Capsim 1. What is the formula for calculating your sales forecast? 2. Where do you get the information needed to fill in the formula? Below is a Capsim

1. What is the formula for calculating your sales forecast?

2.  Where do you get the information needed to fill in the formula?

Below is a Capsim worksheet I created to help you make decisions based on data.

Below is also a video on how to make decisions based on data.  Scroll ahead to the Sales forecasting portion of the video and answer these questions.

Please answer the following questions following the review of the video and worksheet.

Instructions

 Instructions 1 This workbook pulls formulae suggested in the Team Member Guide; follow the steps in the order they are numbered in each tab. 2 It’s assumed that you already have a strategy aimed at a particular market segment for each product– either Low End or High End. If you don’t have a strategy and target segment(s) chosen, then review the Six Strategies PowerPoint to determine the meaning of each strategy, suggested, conceptual direction for decisions, and which segment Seems suitable for that strategy 3 There are severalTabs representing several different calculations you should make in each decision round in early stages of the simulation When satisfied with the decisions, then save them and submit. See the document I gave on how to make decisions in Capsim, which describes how to use the simulation software. 4 All tabs are at the product level of decision making. Therefore, if you have more than 1 product, you need to make a copy of this workdbook and do the calculations again for your other product(s) 5 This workbook is for students doing Practice Rounds. It is to prevent you from being overwhelmed by the complexity of the information and decisions you must make. You should refine this approach as you gain experience analyzing the data. There is a lot more you can do to be successful than these fundamental calculations and decisions. You can even refine the formulae here as you learn more about the simulation. 6 This spreadsheet is not a substitute for reading the Team Member Guide or Six Strategies document. You should consult it whenever you need to make decisions in each functional category. 7 There may be more worksheets in this workbook that can display at once. Don’t forget to use the right-arrow and left-arrows to display workbooks. Do this so you see all worksheets in this file. The arrows are at the bottom left or bottom right of the workbook. 8 There may be values in each tab — ignore them and use your own. Watch out for columns that populate from other areas of the worksheet or calculated; don’t type anything into those cells.

1-R&D Decisions

 Research and Development Decisions Make sure you are following one of the six strategies your team agrees to. Make these decisions in Capsim’s online decision software The software shows you the new customer expectations for the next year in the form of a perceptual map Position your products so they appear in the ideal spot on the map according to your strategy Make sure you introduce new products early in the simulation, as in Round 1 (this is to ensure you see the benefits of the new product as soon as possible) Also be sure to make sure the revision date for all products is within the next year — not in the year after. If you get a revision date after this next year, be less aggressive in your R&D so your product updates within the next year (round).

2-Marketing Pricing Decisions

 Pricing Expectations Minimum Maximum Last Period’s price 20 30 From Capstone Courier from Desired Segment Price drift rate -0.5 -0.5 Next period’s price 19.5 29.5 Make sure your price is within the new range above, consistent with your strategy’s direction on price.

3- Marketing Sales Forecast

 For marketing decisions, you need to forecast unit sales for each product Product Daze-Traditional Sales Forecast for Next Round Calculation: You need a forecast for each product based on their segment A Last Year’s Segment Demand 7387 From Courier report B Segment’s estimated Growth Rate (%) 9.20% From Courier report: Enter as a percent C Expected Segment Demand 8066.604 C=A*(1+B) D Estimated Market Share Next Round (%) for the product in question 13.0% From Courier report Page 8 Potential Market Share for the product : This is a judgment call — you can use your market share for the product last round, and adjust it. Refine this formula as you get more experience with the simulation. Enter it as a percent as in 15% for example F Sales forecast next round 1048.66 F=C*D The above number (sales forecast next round) is a starting point estimate. Its purpose is to give you a rational basis for your sales forecast You may find you have to be more optimistic than this calculation suggests if your pro formas don’t show acceptable sales, profit, contribution margin, stock price, and market share Product Able — Low Tech Segment If you expect to make sales in more than one segment for this product, complete the calculations again for that second segment A Last Year’s Segment Demand 0 From Courier report — for the segment in which the product competes B Segment’s estimated Growth Rate (%) 18.30% From Courier report – from the Courier segment in which the product competes. C Expected Segment Demand 0 C=A*(1+B) D Estimated Market Share Next Round (%) for the product in question 2.9% From Courier report : This is a judgment call — you can use your POTENTIAL market share for the product last round, and adjust it. Refine this formula as you get more experience with the simulation. F Sales forecast next round 0 F=C*D Total Sales Forecast 1048.65852 This is the sum of the forecasts of the two segments, your final sales forecast

5-Awareness Spending

 This is money spent to make people aware of your product. It is called the Promotion budget. Able Traditional Awareness Dollars to Spend Calculation A Last Round Awareness 55% From Simulation Report for that product B Awareness loss -33% Standard as each round advances — from User Guide, page 6 C Starting Awareness next round 22% C=A+B D Target Awareness 60% Consult the awareness of top competitors and the strategy you are following for that product in the Six Strategies PowerPoint. They will give you an idea. This Is in the Courier E Desired Change in Awareness 38% E=D-C F Dollars to spend \$ 1,600 Look up the desired change in awareness on the y-axis of the chart below. Read across until you hit the curve. Read downward to the X- axis to get your required spending Note, new products get a 25% awareness due to the buzz from new products. You can start with row C as 25% for new products Ignore A and B rows for new products See page 6 of the User Guide for more info Spend 1.2 million on Promotion Budget

6-Accessibility Spending

 Accessiblity is how easy it is to buy your product. Money spent on accessibility goes to making websites available for purchasing, or more sales people to help customers buy. It is called the Sales Budget Here is the formula A Starting Accessibility 54% From Courier Report for as specific product B Desired Ending Accessibility 60% Get this by consulting the qualitative description in the Six Strategies document for your strategy, and comparing to your competitors C Desired change in accessibility 6% C= B-A D Dollars to spend 900 From the Sales Budget Accessibilty Curve — read % from row C on the Y-Axis until you reach the curve, read downward to amount you need to spend Spend 2.5 million on Sales Budget (Accessibility_)