decision Map
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PLANNING: “To-Be”Mission
Objectives/Goals
PERFORMANCEASSESSMENT
SurveysFinancials
Benchmarking
SITUATIONANALYSIS: “As-Is”
S.W.O.T.MarketTrends
Competition
ACTION PLANNING &EXECUTION
StrategiesTactics
Methodology – Each Year!
It’s a Competition – Who Wins?• You decide
⁻ Each team picks their own financial metrics from a list⁻ Scored as a proportional ranking⁻ How do you compare a small company to a large
company?• Also consider “non-financial” measures
⁻ Customer Preference⁻ Dealer Rating
• Details to follow on Wednesday…• Almost forgot… the WINNING TEAM will get a prize!
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Metric (KPI) Circle One Weighting* Financial Leverage Avg. Final* Asset Turnover Avg. Final* Return on Sales Avg. FinalProfit Dollars Avg. FinalSales Dollars Avg. Final
100%
Performance Measurement Worksheet Team: _____
• Using the measures below, document how you want your company’sperformance to be assessed.
• Assign a percentage to each measure you want. 40% is the highest weightingyou can give any one measure.
• You must have a minimum of 20% on each of the “3 ROE metrics” (markedwith *), and they must all be weighted equally.
• NOTE: You are expected to leave a sustainable company that you would like tocontinue leading.
Communications and Help
1. Competition Web Portal for course materials, videos, PDFs,etc:https://www.prisim.com/clientaccess/chubb/strategic_finance/portal/(same webpage where the pre-work was located)
2. Team CloudRooms™ - Your Team’s virtual war room!
3. For help in the CloudRooms:• Text Max anytime (24/7): (312) 757-0908• Format your text “Team <X> Instructor help”• An Instructor will join your CloudRoom as soon as possible!
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CloudRoom ™ Details
1. (When the time comes) Close the main meeting2. Open the “Chubb Strategic Finance Course” meeting invite3. Click the “Team CloudRoom” link4. Click “Join” (suggestion: Turn on the camera to meet teammates)5. Click Alt+Enter to go full screen (Alt+Enter to exit full screen)6. (Team liaison) Right click screen > click “Ask Control” > Click
“Request” > Click “Take”
Please stay away from:• Turning off the computer• Clicking “X” out!
• Get Help! Text Max at (312) 757-0908
Team Exercises1. Go to your CloudRoom2. Team Introductions3. Complete a Pop-Quiz
(PDF is posted on the Web Portal)4. 45-minutes total!
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Team-Introduction Exercise – 15-minutes
In your Team CloudRooms:
• Introduce yourselves to each other⁻ Name⁻ Company⁻ Area of expertise⁻ Something unique about you⁻ Favorite animal
• Identify your Team’s strengths and “improvementopportunities”
• Choose a Team Liaison (point of contact for PriSim)
• If you want, create a company tagline – short and pithy
(just kidding)
Pop Quiz - Preparation
• Pop Quiz Description:⁻ Complete the quiz in your CloudRooms⁻ Circle or fill-in your answers⁻ Answer questions as a Team (have a “Master Copy” for
grading)⁻ Due in 45-minutes, we’ll debrief as a group⁻ Highest Score gets $50,000,000…!
• Refer to:⁻ Case Study Guide⁻ Financials inside of StratSim⁻ Simulation “Decision Map”⁻ Simulation Software
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Congratulations! You and your team have been given control of a struggling manufacturing company.During this competition you’ll set your own Strategy. However, for the purpose of this quiz we have madeup a hypothetical one for you.
The following questions are focused only on the Results & Decisions and the Market sections of thesimulation.
OK, let’s assume that your mission is to offer the most stylish and best performing cars to discerningcustomers. You have (Q1) ___ years/periods to accomplish this mission.
Assume that one of your objectives is to grow sales revenue, and that you’ve set a goal of 100% revenuegrowth over the next 5 years. In order to grow your revenue you’ve decided to launch a Luxury cartargeted at the 5L microsegment. A Microsegment is the intersection of a consumer segment and apreferred vehicle class. Launch your 5L vehicle by creating a New Concept in Product Development andthen moving it into a Development Center. The preferred Size Range of your 5L should be between(Q2)________ (what range) and the Expected Price Range should be between (Q3)________ (whatrange).
You currently have (Q4)_____ (how many) development centers, and it takes 1 year to build a newdevelopment center. This determines how many development projects you can work on concurrently.Launching your 5L will occupy a Development Center for (Q5)_____ (how many ) years. Next year your 5Lwill still be in development - will you be able to increase/modify the 5L’s Styling during this time (Q6) Yesor No (circle one)? You have determined that your 5L’s MSRP will be $40,000, if the dealer discount is10%, how much sales revenue will YOU get for each vehicle sold (Q7)________? Under Technology, youcan invest in four technical capabilities. Currently, the maximum level of Styling your firm can incorporateinto your 5L is (Q8)________.
Team #: ______ Total # Incorrect: ____ Business Challenge™ Page 1
To increase your revenue you’ll also upgrade your Truck. According to the Size and MSRP “Position Map”, thetargeted Microsegment of your truck is (Q9)________. When launching an upgraded vehicle, that old modelinventory will be disposed of at a loss (Q10) True or False (circle one)? If you do a Minor Upgrade to yourTruck, the size can be increase/decreased by (Q11) ________ (how much).
To ensure your Truck is priced to generate a profit, you’ll want to monitor your contribution margin. You cansee last year’s Contribution Margins by looking at Product Contribution. What was the Contribution Margin(%) for your truck last year (Q12) ____%?
Your marketing efforts build awareness, generate interest, create an image, and communicate informationabout your products. Without adequate customer awareness, even your upgraded Truck will not sell well.Under Marketing, you can make both Corporate and Product Marketing decisions. Currently your Truck’sadvertising theme is (Q13) _________?
With a fifth product coming to your production line you have to pay attention to your plant capacity. TheManufacturing section provides actual production, sales, inventory and days inventory by product. At thecurrent production level, a plant capacity increase of at least (Q14)________ thousand units will allow youto NOT incur any Over Capacity charges starting next year. It takes (Q15)________ years to increase yourcompany's production capacity.
Keep in mind that it is the Dealership that actually makes the sale and provides follow-up services. UnderDistribution, you can change your number of Dealers by up to (Q16) _________ % of your current Dealerseach year.
Note that Financial Statements show the prior year’s financial performance. The Pro-Forma reports, on theother hand, use your (Q17) _________ Forecast and the cost of your decisions to calculate next year’sfinancial reports. The pro-form reports can be of great value as you experiment with different scenarios.
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Good Luck!1. Go to your CloudRooms2. Do Team Intros3. Do Pop Quiz4. Come back to this Webinar in 45-
minutes at ___:___
Team Introductions
• Each Team (1 minute)
ü What’s your Team Name?
ü What’s your tagline?
ü What strengths and “improvement opportunities”?
ü Favorite animals?
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Pop Quiz Review!$50,000,000 Prize
Self-graded – Be honest or youwill suffer unbearable pain in
the afterlife!
Practice Roundand SWOT Analysis
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Practice “Period 5” – Try This in StratSim!1. Results & Decisions/MARKETING – choose a PRODUCT(S) and:
• Change PRICE (MSRP) →• Change ADVERTISING →
• Change SALES FORECAST
2. MANUFACTURING:• Change SCHEDULED PRODUCTION for a product• Add CAPACITY
3. PRODUCT DEVELOPMENT:• Do a NEW MINOR UPGRADE• Develop a NEW CONCEPT
4. DISTRIBUTION – add DEALERSHIPS
5. TECHNOLOGY – increase an ATTRIBUTE
6. Go to FINANCE and pay yourselves a DIVIDEND!!
7. Look at your PRO-FORMA
8. Go to DECISION ANALYSIS and REVIEW your decisions
“To-Be”:FocusMission,
Objectives,Strategies,
Tactics
“As-Is”:LearnStrengths,
Weaknesses,Opportunities,
Threats
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Defining the “As-Is” with SWOT
“Discovery consists of seeing what everybody has seen and thinking what nobody has thought.”Albert Szent-Gyorgyi, in Irving Good, The Scientist Speculates (1962) US (Hungarian-born) biochemist (1893 - 1986). Discovered Vitamin C
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Asse
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Exte
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Strengths
S
Weaknesses
W
Opportunities
OThreats
T
“My conclusion… is that a good managerial record is far more a function of what businessboat you get into than it is of how effectively you row.”Warren Buffett, in The Essays of Warren Buffett, 2015
Example of SWOT
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Exte
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1. Positive NetProfit
2. Strong Cash Flowfrom Operations
Strengths1. Low Contribution
Margin onEconomy car
2. No R&Dinvestment
Weaknesses
1. Develop new AEVfor potentialmarket
2. Invest Cash inCDs at 3.0%
Opportunities
1. GDP forecastedto fall
2. Projected CarSales dropping;Gas Prices rising
Threats
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Do It Yourself SWOT Template
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Strengths Weaknesses
Opportunities Threats
Getting Started – Practice Round and SWOT…
1. Practice Round! Go crazy! Due at 4:45
2. ALSO conduct “As-Is” analysis:1. Review simulation data to assess:
• Strengths, Weaknesses, Opp’tys, Threats2. What can you DO with that data?
• Experiment with decisions, dynamics• Revise SWOT
3. Tomorrow: Conduct “To-Be” planning &make REAL decisions1. Develop Mission, Objectives, Strategies2. Execute your Tactics!
Finish by 4:45 and meet here for optional end-of-day touch base/Q&A
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End of DayTouch-Base
Q&A
Reflections and Takeaways…
1. Solo Exercise: Reflections and Takeaways• Reflect on what you’ve experienced in the class• Jot down some notes• What’s has resonated for you?• What can you apply to your job?• On Friday – you get to share 1 takeaway with the group
2. Do the self-study pre-work, watch the videos
3. Sleep well, and dream of triumphant victory
“We do not learn from experience… we learn from reflecting on experience.”Jon Dewey, philosopher and educator quoted in Measure What Matters, by John Doerr, 2018
“Learning from direct experience can be more effective if coupled with reflection –that is, the intentional attempt to synthesize, abstract, and articulate the keylesson taught by the experience.”Harvard Business School study, quoted in Measure What Matters, by John Doerr, 2018
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