R&D Strategy of Ferris Company
This page consists of Research and Development Strategy of virtual company Using the Capsim Business Simulation. In the simulation, five-person teams ran a fictitious business and competed against five other businesses, for 8 Rounds, in an industry with two distinct sectors.
Simulation Conditions
Research & Development is very important for all of us because, in the sector each of us started with the same product with same performance, size, and MTBF. In the Low-Tech sector, first thing customer looks for is price and it continues as, age, reliability, and ideal position. In the High-Tech sector, first thing customer looks for is ideal position and it continues as, age, price, and reliability.
R&D Strategy In The Beginning
While creating our R&D strategy, we focused on three essential purposes/requirements. The first one was consistency. We know that advantage is not the result of a single decision, but the cumulative result of a series of decisions, actions, and behaviors over time. Therefore, in our first team meeting, we discussed what do we expect from the R&D department not only first weeks but throughout the course. This also helped with the second essential purpose of us, alignment. The R&D department tends to be isolated from the rest of the organization. We know that organizations thrive when their strategies are aligned to the realities of the environment or the broader organizational context in which they operate and we decide to meet every Monday to make decisions together, aligned with other departments. Coherence is the last purpose of our R&D strategy. It provides an integrating mechanism to ensure these tactical decisions will be strategically efficient.
Round 01
Round 1 | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 6.4 | 13.6 | 23000 | 3 |
Low-Tech Top prod. | 5.3 | 14.3 | 17000 | 2.13 |
High-Tech Top prod. | 7 | 13 | 21000 | 2.34 |
In the first round, we decided to focus on the Low-Tech sector with our Fast product. We did not change the ideal position of the product -which is, in low-tech, the least important customer buying criteria- therefore we did not spend too much money on Fast product in terms of R&D. Also, by not changing the ideal position of Fast, we were able to keep its age high, which is the second important factor in the Low-Tech sector.
We could have decrease the performance of the product to attract more customers in the Low-Tech, but it was both pricy and time-consuming, and it was the least important criteria (%9) for the customers, and the market demands will be like what Fast product has. By not decreasing it we were able to get a high market share also in the High-tech sector. We only increased the MTBF of Fast, which was the third important criteria in Low-Tech. This way we keep our R&D cost of the product low and revision date was much earlier than the other companies which is in the first month of the year. We chose to sell our product at $35 and with our low R&D cost arranging relatively high price, helped us making high profits.
We also wanted to sell Fast in High-Tech sector. Even though, it’s age is higher than the expected, which has the second place in high-tech buying criteria, we were able to pass most of our competitors and Fast had the 2nd place in high-tech. With our low costs and high sales, we think we did a great job in the first round.
​
Our R&D cost for the Fast product was low so, we spent our budget to develop a new product for the next round, Ferry. It had a perfect ideal position for the high-tech sector therefore, its focus is the High-Tech sector. It had a relatively low MTBF value, but we know that reliability is the lowest buying criteria for high-tech customers by 13%. By keeping our MTBF value low, we were able to get a closer revision date. The product had an ideal position, and it started to next round at the age of 0.
Round 02
Last round we have already planned a new product, Ferry, therefore, this round we did not plan a new product. Our first product Fast, was in an ideal place in both Low- and High-Tech sectors, and its age was 2.76. It has a relatively low price; therefore, we sold the Fast quite well this week. In the Low-tech industry, it had an 18% market share and become the 2nd top item. In the High-tech segment, Fast was the 3rd most popular product and it had a 10% market share. Basically, Fast did greater than our expectations.
Title | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 7.1 | 12.9 | 21000 | 2.8 |
FERRY | 8.1 | 11.9 | 1600 | 0.7 |
Low-Tech Top prod. | 5.3 | 14.3 | 18000 | 3.13 |
High-Tech Top prod. | 7.5 | 12.5 | 22000 | 1.97 |
On the other hand, our second product Ferry did not satisfy our expectations. Its main focus was the high-tech segment. It had perfect performance and size for the high-tech customers, and we knew that the ideal position is the most important buying criteria of the high-tech customers. It also had the perfect age according to high-tech customers. According to high-tech customer’s buying criteria, Ferry had perfect values in both ideal position and age which has a total of 63% importance for the customer’s criteria. Even though it meets high percentages of buying criteria, it did not sell as we expected. It had only 8% market share in high-tech which is lower than our first product Ferry. We realized our first mistake last week, which was Ferry having a really low MTBF, but we needed to wait one more week to change that. Besides that, we analyzed the top products in the high-tech segment and noticed that, although our costs were low, we overpriced the product, and high-tech customers also made choices according to price.
Round 03
Title | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 7.1 | 12.9 | 21000 | 3.8 |
FERRY | 8.1 | 11.9 | 20000 | 1.7 |
Low-Tech Top prod. | 6.5 | 13.8 | 20000 | 2.4 |
High-Tech Top prod. | 8.5 | 10.5 | 20000 | 1.12 |
This round our company did worse than we expect. In terms of R&D, our first product Fast, did great, but we overproduced it. Its performance and size are in ideal position according to our strategy which is selling Fast both in low-tech and high-tech. But its age is getting older therefore we will consider making a revision.
On the other hand, Ferry, our second product sold also pretty good but still we produced too many and this is the main reason we had problems. We increased Ferry's MTBF. Also, after seeing other teams’ results, we noticed that its performance -8.1- is lower than top products in high-tech -8.5-, and its size also little higher than the top products. Finally, we launched our 3rd product which is Fuel, and its focus is low-tech segment, and we are thought setting a low price.
Round 04
This round we realized our mistakes clearly. Last week we produced way more than we should therefore we spend much money on the inventory. This week we decided to sell the products in our inventory and not take an emergency loan.
​
In terms of R&D, we decided to make a revision on our Ferry product. We did not have much money therefore we spend most of the R&D budget on one revision.
Title | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 7.1 | 12.3 | 21000 | 2.7 |
FERRY | 8.1 | 11.9 | 20000 | 2.7 |
FUEL | 6.4 | 14 | 19000 | 0.8 |
Low-Tech Top prod. | 7.5 | 12.5 | 20000 | 3.97 |
High-Tech Top prod. | 9.5 | 10.5 | 20000 | 1.27 |
In the middle of the following year, our product Ferry will launch with a great ideal position for the high-tech segment. Ferry is the only product that revised in that round, we think that as an advantage. With its new ideal position and younger age, during the second part of the year, we hope to sell more and get profit. When we look at the Customer Survey results, it is obvious that ideal position is the most important buying criteria and price do not have that much effect, so we are considering to making list price of Ferry high. We did not make changes to our other products due to financial problems.
Round 05
Round 5 | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 7.6 | 11.8 | 21000 | 2.21 |
FERRY | 10.2 | 9.8 | 19000 | 2.12 |
FUEL | 6.9 | 13.5 | 19000 | 1.27 |
Low-Tech Top prod. | 7.5 | 12.2 | 20000 | 2.9 |
High-Tech Top prod. | 9.8 | 10.2 | 20000 | 1.53 |
Our first product Fast, was in an ideal place in both Low- and High-Tech sectors, and its age become 3.2 at the end of the year.
​
Fast has a relatively low price; therefore, we sold the Fast quite well this week. In the Low-tech industry, it had an 11% market share and become the 5th top item in low tech segment.
​
Our second product Ferry did not satisfy our expectations again. Its focus was the high-tech segment. It had perfect performance and size for the high-tech customers, and we know that the ideal position is the most important buying criteria of the high-tech customers.
But we think that this week it price was too high to sell good amounts. Also, its revision date was at the middle of the year, maybe that effected the sales. When we look at the Customer Survey results, last round it was obvious that ideal position is the most important buying criteria and price do not have that much effect, so we made the list price of Ferry high, 44$. Unfortunately, Ferry did not sell as we thought. We tried to set Ferry according to Customer Surveys of last year, but we can see that even 37 points, Bapple sold the most.
Round 06
Our first product Fast, is in an ideal place in Low -Tech sector, and it still continuous to sell in High-tech sector too. This year we did a little revision on Fast and increased its performance, and its age become 2 at the end of the year. It has a relatively little high price; but still, we sold-out the Fast quite well this week. In the Low-tech industry, it had an 10% market share and its customer survey increased 8 points. Also, our third product Fuel sold-out. We did not spend any budget on that product and its cost is very low besides the other products in the market, so it is nearly all profit for us.
Round 6 | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 7.8 | 11.6 | 21000 | 2.02 |
FERRY | 11 | 9.3 | 20000 | 1.87 |
FUEL | 6.9 | 13.5 | 19000 | 2.27 |
Low-Tech Top prod. | 7.8 | 12.7 | 19000 | 1.81 |
High-Tech Top prod. | 11.2 | 9 | 23000 | 1.58 |
Our second product Ferry, finally, did satisfy our expectations this week. Its main focus is the high-tech segment. It has perfect performance and size for the high-tech customers, and we know that the ideal position is the most important buying criteria of the high-tech customers. Last week we made the list price of Ferry high, 44$, its price was too high to sell good amounts therefore we decreased it this week. We did a little revision on Ferry too by increasing its performance, decreasing size, and increasing MTBF. It is on the 3rd place in High-Tech segment and has 10% market share. Our only regret is producing less.
Round 07
Round 7 | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 8.3 | 11.6 | 21000 | 1.88 |
FERRY | 11.9 | 9.1 | 20000 | 1.76 |
FUEL | 7 | 13 | 19000 | 2.04 |
Low-Tech Top prod. | 7.8 | 12.7 | 19000 | 2.81 |
High-Tech Top prod. | 12.2 | 7.8 | 22000 | 1.25 |
This week, in terms of R&D, we did revision to all of our products. We increased Fast’s performance 0.5 and it helped us keep its age 0.1 lower than the last round. After we increased our sales on Ferry, we made a good revision to keep it that way. We decreased its size only 0.2 but we increased its performance 0.9 moreover with the automations we did, we were able to still lower its material cost. Finally, with our third product Fuel, we only increased its performance 0.1 and decreased its size 0.5. Its effect on material cost was lower than 1 therefore Fuel still serves its performance as a low quality, low cost, money machine.
Round 08
In this round, since it is the final one, we wanted to close our company in a good place. We had money that we can spend but we did not want to spend it on reversion, therefore, we did small revisions with low cost and close revision date. For our first product Fast, we decided to increase its performance by .5 and decrease its size only .3 and its revision date was in the middle of April.The only problem was that its age was a little low for the low-tech segment which is around 1.8 at the end of the year. Performance increase also raised our material cost but with TQM investments, we decreased material cost by nearly a dollar.
Round 8 | Performance | Size | MTBF | Age |
|---|---|---|---|---|
FAST | 8.8 | 11.3 | 21000 | 1.8 |
FERRY | 12.3 | 8 | 20000 | 1.63 |
FUEL | 7 | 13 | 19000 | 3.04 |
Low-Tech Top prod. | 7.8 | 12.7 | 19000 | 2.81 |
High-Tech Top prod. | 12.2 | 7.8 | 22000 | 1.25 |
On our second product Ferry, we increased its performance by .4 and decreased its size by 1.1. Its revision date was at the end of June. Its material cost increased only a little with the TQM investments. These investments were a little hard for us because of our previous mistakes so in the high-tech sector, we were little behind from our competitors. But we did our best from learning our mistakes.
​
Finally, our last product Fuel did great again as always. Its performance and size are the worst ones in the market, but with 350 products it again sold out. In the industry, it has the second-lowest material cost and has no other expenses therefore it is pretty good in terms of profit.
To generally review our performance in terms of R&D we can say that we were not very good at calculating the results of our actions. It was quite hard to see the outcomes in a new system we are learning. Eventually, we did some mistakes such as giving low MTBF, not caring much about the ages of the products, or checking out the effects of high material cost but throughout the process we learned from our mistakes and thrive every week to be better.