Capsim: How to Win | Naveen Jindal School of Management (2024)

by Larry Chasteen - February 28th, 2020 - College Knowledge, EMBA, , JSOM Partners, Student Life

Answers from an expert to get you started on the right path

Are you looking to get ahead on the Capsim Foundation Challenge? Do you want to win at Capsim?

Hi, I am Dr. Larry Chasteen, a clinical professor and member of the Organizations, Strategy and International ManagementArea faculty in the Naveen Jindal School of Management at UT Dallas. During my experience as a professor, I haverealized that the best way to teach something is to make it interactive and practical. In my pursuit to find the perfectcurriculum, I came across Capsim,a business simulation that allows students to play the roles of the management team ofa multi-million- dollar company in a competitive marketplace. Capsim has four or five different simulations. I useFoundation.

Mentoring students in this simulation has been a rewarding experience, and some very successful stories have inspired usto continue working beyond the classroom. In this article, based on all my years and experience working with Capsim, Italk about the impact of the simulation and give you expert advice on six essential decisions to make in the game.

What does Capsim teach you?

I started using the Capsim Foundation Challenge in my classes because it is one of the most popular business simulationsin the world, with more than 900 universities participating. It is a key activity of Strategic Management (BPS 4305),the course in which you get to run a company. You get to practice making executive decisions regarding accounting,finance, research, design, and more. Many activities mimic real-life situations and revolve around designing products,pricing them, and finding the perfect marketing strategy to sell them.

At first, when you approach the simulation, everything looks a bit overwhelming because of the number of variables. Iencourage you to take on this hurdle, and soon, you will understand how it all works. My piece of advice is not to giveup; look to your instructor for help and work with all the materials you can find online. Even though there are lots ofthings to learn, depending on your learning style, you can find guides, presentations about making decisions, and videosmade by university professors and former Capsim students.

Indeed, the best way to master Capsim is to jump in and try it. I recommend reading the guides as you make your waythrough different decision sets. In my class, students start with the individual practice rounds until they feelconfident about the game. The participants have to familiarize themselves with all the rules and tasks before they canpick partners to form teams. I approach the simulation with teams because, in today’s complex business environment, youneed the expertise from many points of view to accomplish tasks the best way possible.

The goal of Capsim is to help students relate to what happens in the real world. OneThe secret for winning lies inlooking at your competition to see what they are doing, and then adapting and strategizing to do things better and makebetter decisions— just like in the actual competitive marketplace. There is no one set of “winning decisions,” but youcan improve by practicing different strategies.

First, you play eight rounds with your team. Each round represents one year of sales. You try different strategiesmaking decisions, and all your points count toward the grade. Then, I base the class ranking on profits and determine awinning team.

Now, let’s focus on six key aspects I believe will positively impact your outcome in the Capsim Foundation Challengesimulation.

What is TQM in Capsim, and how do you use it?

Total Quality Management (TQM) is an option in the game; it is a way to distinguish your products and make them better.It costs money to use this option, but it could make your product more attractive, reduce the cost of materials, lowerthe cost of labor, give you faster Research and Development (R&D) upgrades, add “green initiatives” and sustainableoptions. All of these will increase the demand for your products

Expert Tip: Using this option could potentially increase your total revenue in the long run. Make sure you set a budgetfor this option, so you don’t overspend

What to do with excess cash

You want to make sure you use cash; remember you are a business, not a bank. Your objective is to grow your company.

On one side, you start with one product; it could be a high-tech or low-tech product. You can invest the cash intodeveloping other products — because you can have up to five and you can optimize with TQM

On the other side, if you already have enough products, you can pay dividends to the shareholders or repurchase yourstock. Just like in the real world, your company gains value by showing revenue.

How to increase leverage in Capsim

Leverage is the ratio of equity to debt, and if you look at financial principles, you want to have a balance when itcomes to these variables. Depending on the situation, you can take out or pay back loans to increase or decrease yourdebt, or you can sell or buy back stock to increase or decrease your equity.

How to increase customer accessibility

If you spend money on marketing and sales, you will increase customer accessibility. However, you do not want to spend alot of money on this because it could have adverse effects.

Expert tip: My go-to advice is to evaluate the competition and match their spending, allot no more than $1,000 perround.

How to increase the stock price

To keep your business profitable, you want high contribution margins. If you are sitting on cash, try to pay dividendsto the shareholders. But make sure you only pay dividends after you have had earnings; dividends have to be less thanthe earnings-per-share.

How to decrease the chance of needing emergency loans

Use forecasting and manage your cash. Plan to have some left-over cash ($5M to- $8M) because you never know exactly howmuch you will sell. Set the R&D upgrades properly and plan for new products to come out within the next year, so the newproduct does not miss out on significant sales. Also note that for revisions, the product will sell with the oldparameters until the update takes place —so pricing can be tricky.

There are many other aspects to take into consideration. I hope that this guide helps you clear up some things and thatyou can begin the simulation on a positive track. If you are still wondering how to win at Capsim, enroll one of theBusiness Policy and Strategy courses here at the Jindal School, or leave a comment below.

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