FAQ in BUS201

Find the answer to some of the most commonly asked questions in BUS201 here.

General Capsim Advice

Are there any common mistakes people make in the first round we should know about and how do we avoid this?

The most common general mistake is to act without thinking. This leads to emergency loans, disgruntled team members, and loss of market share. The most common technical mistake is to end a round with decisions that you didn't intend to be final. This also leads to emergency loans, demoralized team members, and loss of market share. The solution to both is simple (not easy): Use rational decision-making based on best available information, manage your team dynamics, and put in place a norm for error-checking decisions when they are final and ready to be processed--after which no one is supposed to make any changes.

There are so many details and steps in the process of being successful in this simulation. How can I manage them?

Some teams have found that making a flowchart of each round's activities and decisions is helpful. Ensure that you take things one step at a time and truly understand how one decision affects another to manage all the details strategically.

Will our team fail if we have to end up taking an emergency loan?

You won't fail the simulation immediately, but it is a serious setback. You should be able to avoid it if you're careful.

Technical Capsim Questions

Will the simulation be giving us specific tasks to accomplish? Or will we be free to make decisions based on criteria and whatever we think is best at that moment?

The simulation gives you the same interface and decisions each round. What changes is the industry, customer preferences, and competitors' actions.

How do I forecast more accurately?

Forecasting can be done with three various methods. The first is the basic segment growth method. The second is the potential sales method. Lastly is the customer survey score method. Forecasting is vital to maintaining appropriate levels of inventory. See the Capsim guide for more details.

What should we increase our automation to?

Automation is an investment that lowers labor cost in producing a product. Capsim starts at 3.0 and goes up to 10.0 in automation ratings. Keep in mind that the higher the automation rating, the longer it will take to R&D your product.

How do we get maximum plant utilization?

Plant utilization is a measure of the productivity of the labor plants. In order to maximize it, you would produce twice as much as the first shift capacity. Think of it in a real world context: there are usually two shifts of workers during the day in a manufacturing plant. If you only utilize all the capacity in the first one, you have produced 100% of the amount you could for that shift. Therefore, to maximize the plant utilization to over 100%, you would utilize the entirety of the second shift.

Is it worth it to invest in automation?

Automation is an investment that lowers labor cost in producing a product. Capsim starts at 3.0 and goes up to 10.0 in automation ratings. Keep in mind that the higher the automation rating, the longer it will take to R&D your product.

How do I improve my contribution margin?

Contribution margin is a sales less variable costs per unit. It is essentially the company's return on the sales it makes. The higher the contribution margin, the better. To improve it, it's either reduced the variable costs (material and labor) or raise the price per unit.

How do we increase our stock price?

Stock price is dependent on a three factors: book value, earnings per share, dividends, and emergency loans. The ways to impact book value are issue stock, retire stock, retain profits, and pay dividends.

What is the difference between long-term debt and current debt?

The first difference between the two types of debt is the period to maturity, or the time that you must repay the debt. Current debt comes due in the next round after issuance whereas long term debt comes due 10 rounds in the future. Additionally, the interest rates for current debt are relative to your company's performance and the long term interest rates would be your current debt interest rate plus 1.4% extra.

Our cash position was positive when we submitted decisions, why did we get an emergency loan?

Emergency loans are encountered for a few reasons. One is that product forecasts were higher than actual sales and thus resulted in carrying inventory that was not anticipated. This in turn creates inventory costs that eat away at profit. Additionally, firms may encounter emergency loans when they fail to finance plant improvements (such as buying capacity or automation) and eat into their cash reserves. This, coupled with a marginally profitable round, will result into spending cash the business doesn't have. It's important to note that simply because a cash position was positive, it does NOT equal profitability.