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TABLE OF CONTENTS

Research and Development (R&D) ........................................................................ 2
Production ................................................................................................................. 5
Marketing.................................................................................................................. 7
Reminiscences and Reflections ............................................................................... 9
Appendix .................................................................................................................10
R&D .....................................................................................................................11
Production ...........................................................................................................12
Marketing ...........................................................................................................14











Research and Development (R&D)

The main function of R&D is to research and develop products that customers want.
Funding R&D is an investment in a company's future, and plays an important role in business.
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R&D are investigative activities that a business chooses to conduct with the intention of making
a discovery that can either lead to the development of new products or procedures, or to the
improvement of those existing. More specifically, these activities consist of selling at the right
price, revising products at the correct age, choosing the ideal position and ensuring decent
reliability. When these criteria are met, customers are happy and product sales increase.
Chesters R&D department was chartered with the responsibility to monitor these criteria.
Team Chesters goal was to become a niche cost leader. Our objectives included keeping
cost low while still providing our customers with products that meet their expectations. Team
Chesters R&D department researched the profitability of the five segment products to determine
which would be most cost effective and economical to produce. R&D determined that the High
End and Performance segment products are fast moving and need revision every year. This
would turn out to be too costly not only for the revision, but they also require high caliber
workers demanding large wages plus expensive material to manufacture those products. In
addition, the Size segment product has a 1.5 year revision time frame and was appropriate to
produce and market but only for a few years while we earn the most profit possible. However our
cash positions were very strong to compare to the other teams and we decided to continue the
production up to round 8. After two rounds, we also realized that we had very strong
competitors, Andrews, Digby Erie and Ferris. For example, from Round 3 to Round 8, Ferris
was the leading company in the High End segment. Their performance increased from 10.6 to
16.7 while their size decreased from 14.8 to 3.4 in Round 8. In order to stay strong as a company
and have a successful financial future, Team Chester decided to concentrate on the all five
segments and try to have 20 % market share in every segments and we achieved overall market
share of 20.43%.
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Chester determined that the Low End and Traditional products had longer revision time,
required lower labor costs, lower material costs and encouraged increased automation levels.
Considering these advantages, Team Chester decided to produce more on these two segments.
For the Traditional segment, we focused on its positioning to ensure it is close to its ideal spot on
the perceptual map. We monitored its age and tried to keep it at no more than two years. For
Round 1, Chester came first and Rounds 2, 3 4,5,6,8 and 7 came third in the Traditional segment
competing with Andrews and Erie. However, Chester always had lower prices than other
groups. In round 8, Chester came second in the Traditional segment with 2,475 Units sold. Our
low price of $24.00 per unit and 2900M promo- budget of gave us a competitive edge.
Unfortunately, the Age of our product did not meet the #1 Buying Criteria in these rounds
compare with other groups. For the Low End product, we focused heavily on keeping price
down since these customers place 53% importance on this criterion. We also monitored its
position to ensure it is close to its ideal spot and age. Reliability did not prove to be of high
importance (only 7%) for our customers thus we saved on material cost by keeping reliability
low. In comparing Round 1 and Round 2, Team Chester had the second lowest selling price for
both the Traditional and Low End segment products. Andrews was selling their Low end
product Acre at $21.50 a unit, Digby was selling dell at $22 a unit Erie was selling Ebb at $20 a
unit and we were selling Cedar at $21 a unit.
This strategy saved our company a lot of money for our future plans. We invested our
savings in revising in our products and automations. This strategy also allowed our company to
increase automation for our existing products. By doing so, we saw our material cost decrease
from $10.85 to $8.56 for our Traditional product Cake and material costs decrease from $7.05 to
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$5.23 for our Low End product Cedar. By the end of Round 8 the dramatic decrease in material
cost led to increased productivity and profit (see Appendix - R&D A).
Customer satisfaction is the key for the success of any business. From Round 1 to Round
8, we managed to meet our customers expectations by keeping our prices competitively low
compared with all the other teams; we basically positioned our products correctly; we maintained
decent age and reasonable reliability. By doing so, we satisfied our customers needs, increased
sales, and enhanced our shareholder and company wealth. Additionally, we are proud to say our
company received 30 out of 40 stars which was the third highest and received AAA ratings from
S&P which had only two teams for the simulation based on the Capstone Round Analysis
Reports for all 8 rounds.
Production

As a strategy to achieve its goal of becoming the cost leader in the traditional and low
and segments, Team Chester has been closely monitoring each products capacity requirements
and inventory levels throughout the simulation to avoid stocking out and holding too much
inventory Team Chester has been closely monitoring each products capacity requirements and
inventory levels throughout the simulation to avoid stocking out and holding too much inventory.
The team is aware that these oversights have financial drawbacks. Every time the team stocked
out resulted a direct loss of potential sales that could have been used for plant and product
improvements. These missed sales also could have also utilized the period costs spent for the
year at no additional cost for the company. Excess inventories were company investments with
no returns that cost the company stocking fees that in turn increased the companys variable
costs. To minimize these mistakes, the team considered the industry demand and growth rates in
forecasting demand for its target segments, which in turn gave the least possible amount of
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stocking costs and potential revenue loss. After cumulatively summing the excess inventories
for all the products per round for all teams for the eight rounds, Team Chester managed to keep
its average total carry over inventory level at the lowest level when compared to all teams. This
translates into Chester incurring the least amount of stocking expenses throughout the
competition. Team Chester total inventories were 3,549 units while the other teams ranged from
3,828 units to 16,889 units. Team Chester therefore averages the lowest with 443 units per
round for all eight rounds as the others teams average ranged from 481 units to 2107 units (see
Appendix - Production - A).
With the objective of becoming the cost leader in traditional and Low End
segments, the team used tactical adjustments such as reducing the price and produced more on
these segments. Team Chester used the strategy to steadily increase the automation levels
starting at 4 and ending at 10 for these segments. As Team Chester spent $4 per unit of capacity
for every unit increase of automation level, the team reduced labor costs by about 10% the
following year after the automation increase (see Appendix - Production - B). As for all the
segments that the team was focusing on, automation was kept at a constant level of 6 throughout
the rounds until the products gained market share of 20%. As a team we did not introduce any
new products in the market, nor purchased additional capacity, this decision was a mistake and it
did cost us. The team also utilized second shifts as necessary to ensure that customer demands
were met and labor costs were kept to its minimum. However as a result of increased automation,
overtime costs were offset. The team did not reduce automation in any rounds, thereby avoiding
retooling costs.
It was obvious that by round 4, as evidenced by a declining market shares, that there were
several teams eyeing the same market segments that Team Chester was focusing on. However,
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the team was able to maintain healthy margins by keeping close watch of its contribution margin
and ensuring that it was at least 30%. The team managed to sustain a contribution margin that
ranged from 34.1% to 55.9% in seven of the eight rounds (see Appendix - Production - C). This
was done by keeping variable costs like labor, material, and stocking fees at minimal. Team
Chester had the Second lowest variable costs average of $99.5M among 6 the teams throughout
the competition while the other teams were averaging from $104.9M to $116.9M (see Appendix
- Production - D). Because the team was able to keep its variable costs to a minimum, which is
in this case the second lowest overall average, the team was able to compete in terms of product
prices and was thus able to achieve its goal of becoming the cost leader in the Traditional and
Low End segments and still be profitable. Team Chesters cost leadership will continue in the
coming years as long as healthy margins are maintained by keeping variable and period costs
minimal.

Marketing

Chester sets out to produce and market products tailored for the all five segments. Our
marketing goal was to ensure we market products that the customer wants. Our strategies to
accomplish such objectives encompass providing customers with products that are of the lowest
price since price is 53% important for our Low End segment customers, ensuring adequate
awareness and accessibility of our products through ideal promo and sales budgets, effectively
positioned our products to match its ideal age inside its segment circle since age is 47%
important to our Traditional segment customers and providing products with acceptable quality.
In addition, we also strive to build a strong sustainable customer base by nurturing mutual
relationships and long term loyalty with them. By incorporating these strategies, our marketing
department was armed to provide growth and success for our company.
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One of our competitive strengths was to control our price to be the lowest amongst our
competitors. The price range for Traditional product is from $19.50 to $29.50. Chester
marketed its Traditional products at the lowest price of $24.00 in Round 8. This price was not in
the lower third of the range as outlined in our strategy but it was certainly the lowest amongst all
teams. Our Low End products were being marketed for $17.00. Again this was the lowest price
offered for this product and as such it was not necessary to sell in the lower third price range.
From these statistics, we can conclude that we did excellent in keeping our price below all of our
competitors. See Appendix Marketing chart and graph A for price comparison of the
Traditional and Low End segments for all teams.
Our strategic plan includes increasing our customer awareness for our Traditional product
to 70% and awareness for Low End product to 60% by year 8. To accomplish these projections,
we invested a total of $4.6M in promo budget and achieved 87% awareness of Traditional and
for Low End products. Other teams did not do better than us. Andrews invested $1.725M in
promoting Able and achieved 80% awareness in round 8. It is logical to conclude that an
increase in promo budget would result an increase in customer awareness. As customer
awareness increases so is the potential for increased sales.
We also projected to achieve and sustain 70% customer accessibility by the end of Round
5. During Round 5, we invested $2.4M in Traditional sales budget and achieved 70% customer
accessibility. We invested $2.5M in Low End sales budget and achieved 73% accessibility on
our Low End products. Judging these results we can conclude we basically achieved our 5 year
goal for awareness and accessibility. We observed that other companies that invested more in
their sales budget achieved more accessibility. Erie invested $1..09M in their Egg sales budget
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and was awarded with 900% accessibility. An increase in accessibility therefore tends to
increase product sales.

Reminiscences and Reflections

Looking back at this simulation, we must conclude that it was a wonderful and
challenging experience even though stressful at times. However Team Chester bond together to
in a cohesive way to build and managed a successful and profitable company. We strategically
decided on a plan to manufacture and market in all five segments products and we were pleased
with our results. Sometimes we were off our target ratios or not matching our production with
capacity or forecast. Sometimes we did not invest adequately in the detail diversity section of
our promo and sales budgets. Sometimes we were spending too much in areas that wouldnt
have been cost effective. However, we were quick to observe our mistakes and took prompt
corrective actions. Our understanding of the competitive simulation increased with each round
and this adds to our enthusiasm. We have achieved some critical success during our simulation.
We earned 30 stars. We marketed the lowest cost Traditional and Low End segment products.
Despite that we produced and marketed the least variety of products; we made decent profits and
never had a need for an emergency loan.
Something we could have done differently to beat the competition would have been to
phase out the products we were not interested much faster, purchase plant and equipment
capacity earlier and introduced more alternative products in our targeted segments. We could
have invested more in our automation to reduce our labor cost and we could have better
forecasting that would help to stop the stock outs our products. These steps can be implemented
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moving forward. However, overall Team Chester was very pleased with the way we managed
Chester Inc.





























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Appendix
R&D

A. Material Costs
Product Segment Rd 1 Rd 2 Rd 3 Rd 4 Rd 5 Rd 6 Rd 7 Rd 8
Cake Traditional $10.85 $10.66 $10.26 $9.25 $8.28 $8.08 $7.92 $8.56
Cedar Low $7.05 $5.76 $4.81 $4.81 $4.55 $5.05 $4.25 $5.23
Cid High $15.96 $14.87 $15.22 $14.85 $14.00 $13.96 $13.70 $13.43
Coat Performance $15.53 $15.34 $15.43 $14.20 $13.58 $13.34 $13.15 $12.94
Cure Size $13.73 $13.54 $13.27 $12.00 $11.45 $11.22 $11.03 $10.83
Total $63.12 $60.17 $58.99 $55.11 $51.86 $51.65 $50.05 $50.99



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Production

A.Contrib. Margins in%
0
10
20
30
40
50
60
Round1 Round2 Round3 Round4 Round5 Round6 Round7 Round8
Andrews
Baldwin
Chester
Digby
Erie
Ferris



Andrews Baldwin Chester Digby Erie Ferris
Round1 28.2% 28.5% 28.5% 33.1% 29.0% 32.9%
Round2 38.9% 21.0% 33.2% 32.2% 31.41% 31.7%
Round3 40.2% 12.2% 30.4% 28.9% 28.1% 27.0%
Round4 43.3% 26.7% 34.12% 33.0% 35.0% 28.5%
Round5 48.0% 24.6% 43.2% 33.5% 40.3% 30.9%
Round6 49.1% 2.9% 43.7% 34.2% 43.4% 29.65%
Round7 52.6% 12.9% 58.8% 35.4% 49.5% 34.4%
Round8 56.1% 4.3% 55.9% 29.7% 46.3% 25.6%
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B.Excess Inventory Units for all Teams by Round
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Andrews Baldwin Chester Digby Erie Ferris
Round1
Round2
Round3
Round4
Round5
Round6
Round7
Round8

Unit of Excess Inventory
Company Rd 1 Rd 2 Rd 3 Rd 4 Rd 5 Rd 6 Rd 7 Rd 8 Average Total
Andrews 943 590 977 1228 1714 3430 1417 1590 1486 11889
Baldwin 1640 4140 3554 1691 1046 1750 1144 1894 2107 16859
Chester 1557 277 505 400 129 582 1 98 443 3549
Digby 391 409 914 1031 1510 1204 0 936 799 6395
Erie 457 321 291 433 523 1247 0 581 481 3853
Ferris 514 349 647 517 1060 1197 0 904 648 5188
C. Automation Compared to Direct Labor Cost by Round
Automation Direct Labor Costs
Round Cake Cedar Cid Coat Cure

Rd 1 4 5 3 3 3 $39,100
Rd 2 4 5 3 3 3 $34,505
Rd 3 4 5 3 3 3 $41,883
Rd 4 6 6 6 6.1 6.1 $52,144
Rd 5 6 6 6 6.1 6.1 $40,140
Rd 6 10 10 6 10 10 $40,209
Rd 7 10 10 6 10 10 $12,754
Rd 8 10 10 6 10 10 $20,959

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Variable Cost for all Teams by Round
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
Round0 Round2 Round4 Round6 Round8
Andrews
Baldwin
Chester
Digby
Erie
Ferris














Variable Costs (Labor,Material,Carry)
Round Andrews Baldwin Chester Digby Erie Ferris
Round 0 $72,513 $72,513 $72,513 $72,513 $72,513 $72,513
Round 1 $95,398 $80,787 $93,816 $76,922 $77,957 $74,813
Round 2 $94,610 $59,473 $80,850 $116,372 $82,321 $104,787
Round 3 $86,290 $41,090 $94,678 $140,409 $112,060 $138,573
Round 4 $95,174 $48,324 $110,826 $155,305 $102,451 $135,490
Round 5 $91,750 $27,197 $97,629 $116,930 $108,955 $110,353
Round 6 $94,087 $18,999 $98,110 $131,553 $97,723 $92,613
Round 7 $108,161 $27,731 $60,196 $137,446 $75,169 $86,020
Round 8 $95,196 $20,899 $87,658 $170,433 $110,193 $117,252
Average $104,147 $49,626 $99,534 139,735 $104,917 $116,551
Total $833,179 $397,013 $796,276 $1,117,883 $839,342 $932,414
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Marketing
A.Traditional and Low End Segment Price Comparison
Traditional Segment

Low End
Segment
Price Comparison

Price Comparison
Able $ 24.00

Acre $ 19.5
Baker $ 27.50

Cedar $ 17.00
Cake $ 24.00

Dell $ 19.5
Daze $ 25.50

Eat $ 18.5
Echo $24.00

Ebb $ 17.00
Egg $ 24.00

$




22
23
24
25
26
27
28
Able Baker Cake Daze Echo Egg
Price

Low End Segment Price comparison
15.5
16
16.5
17
17.5
18
18.5
19
19.5
Acre Cedar Dell Eat Ebb
Price

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