Business Strategy - Professor Gary Whitney University of California, San Diego

A comprehensive strategic simulation will be one learning tool. This simulation, Capstone^®;, models an oligopoly in which teams of students will manage companies in competition with five others. Performance will be judged in multiple ways--one is financial performance in direct competition with other companies. Your company performance on this simulation will be closely monitored and your financial results will be posted online in the Capstone^®; Courier and on the bulletin board next to my office. Although the Capstone^®; book is free, you must register for it and pay the fee ($39).

During the simulation, companies will be required to write various reports as listed in the schedule. Each is described in more detail.

Simulation performance evaluation in this course is similar to a large company. You will do well if your company does well. Each member of your management team will get the same grade for the team performance. Expectations for the products are described in the appendixes.

Past experience has suggested the simulation teams of four people are most effective. Larger teams spread the work out more but they have the increased burden of coordinating meetings. You will have the opportunity to select your own team members.

Poorly performing company members may be fired by following proper procedures. These procedures require a documented verbal warning, a written warning, and a final written termination notice. A week must elapse between each phase to allow time for improvement. See me for details.

Cases

The other main learning tool will be cases from the Wheelen and Hunger book. You must come to class prepared to discuss the issues facing the case company and offer solutions. In addition, you will write one case analysis. The final exam will be a case analysis.

Resume

You will be required to write a resume that you would use to search for a job in the year 2006"after your first five years professional work.
Summary

The simulation provides an executive perspective of one company over a long period of time. Cases provide an executive perspective of multiple companies at snapshots of time. The resume is to give you a forward-looking personal perspective. Together they make complementary learning tools.

GRADES

Points

You must have a current USD computer account by the second week of school. This will allow you connect to WebCT from any Internet browser anywhere in the world.

WebCT will provide access to PowerPoint slides, class schedules, and grades. WebCT is the official grade sheet for the class. You can use it to check your grades throughout the semester and see your final grade before the Registrar mails it to you.

Products

Each of the graded products is explained below. Due dates are listed in the schedule.

Learning environment

The educational mission of the School of Business is to prepare future business leaders. However, the ability and willingness to learn reside in the individual. High levels of learning can be achieved only if all members of the USD community understand and respect their mutual obligations. Each of us defines the quality of this learning experience through our daily actions and choices.

Excellence in a learning environment is attainable only if faculty and students adhere to the ideals that support high levels of learning. Outlined below is a set of specific expectations"for both students and faculty"that support these ideals.

These mutual expectations are neither trivial nor obvious. They are not trivial because all of us must consistently attend to details and align attitudes with behavior in order to achieve excellence in the learning environment. They are not obvious because of the diversity of cultures and prior experiences among the faculty and students.

All assignments for the semester are explained below. The first group is team assignments for which all team members get the same grade. Individual assignments follow.

All papers must be typed and should be should be stapled together without covers, binders, etc.

Team products

All team members must sign team papers.

Capstone^®; Strategic Plan

This paper should follow the outline below and contain the SWOT matrix and enough explanation that someone not familiar with your industry could understand it. See W & H, Chapter 5 and, in particular Figure 5-2 on page 112. Use your collective judgment to identify your company's strategy for the rest of the simulation.

Executive summary (Capsule describing your strategic direction.)

Mission

Mission statement

Objectives (be specific including final stock price, ROS, market share, and position in overall ranking)

Management

Executive profiles (describe yourselves)

Organization structure and job descriptions (describe your management team responsibilities)

General policies (guidelines for operating your company that are fundamental and change very little regardless of strategy)

Personnel (e.g., union relations and team management)

Shareholders (describe your responsibilities to your equity holders e.g., high dividends, rapid capital appreciation, steady profits. Be specific.)

External environment, threats and opportunities

Economic forecast (situation analysis from Capstone^®; book)

Market forecast (at a minimum, this will include units sold by segment)

Competitors' probable strategies (Describe each of your competitors' strategy and forecast future actions that will affect your market position.)

Strengths and weaknesses

Market position

Products

Production capacity

Financial

Management skills and willingness to take risk

Strategic choice (In one or two paragraphs, explain how you matched your strengths and weaknesses with threats and opportunities to select a strategy.)

Tactics (Explain the operational details of how your will execute your strategy. This may occur in phases, especially if you have chosen a combination strategy, e.g., "Stability until stock price exceeds $10.00 and then growth in new venture.")

Marketing

Phase 1...

Phase 2...

Production

Finance

Contingency plans (Explain what you will do if your forecast turns out to be completely wrong.)

Appendixes

Pro forma financial statements (complete through the last year)

• Income
• Cash flow
• Balance sheet
• Stock price and ratios Control graphs (Select the four to six variable that are crucial to the success of your chosen strategy and show your graphs to-date and projected.
• Capstone^®; Financial Performance
  

All companies will be evaluated against the same financial performance criteria. These criteria are easy to understand, realistic, and represent criteria that might be used in a young, technology-driven, San Diego business this year.

Think of managing your company for the benefit of current stockholders (including yourself). All shareholders want to see a high stock price at the end because this represents real value. We can sell the stock. On the other hand, we may not want to sell the stock at the time that you finish as managers. We may want to hold on to the stock because we may believe future earnings will be even greater. Furthermore, we do not want to have stock in a company that has been manipulated to create a stock price bubble that is set to burst. Therefore, we are interested in a company that has a significant market share because that gives it certain market power. However, we do not want market share at the expense of low margins. We also want to own stock in a company that makes a decent Return on Sales (ROS).

Therefore, grades for company financial performance will be weighted as follows.

Capstone^®; produces a series of -Success Reports- for you. After logging in, under -The Class, CAPXXXX,- select -success reports.- Chose the option called -Final Industry Scores- which will be used for grades. Each team has a weighted score within their industry.

To convert the weighted score to a course grade, I will take the highest team score and convert it to the maximum possible toward the grade (100 out of 100). Then I will take the lowest team score and convert that to a C equivalent (about 75 out of 100). I will use judgment on the low end equivalent. If the lowest team made little or no effort, the bottom score could be lower.

Once the top score (guaranteed 100) and the bottom score are set, the others will be arrayed linearly between them.

Lessons Learned from Capstone^®;
Each team should write a short (five pages maximum) description of strategic and decision making lessons learned during the simulation. It can take the form of advice you would give to a team of your peers just beginning the simulation.

The paper could be a continuation of, -If we were to start all over again, here are the things we learned to do and you should do them also.- And, -If we were to start all over again, these are the things we would do differently.- Do not focus on decision details like, -we should have raised prices in 2004 to $37.50.- Extract broad strategic lessons like, -we should have created a rolling three year pro forma cash flow statement because it would help plan for future production capacity.-

You may use a bullet format if you like but it must be in full sentences.

Individual assignments

Resume

You must write a one-page resume dated June five years from now. Assume you are leaving your existing position and seeking new opportunity. The resume should include at least the following elements:

• Objective
• Education
• Job history
• Qualifications and skills
• Contribution to discussions

Each day that we discuss a case or other general issue in class I will take note of your contribution to the quality of discussion. You may volunteer or I may call on people at random. Obviously, if you are not present or are unprepared, you get no contribution credit. On the other hand, if you offer significant insights based on careful preparation, you will get maximum credit for the day's contribution. At the end of the semester I will tally the credits and assign points based on your contributions to the discussion.

Grades and levels of participation are listed below.

Scale Level of Participation

A consistent leader in class participation. Is always prepared and has identified key issues (e.g. financial ratios, key competitive issues, etc.). Responds to comments of the professor and other students. Participation is of the highest quality; comments are relevant, thoughtful, and precise.

Reasonably frequent participator in class. Occasionally takes the lead in introducing a new topic. Responds to comments and/or questions posed by the professor, but not as frequently to comments made by other students.

Occasional contributions to the class. Occasional responses to the remarks of other students. Rarely, if ever, initiates a discussion.

Ideas and illustrations are occasionally forwarded from personal experience in response to the professor's questions. Does not respond to other students. Minimal case preparation.

Takes no part in classroom discussion or activities or is not prepared for discussion when called upon.

Written cases

You are assigned one case based on the first letter of you last name for written analysis during the semester. Written cases must be submitted before the class begins for the day. They will not be accepted for any reason after that. If your case is late, it will be returned ungraded.

Your case analysis should be written as a memoran dum.

Assume that we are a management-consulting firm and that I am your immediate superior. Furthermore, assume I have asked you to review and analyze the situation in the case and to offer action recommendations. The memorandum is to communicate your recommendations and reasons to me. Thus, your grade is based upon (1) the clarity of the logic that underlies your recommendation, (2) the use of the facts in the case to support your recommendation, and (3) the use of appropriate material from this and all courses taken in college.

A case evaluation matrix follows. Case feedback will be marked on the form. There is no perfect recommendation in a case.

COOPERATION

You may discuss the case with your colleagues before writing it however you must write every single word yourself.

FORMAT

Communicating your ideas is the function of the written analysis. The assumption of the assignment is that you are submitting a report to a decision maker who has limited time to read and understand your recommendations; there are stringent requirements on your memorandum.

• Do not use binders, title pages, cover sheets, or any other pieces of paper that are not a direct part of your memo.
• Correct spelling and proper grammar are essential.
• The memo is limited to five double-spaced pages. Exceeding the limit will reduce your grade. You may append supplemental material such as financial analysis beyond the limit but be aware that it can only back up conclusions from the text. A busy executive will read it only it if he or she questions your logic or calculations.
• Papers will not be accepted after the classroom discussion of the case.

STRUCTURE

Executive summary

The opening paragraph, not to exceed half a page, should contain a brief general statement of the problem or situation, the reason a decision is needed at this point, and a statement of your recommendation. The opening paragraph cannot be written until all of your analysis is complete. Thus, though it is the first part of your memo; it must be written last!

The remainder of your memo should consist of the reasons for your recommendation. The following structure is suggested but need not be followed blindly if a variation produces a more lucid analysis.

Problem statement

This is a specific statement of the problem or issue facing the company, usually just a few sentences. Be careful not to imply a solution here or you will limit the analysis and the search for alternatives

Analysis

Identify dominant internal strengths and weaknesses and analyze interactions with the external threats and opportunities facing the company.

Alternatives

Review possible alternatives to resolve the issues. Note the advantages and disadvantage of each possible solution.

Recommendations

Explain your specific recommendations, why you selected that particular action, and how it solves the problem. It is likely to include a financial projection. Be sure your recommendations can be supported with available company resources.

The detailed analysis may follow the -Format for Case Analysis- on page 328 of the text and the more detailed outline on pages 252 to 259. This outline is somewhat like a checklist as it lists everything that might be relevant. Part of your job is to isolate and write about only the important issues and omit the others.

Midterm exams will be multiple-choice questions covering Capstone^®; and assigned W & H chapters.

Final exam

The final exam will be a case analysis. Details will be announced in advance.

Peer evaluation

Capstone^®; has a peer evaluation component that must be completed online at the end of the semester. Each team member will assess his or her peers to reflect their contributions to your Capstone^®; company. This will be converted into a 100 point scaled peer evaluation.

Failure to turn in your peer evaluations may result in a grade of Incomplete for you.