{\rtf1{\fonttbl {\f2 Times New Roman Italic;} {\f3 Times New Roman Bold;} {\f4 Times New Roman;}

{\f5 Times New Roman;} {\f6 Times New Roman Italic;} {\f7 Times New Roman;} {\f8 Times New Roman;} {\f9 Times New Roman Bold;} {\f10 Times New Roman Bold;} {\f11 Times New Roman Bold Italic;} {\f12 Times New Roman;} {\f13 Times New Roman Bold;} {\f14 Times New Roman;} {\f15 Times New Roman;} {\f1000000 Times New Roman;} }{\colortbl; \red0\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; \red255\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; \red255\green0\blue0; \red255\green0\blue0; \red0\green0\blue0; \red0\green0\blue0; }\viewkind1\viewscale100\margl0\margr0\margt0\margb0\deftab80\dntblnsbdb\expshrt n\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg1}{\bkmkend Pg1}\par\pard \ql \li1080\sb0\sl-414\slmult0 \par\pard\ql\li1080\sb0\sl-414\slmult0 \par\pard\ ql\li1080\sb10\sl-414\slmult0 \up0 \expndtw0\charscalex97 \ul0\nosupersub\cf2\f3 \fs36 StratSim Frequently Asked Questions \par\pard\qj \li1079\sb0\sl-260\slmult 0 \par\pard\qj\li1079\ri1149\sb34\sl-260\slmult0\fi0 \up0 \expndtw-2\charscalex1 00 \ul0\nosupersub\cf4\f5\fs22 The \ul0\nosupersub\cf5\f6\fs22 frequently asked questions\ul0\nosupersub\cf4\f5\fs22 are grouped into categories, in the follow ing order. (Some of these are based in \up0 \expndtw-4\charscalex100 part on q uestions from Chris Moorman\u8217?s WEMBA Strategy class.) \par\pard\ql \li1800\ sb166\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 P ricing and Cost \par\pard\ql \li1800\sb7\sl-253\slmult0 \up0 \expndtw-4\charscal ex100 Finance \par\pard\ql \li1800\ri3708\sb10\sl-250\slmult0 \up0 \expndtw-4\ch arscalex100 Manufacturing and Inventory \line \up0 \expndtw-4\charscalex100 Tool s, Research, and Customers \line \up0 \expndtw-4\charscalex100 Technology \par\p ard\ql \li1800\ri3277\sb19\sl-240\slmult0 \up0 \expndtw-4\charscalex100 Upgrades and New Product Development \line \up0 \expndtw-4\charscalex100 Development Cen ters \par\pard\ql \li1800\ri3905\sb4\sl-260\slmult0 \up0 \expndtw-4\charscalex10 0 Dealership and Distribution \line \up0 \expndtw-4\charscalex100 Entering Decis ions \par\pard\ql \li1800\ri4489\sb0\sl-260\slmult0 \up0 \expndtw-4\charscalex10 0 B2B Marketing \line \up0 \expndtw-4\charscalex100 Licensing \par\pard\ql \li18 00\sb1\sl-235\slmult0 \up0 \expndtw-4\charscalex100 Miscellaneous \par\pard\ql \ li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb276\sl-276\slmult0 \up0 \expndtw -3\charscalex100 \ul0\nosupersub\cf9\f10\fs24 PRICING AND COST \par\pard\ql \li1 079\sb243\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs 22 What is the \ul0\nosupersub\cf10\f11\fs22 expected price range\ul0\nosupersub \cf8\f9\fs22 ? \par\pard\ql \li1079\sb0\sl-252\slmult0 \par\pard\ql\li1079\ri957 \sb16\sl-252\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 T he expected price range reflects the beginning of the purchase process, when the

customers say to themselves, \line \up0 \expndtw-2\charscalex100 \u8220?What pr ice am I generally expecting/looking to pay for a vehicle?\u8221? Obviously, d uring the actual purchase \line \up0 \expndtw-3\charscalex100 process, customers prefer a lower price, but early in the process, they have a general sense of wh ether a vehicle is \line \up0 \expndtw-2\charscalex100 out of their price range, or else is priced so low that it won\u8217?t have the features they want. The customer uses the \line \up0 \expndtw-2\charscalex100 expected price range to d etermine the vehicles in her/his consideration set, along with vehicle class and size. In \line \up0 \expndtw-2\charscalex100 effect, expected price range is primarily a positioning issue before the actual buying process begins. \par\pard \ql \li1079\sb248\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\c f8\f9\fs22 How do you change the MSRP of a product? \par\pard\qj \li1079\ri1000\ sb242\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 O n the consumer marketing decision screen, click on the product, and then you'll be able to change the marketing \up0 \expndtw-4\charscalex100 mix decisions for that product. \par\pard\ql \li1079\sb246\sl-253\slmult0 \up0 \expndtw-4\charscal ex100 \ul0\nosupersub\cf8\f9\fs22 Is there a way to calculate the profit-optimiz ing price of a vehicle? \par\pard\qj \li1079\sb0\sl-250\slmult0 \par\pard\qj\li1 079\ri1061\sb20\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4 \f5\fs22 The test market (tools - test market) is the best approach for optimizi ng price on current products. Concept tests \line \up0 \expndtw-2\charscalex10 0 (tools - concept test) is the best place for new products (or upgrades). Of course, competition will likely change \line \up0 \expndtw-3\charscalex100 (mark eting mix or new products), so these studies provide guidance, but they can\u821 7?t include competitive strategy. \par\pard\qj \li1079\ri1089\sb242\sl-260\slmul t0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Beaut's MSRP is set up at $39,834, however its average retail price is $40,088. Is it technically p ossible for \up0 \expndtw-4\charscalex100 StratSim customers to pay more than th e sticker price? \par\pard\ql \li1079\sb246\sl-253\slmult0 \up0 \expndtw-3\chars calex100 \ul0\nosupersub\cf4\f5\fs22 Yes, it typically happens in one or more of the following circumstances: \par\pard\ql \li1439\sb247\sl-253\slmult0 \up0 \ex pndtw-2\charscalex100 1) Demand is high relative to supply, allowing dealers to mark up prices. \par\pard\qj \li1439\ri936\sb2\sl-260\slmult0\tx1799 \up0 \expn dtw-3\charscalex100 2) Dealer margins are tight on the vehicle and so they mark it up closer to industry standards for that product \line\tab \up0 \expndtw-4\c harscalex100 class. \par\pard\qj \li1440\ri1230\sb0\sl-260\slmult0\tx1800 \up0 \ expndtw-3\charscalex100 3) Since dealers are independent businesses, they may l ook at market conditions and realize that a higher \line\tab \up0 \expndtw-3\cha rscalex100 price is advantageous to their interests. This would typically happ en on higher-end vehicles. \par\pard\ql \li1080\sb226\sl-253\slmult0 \up0 \expnd tw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What is the difference between ba se cost, unit cost and dealer price? \par\pard\ql \li8800\sb168\sl-276\slmult0 \ up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 1 {\shp {\*\shpinst\shpleft1050\shptop1494\shpright11190\shpbottom1514\shpfhdr0\sh pbxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz16\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 10140}}{\sp{\sn geoBottom}{\sv 20}} {\sp{\sn pVerticies}{\sv 8;4;(0,20);(10140,20);(10140,0);(0,0)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }} {\shp {\*\shpinst\shpleft1080\shptop6312\shpright3412\shpbottom6334\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz109\shplid1 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 2332}}{\sp{\sn geoBottom}{\sv 22}}

{\sp{\sn pVerticies}{\sv 8;4;(0,0);(2332,0);(2332,22);(0,22)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g2}{\bkmkend Pg2}\par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0 \sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\s l-253\slmult0 \par\pard\ql\li1080\ri4671\sb79\sl-253\slmult0 \up0 \expndtw-4\cha rscalex100 \ul0\nosupersub\cf4\f5\fs22 Base Cost = estimated unit cost based on 100,000 units of production \up0 \expndtw-4\charscalex100 Unit Cost (COGS) = act ual cost to manufacture based on actual volume \up0 \expndtw-4\charscalex100 Dea ler Price = price you are charging the dealer for the vehicle \line \up0 \expndt w-4\charscalex100 Your margin = dealer price - unit cost \par\pard\ql \li1080\sb 0\sl-253\slmult0 \par\pard\ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw-4\charsca lex100 \ul0\nosupersub\cf8\f9\fs22 What impacts COGS in StratSim? \par\pard\ql \ li1080\ri830\sb248\sl-252\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\ cf4\f5\fs22 Economies of Scale. There are definite economies of scale present in the automobile industry and in StratSim as \line \up0 \expndtw-3\charscalex10 0 well. An obvious example would be use of existing capacity (a fixed cost). If two firms have the same capacity, \line \up0 \expndtw-3\charscalex100 the fi rm that operates at 90% capacity utilization will enjoy a cost advantage over a firm operating at 70% \line \up0 \expndtw-3\charscalex100 capacity utilization, presuming, of course, that each firm sells the vehicles that it produces and doe sn\u8217?t carry them \line \up0 \expndtw-3\charscalex100 in inventory. A seco nd example is distribution. Distribution costs are generally fixed, so again, a firm that sells \line \up0 \expndtw-3\charscalex100 more vehicles per dealer e njoys a cost advantage where the fixed costs of the dealership network are sprea d over \line \up0 \expndtw-2\charscalex100 more vehicles. There are also some fixed costs included in the general and administrative expenses on the income \l ine \up0 \expndtw-3\charscalex100 statement which are the same for all firms, so again, spreading these costs across more unit sales provides a \line \up0 \expn dtw-4\charscalex100 relative advantage. \par\pard\qj \li1080\ri1293\sb248\sl-253 \slmult0 \up0 \expndtw-2\charscalex100 Learning Curve Effects. In StratSim, th ere are learning curve effects present at both the product level and the \up0 \e xpndtw-2\charscalex100 class level. Therefore, all things being equal, a firm that has higher market share with a particular product, or \up0 \expndtw-3\chars calex100 higher market share of a particular vehicle class will enjoy a cost adv antage over those products or firms with \up0 \expndtw-4\charscalex100 lower uni t market share. \par\pard\ql \li1080\sb0\sl-252\slmult0 \par\pard\ql\li1080\ri85 6\sb16\sl-252\slmult0 \up0 \expndtw-2\charscalex100 Savings through Product Desi gn. It is important to recognize that the product design process has an impact on \line \up0 \expndtw-2\charscalex100 unit variable costs. Part of this is d etermined by the specifications of the product, with higher values increasing \l ine \up0 \expndtw-2\charscalex100 the unit costs all things being equal. Howev er, one of the major sources of lowering unit costs is provided \line \up0 \expn dtw-2\charscalex100 through the upgrade process. When a vehicle is upgraded, a long with creating the new product design, the \line \up0 \expndtw-3\charscalex1 00 engineers working on the product also attempt to find ways to lower the cost of the product without sacrificing \line \up0 \expndtw-2\charscalex100 quality. Your firm can calculate the impact of the cost savings of an upgrade by choosi ng to upgrade a product \line \up0 \expndtw-2\charscalex100 and making no change s to the design. Compare the base cost on the original (\u8220?previous\u8221? ) product design with the \line \up0 \expndtw-3\charscalex100 upgrade. This di fference is the cost savings due to re-engineering the product design. Realize that you may both \line \up0 \expndtw-2\charscalex100 change the specifications and enjoy savings due to the upgrade process itself. In addition, products th at share \line \up0 \expndtw-3\charscalex100 common design elements (e.g. HP of 120 - same engine, or safety of 3) also create cost savings by share common \lin

e \up0 \expndtw-2\charscalex100 components across vehicles. Although these sav ings are minimal, it should be considered during the product \line \up0 \expndtw -3\charscalex100 design process. \par\pard\qj \li1080\ri1166\sb248\sl-253\slmult 0 \up0 \expndtw-2\charscalex100 Savings through Investment in Technology Capabil ities. Finally, a firm may invest in technology capabilities \up0 \expndtw-3\c harscalex100 which both allow your firm to create vehicles with higher specifica tions, but also lower costs on the existing \up0 \expndtw-2\charscalex100 vehicl es. An estimate of the savings based on your current product portfolio and pro jected sales is provided on \up0 \expndtw-4\charscalex100 the technology capabil ities input screen. \par\pard\ql \li1080\ri873\sb247\sl-253\slmult0 \up0 \expndt w-3\charscalex100 It is essential that your firm considers the effectiveness of using these cost savings techniques in the context of \line \up0 \expndtw-2\char scalex100 your overall strategy. Cost savings are a net positive whether it im proves your profit margin or it is passed on to \up0 \expndtw-2\charscalex100 th e customer in hopes of gaining more sales. However, remember that it is implem entation of \u8220?smart\u8221? cost \line \up0 \expndtw-2\charscalex100 savings that is ultimately rewarded. Having the largest production capacity is only a n effective cost savings if that \up0 \expndtw-2\charscalex100 capacity is used (and sold). Having a low cost vehicle is only effective if consumers still wan t to purchase it. \line \up0 \expndtw-3\charscalex100 Thus, the successful manag er is always looking for ways to lower cost, but keeps an eye on whether that co st \line \up0 \expndtw-4\charscalex100 savings is ultimately rewarded on the bot tom line. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-3\charscalex10 0 \ul0\nosupersub\cf8\f9\fs22 How do you determine the Mfg price and margins aft er making technology investments? \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\p ard\ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\ cf4\f5\fs22 See the pro-forma product contribution. \par\pard\ql \li1080\sb247\s l-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 How can I estimate unit cost from base cost if the production is less than 100,000 units ? \par\pard\ql \li8800\sb108\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\n osupersub\cf1\f2\fs24 StratSim FAQs - Page 2 \par\pard\sect\sectd\fs24\paperw122 40\paperh15840\pard\sb0\sl-240{\bkmkstart Pg3}{\bkmkend Pg3}\par\pard\ql \li1080 \sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\s b0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb7 9\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Use t he pro-forma product contribution report, but make sure you have entered the pro duction decision. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb 14\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What are the other means to increase efficiency (i.e. reduce COGS/manuf expenses PER $ sales)? \par\pard\qj \li1080\ri1034\sb250\sl-250\slmult0 \up0 \expndtw-3\char scalex100 \ul0\nosupersub\cf4\f5\fs22 In addition to investing in technology, th ere are two other ways of reducing COGS - upgrading the vehicle and \line \up0 \ expndtw-3\charscalex100 increasing the volume. When you do an upgrade, enginee ring also tries to reduce costs in the vehicle. (You can \line \up0 \expndtw-2 \charscalex100 see the approximate unit cost with the upgrade compared to the or iginal to see the savings.) Costs will also go \line \up0 \expndtw-2\charscale x100 down with volume (economies of scale / experience effects). Also, do note that inflation is pushing your COGS \line \up0 \expndtw-4\charscalex100 up. \pa r\pard\ql \li1080\sb0\sl-252\slmult0 \par\pard\ql\li1080\ri1178\sb17\sl-252\slmu lt0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Retooling costs we performed a major upgrade on two of our models (they will be out in Period 3) . This \up0 \expndtw-3\charscalex100 means we write off the current inventory an d produce essentially from 0. We understand this, but when \up0 \expndtw-3\chars calex100 putting our model production targets in the decisions, we get hit with retooling charges on both \line \up0 \expndtw-3\charscalex100 models...why is th is? We think it has to do with machine tool volume - are we close in our thinkin g here? \up0 \expndtw-3\charscalex100 Also, will there ever be a period where al l retooling costs will be 0? We did not anticipate having to shell \up0 \expndtw -4\charscalex100 out more money for the upgrades. \par\pard\ql \li1080\ri944\sb2 46\sl-255\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Reto

oling is required for major and minor upgrades and also increases in volume beyo nd what has been produced \up0 \expndtw-3\charscalex100 before for a vehicle (ty pically this means you are reassigning some of your capacity from one vehicle to another). \up0 \expndtw-2\charscalex100 Minor upgrades have lower retooling cos ts, however. So there are probably two reasons for your retooling... one \up0 \expndtw-2\charscalex100 is the upgrade itself and the second is (perhaps) an in crease in volume. Presuming no increase in volume or \line \up0 \expndtw-2\cha rscalex100 further upgrades, you will have no retooling costs in the following p eriod. \par\pard\qj \li1080\ri1320\sb241\sl-260\slmult0 \up0 \expndtw-3\charscal ex100 \ul0\nosupersub\cf8\f9\fs22 Our products are the Boffo, Buzzy and Boss. We are getting hit with large charges for retooling and we \up0 \expndtw-4\charsca lex100 haven't done any upgrades. Can you explain? \par\pard\qj \li1080\ri1083\s b246\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Th e retooling costs you are seeing are associated with the increased production of the Buzzy and the Boss in the \up0 \expndtw-3\charscalex100 previous period, no t necessarily due to product upgrades. Whenever production is increased over the previous \line \up0 \expndtw-2\charscalex100 period, you will be assessed retoo ling costs. Another good reason to carefully manage your inventory and plan \u p0 \expndtw-4\charscalex100 production carefully. \par\pard\ql \li1080\sb247\sl253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What is in cluded in the G&A costs? \par\pard\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li 1080\ri953\sb20\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4 \f5\fs22 G&A (General and Administrative) is a catch all for a number of indirec t expenses such as an admin cost for each \up0 \expndtw-3\charscalex100 vehicle sold and admin cost for each dealership (plus add'l for building dealership) as well as a fixed admin cost \up0 \expndtw-4\charscalex100 for every team (same). \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slmult0 \ par\pard\ql\li1080\sb237\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosup ersub\cf9\f10\fs24 FINANCE \par\pard\ql \li1080\ri1032\sb241\sl-256\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Amortization and Depreciat ion - I assume that some of our expenses are treated as period expenses and \lin e \up0 \expndtw-3\charscalex100 others are depreciated over their useful lifetim e. (I understand the cash flow implications.) I couldn't tell \line \up0 \ex pndtw-2\charscalex100 what the depreciation rate was for different classes of in vestments. Specifically, what is the depreciation \line \up0 \expndtw-2\charsc alex100 rate and method for the following expenditures: Increasing our Product ion Capacity, Improving our \line \up0 \expndtw-3\charscalex100 Technology Capab ility, Opening New Dealerships, R&D spending (Minor and Major Upgrades, New \lin e \up0 \expndtw-3\charscalex100 Products). Are there any other expenses that a re depreciated? What is the amortization rate? \par\pard\ql \li1080\sb247\sl-2 53\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 In general, the simulation tries to keep expenditures as current as possible, so for openin g dealerships and \par\pard\qj \li1080\ri1016\sb0\sl-260\slmult0 \up0 \expndtw-2 \charscalex100 technology capability, these are expensed in the current period. R&D is expensed over the course of the product \line \up0 \expndtw-3\charscale x100 development project (1, 2, or 3 years). Production capacity is depreciate d over 10 years. The simulation speeds \line \up0 \expndtw-3\charscalex100 up depreciation/amortization rates mainly to make sure most investment decisions im pact the firm during the \par\pard\ql \li8800\sb0\sl-276\slmult0 \par\pard\ql\li 8800\sb13\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs 24 StratSim FAQs - Page 3 {\shp {\*\shpinst\shpleft1080\shptop11472\shpright2172\shpbottom11494\shpfhdr0\s hpbxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz255\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 1092}}{\sp{\sn geoBottom}{\sv 22}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(1092,0);(1092,22);(0,22)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s

p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g4}{\bkmkend Pg4}\par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\sb0 \sl-240\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri178 8\sb142\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 simulation rather than after they\u8217?ve retired. This may not be in compli ance with GAAP, but it improves \up0 \expndtw-4\charscalex100 accountability for decisions in the simulation. \par\pard\ql \li1080\sb0\sl-250\slmult0 \par\pard\ ql\li1080\ri1257\sb22\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupers ub\cf8\f9\fs22 If we reduce capacity, does it reduce deprecation expense from th e initial capacity investment? Or, will \line \up0 \expndtw-3\charscalex100 de precation expense continue at its current rate as defined by StratSim - at the 1 0-year straight-line \line \up0 \expndtw-4\charscalex100 schedule? \par\pard\ql \li1080\ri1340\sb248\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersu b\cf4\f5\fs22 When you reduce capacity, you are actually selling off some of you r equipment. There are some expenses \up0 \expndtw-3\charscalex100 involved in t he selling of the equipment that are determined by the age of the plant. So, yes , the straight-line \up0 \expndtw-3\charscalex100 depreciation will continue, bu t the amount will change due to the selling off of the equipment. Reductions are \up0 \expndtw-3\charscalex100 expensed on the un-depreciated values, starting w ith the oldest plants. \par\pard\qj \li1080\ri1428\sb242\sl-260\slmult0 \up0 \ex pndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 The manual states that depreci ation will remain constant unless PP&E is purchased or sold. Does that \up0 \exp ndtw-4\charscalex100 mean that we assume that depreciation goes into infinity? \ par\pard\qj \li1080\ri1690\sb240\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \u l0\nosupersub\cf4\f5\fs22 Not to infinity, but over 10 years straight line. Si nce the game is played up to 10 years, you can count on \up0 \expndtw-3\charscal ex100 depreciation remaining constant (unless you increase capacity) over the pl ay of the game. \par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-4\charsc alex100 \ul0\nosupersub\cf8\f9\fs22 What constitutes G&A expenses? \par\pard\qj \li1080\sb0\sl-253\slmult0 \par\pard\qj\li1080\ri1100\sb14\sl-253\slmult0 \up0 \ expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 G&A is a catch all for a num ber of indirect expenses such as an admin cost for each vehicle sold and admin c ost \up0 \expndtw-3\charscalex100 for each dealership (plus additional for build ing dealership) as well as a fixed admin cost for every team (same). \up0 \expnd tw-3\charscalex100 Training and support for dealerships is included, as well as factors related to receivables and payables that you \up0 \expndtw-4\charscalex1 00 can't directly control. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expnd tw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What comprises manufacturing over head costs in the income statement? \par\pard\ql \li1080\sb247\sl-253\slmult0 \u p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The Manufacturing Overhe ad costs are the costs involved with the maintenance and general upkeep of your \par\pard\qj \li1080\ri951\sb7\sl-253\slmult0 \up0 \expndtw-3\charscalex100 manu facturing facilities, including repairs to the building, repairs and preventativ e maintenance of manufacturing \up0 \expndtw-2\charscalex100 equipment, etc. P art of the costs calculation is the age of the facilities and equipment, so the retooling process \up0 \expndtw-3\charscalex100 that occurs with vehicle product ion changes and increases in your production capacity adds newer, more efficient \up0 \expndtw-4\charscalex100 facilities and equipment and lowers the manufactu ring overhead costs. \par\pard\qj \li1080\ri1056\sb242\sl-260\slmult0 \up0 \expn dtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Does the stock price impact any of the purchasing behaviors in the simulation? Are we being measured by \up0 \ex pndtw-4\charscalex100 stock price in any way? \par\pard\qj \li1080\ri1343\sb249\ sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 No, sto ck price itself does not impact customer preferences. However, it is likely to be an indication of other \up0 \expndtw-2\charscalex100 factors that may be wea k or strong that do impact it. Also, stock price would impact a firm's ability to raise \up0 \expndtw-3\charscalex100 addition capital, which can then be used to influence purchase behavior. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pa

rd\ql\li1080\sb15\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\c f8\f9\fs22 Do you have any general factors or tips to raise your stock price? An y thing you can send along those lines? \par\pard\qj \li1080\ri1153\sb247\sl-253 \slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Stock price i s an indicator of the current position of the firm. Profitability, growth, fut ure potential, as well as \up0 \expndtw-2\charscalex100 market risk, are all fac tored into stock price. Please carefully consider your current position, your strategy, and \up0 \expndtw-2\charscalex100 the execution of your strategy. Si nce stock price is an overall measure of the current position of your firm, you \up0 \expndtw-3\charscalex100 will want to consider all factors that go into mak ing your firm a profitable one, thinking long-term. \par\pard\qj \li1080\ri1253\ sb242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 E quity issuance: In the equity markets, when a company announces that it will s ell additional shares of \up0 \expndtw-2\charscalex100 stock, this usually cause s the stock price to fall. Does our simulation react in the same manner? \par\ pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupers ub\cf4\f5\fs22 If all other things remain unchanged, yes. \par\pard\ql \li1080\s b247\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Is the long-term interest rate dependent on the size of the debt issue? \par\pard\ ql \li8800\sb0\sl-276\slmult0 \par\pard\ql\li8800\sb92\sl-276\slmult0 \up0 \expn dtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 4 \par\pard \sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg5}{\bkmken d Pg5}\par\pard\ql \li1080\sb0\sl-250\slmult0 \par\pard\ql\li1080\sb0\sl-250\slm ult0 \par\pard\ql\li1080\sb0\sl-250\slmult0 \par\pard\ql\li1080\ri876\sb104\sl-2 50\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The amount of debt a firm issues will most certainly have an impact on the interest rate. In the pro-forma, you \line \up0 \expndtw-2\charscalex100 can experiment with d ifferent levels of debt to see probable impacts on the interest rate. Note, howe ver, that the \line \up0 \expndtw-2\charscalex100 final rate is also dependent u pon how things go during the year, and it will always be less than the short-ter m debt. \par\pard\qj \li1080\ri1060\sb242\sl-260\slmult0 \up0 \expndtw-2\charsca lex100 \ul0\nosupersub\cf8\f9\fs22 The StratSim book implies that an interest ra te will be paid on the excess cash. What is the rate of return \up0 \expndtw-2 \charscalex100 that we'll EARN on our excess cash after we've paid off our short -term debt? \par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-2\charscalex 100 \ul0\nosupersub\cf4\f5\fs22 See the economic outlook report (where GDP and o ther economic data are listed) for the current cash rate. \par\pard\qj \li1080\s b0\sl-250\slmult0 \par\pard\qj\li1080\ri1005\sb20\sl-250\slmult0 \up0 \expndtw-3 \charscalex100 \ul0\nosupersub\cf8\f9\fs22 We are sitting on a large pile of cas h: $5.5 billion. We know that we can give this back to the shareholders \line \u p0 \expndtw-3\charscalex100 by increasing the dividend payout. We also know we c an use this to pay debt...but is there a way to use this \line \up0 \expndtw-3\c harscalex100 cash to finance a new product launch? Could something like this be paid directly out of our cash reserves? \par\pard\ql \li1080\ri972\sb249\sl-252\ slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yes, you may c hoose to use it to invest in new products, upgrades, technology, etc. All of t hose will impact your \up0 \expndtw-2\charscalex100 income statement, however, a nd cannot be handled as a cash-only transaction. Retiring bonds is certainly a n \up0 \expndtw-3\charscalex100 option and an improvement on the cash rate of re turn, but don\u8217?t forget to consider the penalty for calling the \line \up0 \expndtw-2\charscalex100 bonds early. There are two other ways to give this ca sh to shareholders; one is to increase dividends, but another \up0 \expndtw-2\ch arscalex100 is to buy back shares of stock on the open market. And finally, re member that you are receiving interest on that \up0 \expndtw-2\charscalex100 cas h, so it is positively impacting income, and therefore shareholder value. \par\p ard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb15\sl-253\slmult0 \up0 \ expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 If we use bonds or stock for long-term financing, does that automatically pay off short-term debt? \par\pard \qj \li1080\ri1302\sb242\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosup ersub\cf4\f5\fs22 If a firm uses long-term debt, that will reduce the need for s

hort-term debt (as short-term debt is automatically \up0 \expndtw-4\charscalex10 0 given to firms who require cash for ongoing operations). \par\pard\qj \li1080\ ri1308\sb249\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9 \fs22 Bond rating - is there any way in this simulation that we can restructure to improve our bond rating? \line \up0 \expndtw-3\charscalex100 Currently we are at BB and would like to improve on this. We were curious about what our options are \up0 \expndtw-4\charscalex100 here, if any. \par\pard\qj \li1080\ri969\sb24 2\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Gener ally, the bond rating reflects your current default risk as a company. The best way to improve it is to have a \up0 \expndtw-2\charscalex100 successful strategy and execute it well. This will improve your ability to generate a stream of i ncome, etc. and \up0 \expndtw-2\charscalex100 improve your bond rating. Restru cturing might help, but perhaps at the expense of your stock price. \par\pard\qj \li1080\ri1032\sb246\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupers ub\cf8\f9\fs22 Our team recognized that selling bonds would decrease short-term debt by the amount bonds issued. Is \up0 \expndtw-3\charscalex100 there any pitf all if we replace all short-term debt to long-term debt to get benefit on lower interest rate? \up0 \expndtw-3\charscalex100 And if the rate for long-term debt would increase and be greater than that for short tem one, can we make \up0 \exp ndtw-4\charscalex100 an action to reverse the situation? If any, how can we do t hat? \par\pard\ql \li1080\ri990\sb245\sl-256\slmult0 \up0 \expndtw-3\charscalex1 00 \ul0\nosupersub\cf4\f5\fs22 The rate for the long-term bonds will always be l ess than short-term. The "risks" are two-fold. One, the rate a \line \up0 \e xpndtw-2\charscalex100 team pays for long-term will be fixed at the time they ar e issued. So, if interest rates decline or the firm's risk \line \up0 \expndtw -2\charscalex100 profile decreases, one could be spending more on interest with a fixed rate than a variable rate. 2nd risk is that if \up0 \expndtw-3\charsca lex100 the firm decides to \u8220?call\u8221? the bonds at some future date (not required, but must wait 3 years before calling the \line \up0 \expndtw-3\charsc alex100 bonds), there is a one-year penalty for calling them early and all the b onds that were issued together must be \line \up0 \expndtw-4\charscalex100 calle d together (no partial calls). \par\pard\qj \li1079\ri1044\sb247\sl-253\slmult0\ fi0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Our firm\u8217?s b alance sheet currently shows $7 billion of short-term debt and 0 in long-term de bt. If we issue \up0 \expndtw-3\charscalex100 $8 billion of long-term bonds, wil l the $7 billion of short-term debt be paid off (i.e. $0) and we will have $1 \u p0 \expndtw-3\charscalex100 billion in extra cash or will our balance sheet show $7 billion of short-term credit and $8 billion of long\up0 \expndtw-4\charscale x100 term debt with extra cash of $8 billion? \par\pard\qj \li1079\ri1228\sb242\ sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The lon g-term debt will replace your short-term debt. Thus, after issuing the long-te rm bonds (all other things \line \up0 \expndtw-3\charscalex100 being equal), you would have $0 in short-term debt, $1 billion more in cash, and $8 billion of lo ng-term debt. \par\pard\ql \li8800\sb0\sl-276\slmult0 \par\pard\ql\li8800\sb0\sl -276\slmult0 \par\pard\ql\li8800\sb55\sl-276\slmult0 \up0 \expndtw-3\charscalex1 00 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 5 \par\pard\sect\sectd\fs24\ paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg6}{\bkmkend Pg6}\par\pard\q l \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb92\sl-253\slmult0 \up0 \expndtw -2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 I'm having trouble deciding on a di scount rate for my NPV analysis. The simulation only provides rates \par\pard\ ql \li1080\ri876\sb0\sl-253\slmult0 \up0 \expndtw-2\charscalex100 for long-term and short-term debt. I would like to calculate our WACC, however I can't calcu late my firm \up0 \expndtw-2\charscalex100 Beta, and the risk-free rate isn't pr ovided. Furthermore, the simulation Pro-forma analysis only provides a \up0 \e xpndtw-2\charscalex100 one-period projection based on our decisions... so there' s no way to derive the value. What rate does the \up0 \expndtw-3\charscalex100 simulation use to calculate our share price? \par\pard\ql \li1080\sb0\sl-250\sl mult0 \par\pard\ql\li1080\ri841\sb7\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 First, remember that in this simulation, as in the

real world, you are making decisions in an uncertain environment \up0 \expndtw-3 \charscalex100 with less than perfect information. That can be difficult and f rustrating. But there are very few situations where \up0 \expndtw-3\charscalex 100 all of the inputs of an NPV calculation are truly known. If they are \u8220? known,\u8221? it just means that someone has gone \up0 \expndtw-3\charscalex100 through the work of coming up with the assumptions and estimates, which is what you will have to do to some \line \up0 \expndtw-4\charscalex100 extent when you play the simulation. \par\pard\ql \li1080\sb248\sl-253\slmult0 \up0 \expndtw-3\c harscalex100 Second, with regard to the risk-free rate, you\u8217?ll need to mak e an assumption about approximately what it would \par\pard\ql \li1080\ri872\sb7 \sl-253\slmult0 \up0 \expndtw-2\charscalex100 be, based on the cash rate (what i nterest rate they can get in a money market account) and the prime rate. You c an \line \up0 \expndtw-2\charscalex100 use a range of rates here to determine se nsitivity or pick something that is \u8220?average.\u8221? You are correct tha t Beta is \line \up0 \expndtw-2\charscalex100 not provided. As you know, Betas are estimates of risk in the financial world as well; they are not known \line \up0 \expndtw-2\charscalex100 constants. To get out of the dark completely, yo u could use the Beta estimate of one of the auto companies, \line \up0 \expndtw3\charscalex100 although because the simulation is a bit more volatile than the real world, I'd probably increase it a bit from that. \line \up0 \expndtw-3\char scalex100 Using the \u8220?real world\u8221? is generally not advised in the sim ulation, but this might be better than nothing if you need \line \up0 \expndtw-4 \charscalex100 a benchmark. \par\pard\qj \li1080\ri1024\sb242\sl-260\slmult0 \up 0 \expndtw-2\charscalex100 With regard to future cash flows of a project, you wi ll have to make estimates beyond a year. (Note that the first \up0 \expndtw-2\ charscalex100 year forecast is also an estimate.) Depending on the particular investment you are considering, your estimates \up0 \expndtw-4\charscalex100 may be fairly accurate or more difficult to nail down. \par\pard\qj \li1080\ri895\s b249\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Th e market value of the firm is the stock price x the number of shares outstanding . Keeping this equation \up0 \expndtw-2\charscalex100 in mind, when we declare dividends (or increase the dividends) our share price should go up. Is the ma rket \up0 \expndtw-3\charscalex100 value for the firm affected by that? \par\par d\ql \li1080\sb248\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\ cf4\f5\fs22 Increasing dividends may or may not increase the share price\u8212?i t depends on whether investors are more \par\pard\qj \li1080\ri1073\sb2\sl-260\s lmult0 \up0 \expndtw-3\charscalex100 interested in income or growth. That said, an increase in stock price would increase the market value of the firm, \up0 \ex pndtw-4\charscalex100 since the number of shares is unchanged. \par\pard\qj \li1 080\ri1300\sb240\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf 8\f9\fs22 It is not clear if the share price is derived from market value which depends on net income or \u8230? or vice \line \up0 \expndtw-4\charscalex100 ver sa \par\pard\qj \li1080\ri1175\sb246\sl-253\slmult0 \up0 \expndtw-3\charscalex10 0 \ul0\nosupersub\cf4\f5\fs22 Investors buy shares in the company based on the c urrent and prospective performance of the company. If the \up0 \expndtw-3\charsc alex100 number of shares outstanding remains constant, and performance improves, the share price and, therefore, the \up0 \expndtw-3\charscalex100 market value, will go up. Decreased performance means fewer investors interested in the compa ny, lower share \up0 \expndtw-4\charscalex100 prices, and lower market value. \p ar\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosup ersub\cf8\f9\fs22 How do you pay off short-term debt? \par\pard\ql \li1080\sb0\s l-253\slmult0 \par\pard\ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw-2\charscalex 100 \ul0\nosupersub\cf4\f5\fs22 You may replace short-term debt with either long -term debt or cash raised by issuing stock. Alternatively, \par\pard\ql \li108 0\ri1056\sb0\sl-260\slmult0 \up0 \expndtw-2\charscalex100 income from operations , improvements in managing inventory, etc. will also improve your cash position. Think \up0 \expndtw-3\charscalex100 of short-term debt as a revolving line of credit that is used if you need cash to run your business... always \line \up0 \expndtw-4\charscalex100 available and always used if needed. \par\pard\qj \li10 80\ri1231\sb239\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8

\f9\fs22 I have a quick question with regard to short term debt. We had lower short-term debt after playing the \up0 \expndtw-3\charscalex100 practice round a nd wondered what the reason for that was and where this amounts come from? \par\ pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Short-term debt is a "plug" - meaning that the amount of short-term debt is calculated based on their cash flow \par\pard\ql \li1080\sb1\sl-237\slmult0 \up0 \expndtw-3\charscalex100 needs during the year. Thus, if there is less need for cash, the short term debt wo uld be lower. This could be due \par\pard\ql \li8800\sb0\sl-276\slmult0 \par\p ard\ql\li8800\sb95\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\ cf1\f2\fs24 StratSim FAQs - Page 6 \par\pard\sect\sectd\fs24\paperw12240\paperh1 5840\pard\sb0\sl-240{\bkmkstart Pg7}{\bkmkend Pg7}\par\pard\qj \li1080\sb0\sl-24 0\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\sb0\sl-240\ slmult0 \par\pard\qj\li1080\ri1073\sb142\sl-240\slmult0 \up0 \expndtw-2\charscal ex100 \ul0\nosupersub\cf4\f5\fs22 to lots of things - better income from operati ons, better inventory management, or issuing bonds or selling stock. \up0 \expnd tw-3\charscalex100 Whatever drives the cash position will affect short - term de bt. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1372\sb40\sl-2 40\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Does the St ratSim program include a tax shield for depreciation in the financial calculatio ns or is tax a \up0 \expndtw-3\charscalex100 computed directly from net income w ithout adjustment? \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\r i1796\sb40\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\f s22 If you are referring to the tax shield benefits of interest or depreciation, yes, they are definitely included. \up0 \expndtw-3\charscalex100 However, there is no loss-carry forward effect in StratSim. \par\pard\ql \li1080\sb0\sl-253\sl mult0 \par\pard\ql\li1080\sb17\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0 \nosupersub\cf8\f9\fs22 What would be the impact to our stock price if we cut ou r dividends? \par\pard\qj \li1080\ri989\sb250\sl-250\slmult0 \up0 \expndtw-2\cha rscalex100 \ul0\nosupersub\cf4\f5\fs22 All other factors being equal, cutting di vidends will have a negative impact on stock price, but if the cash that is \up0 \expndtw-2\charscalex100 freed up is used to boost income (and therefore equity ), then it could improve stock price. In short, it depends on \up0 \expndtw-3\ charscalex100 what you do with the money saved by cutting dividends. \par\pard\q l \li1080\ri848\sb246\sl-255\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupers ub\cf8\f9\fs22 The program seems to want to keep a minimum cash position. For example, I ran a pro forma that showed \up0 \expndtw-2\charscalex100 I had about 400 MM in cash. I decided to use the cash to increase my technology, thinking t hat my cash \up0 \expndtw-2\charscalex100 position would drop. Instead, my cas h position stayed at around 400 MM, and I took out more short-term \up0 \expndtw -3\charscalex100 debt to cover the investment. Is this correct? Is there a w ay to tell the program to use cash and not take \up0 \expndtw-4\charscalex100 ou t more short-term debt? If there is a cash minimum, what is it? \par\pard\qj \li 1080\ri916\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf 4\f5\fs22 There is a minimum amount of cash that the company requires for on-goi ng operations. This varies depending on \line \up0 \expndtw-2\charscalex100 the operating conditions of the company and cash needs. You can experiment some with the pro-forma to find out \line \up0 \expndtw-2\charscalex100 approximately wha t it will be, but be forewarned that the pro-forma and what may happen aren't ne cessarily the \line \up0 \expndtw-2\charscalex100 same. For example, the envir onment may change and competitors may make decisions that you do not anticipate. \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb236\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosu persub\cf9\f10\fs24 MANUFACTURING AND INVENTORY \par\pard\ql \li1079\sb243\sl-25 3\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Can you expl ain how inventory and flexible production work in the simulation? \par\pard\qj \ li1079\sb0\sl-250\slmult0 \par\pard\qj\li1079\ri922\sb20\sl-250\slmult0\fi0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 In general, the car indust ry aims to have 30-60 days of inventory available, but may have less if a firm i s planning \up0 \expndtw-2\charscalex100 to upgrade or discontinue a vehicle.

It is important to note that when upgrading a vehicle, the current inventory \up 0 \expndtw-2\charscalex100 will not be sold in the market, but will instead be w ritten off at a loss to the company. \par\pard\ql \li1079\sb248\sl-253\slmult0 \ up0 \expndtw-2\charscalex100 By default, the Flexible Production checkbox is ena bled. In this case, if demand is greater than supply, the \par\pard\ql \li1079 \sb7\sl-253\slmult0 \up0 \expndtw-3\charscalex100 simulation will automatically increase production up to 10% to help satisfy the unmet demand. Also, if your \p ar\pard\ql \li1079\ri878\sb10\sl-250\slmult0 \up0 \expndtw-3\charscalex100 suppl y covers greater than 120 days in inventory, the simulation will automatically d ecrease the supply by up to \up0 \expndtw-3\charscalex100 10% to meet the 120 da ys of inventory. If inventory is between 0-120 days, production remains unchan ged. So, \up0 \expndtw-2\charscalex100 checking the production box means that a firm wishes to maintain 0-120 days of inventory. If the checkbox is \up0 \ex pndtw-2\charscalex100 disabled, your firm will produce exactly what you have ent ered in the Scheduled Production field. Do note that if \up0 \expndtw-2\charsc alex100 production is increased beyond your overall firm capacity, you will incu r over-capacity charges. \par\pard\ql \li1079\ri1096\sb242\sl-260\slmult0 \up0 \ expndtw-3\charscalex100 In general, the key issue in managing your production is to 1) forecast well, 2) think about the value of lost sales \up0 \expndtw-3\cha rscalex100 vs. the over-capacity charges or inventory holding in most cases, 3) consider the impact of over-capacity and \up0 \expndtw-3\charscalex100 retooling charges, and 4) consider how a very tight supply may impact your retail prices. \par\pard\qj \li1079\ri1003\sb240\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Does R&D contain building manufacturing capacity als o? In other words, if I paid $1Bn+ for any new car, \up0 \expndtw-3\charscalex10 0 would I be getting a new manufacturing plant (or some capacity in existing pla nt) FREE OF COST? \par\pard\qj \li1079\ri1062\sb240\sl-260\slmult0 \up0 \expndtw -2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Manufacturing is separate from R&D. When you launch a new vehicle or upgrade an existing one, a production \up0 \ expndtw-2\charscalex100 line is retooled to manufacture the new or modified name plate. If you wish to increase overall productive \par\pard\ql \li8800\sb0\sl276\slmult0 \par\pard\ql\li8800\sb31\sl-276\slmult0 \up0 \expndtw-3\charscalex10 0 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 7 {\shp {\*\shpinst\shpleft1080\shptop8436\shpright5384\shpbottom8458\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz176\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 4304}}{\sp{\sn geoBottom}{\sv 22}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(4304,0);(4304,22);(0,22)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g8}{\bkmkend Pg8}\par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\sb0 \sl-240\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri105 0\sb142\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 capacity, you must do so in your manufacturing decision, it does not happen aut omatically (you wouldn't want it \line \up0 \expndtw-3\charscalex100 to if you a lready had excess capacity!). Keep in mind that it takes a year to build new c apacity, so plan ahead. \par\pard\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li1 080\ri938\sb22\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\ f9\fs22 Our team is considerably over capacity and are planning to sell of 300,0 00 of our current capacity. What \line \up0 \expndtw-2\charscalex100 are the r esults for our team if we do this? Will this transaction generate immediate ca sh back based on the \line \up0 \expndtw-3\charscalex100 sale? \par\pard\ql \li1 080\sb248\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs 22 When you reduce capacity, you will sell off your oldest (and most inefficient ) plants. If they are not fully \par\pard\ql \li1080\ri923\sb10\sl-250\slmult0

\up0 \expndtw-3\charscalex100 depreciated, you will receive 50% of the remainin g value on the plant and the other 50% of that difference will be \up0 \expndtw2\charscalex100 an exceptional loss. Because it takes one year to sell and dis pose of the plant, reduced depreciation and plant \up0 \expndtw-3\charscalex100 maintenance costs will begin the following period. \par\pard\ql \li1080\sb248\sl -253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Our team has developed a new product and it is scheduled to be released this upcoming per iod. \par\pard\qj \li1079\ri1131\sb10\sl-250\slmult0\fi0 \up0 \expndtw-3\charsca lex100 Unfortunately we did not account for the increased capacity we might need to manufacture the vehicle. If \up0 \expndtw-3\charscalex100 we choose not to p roduce any models of the new product for the upcoming period in order to buy eno ugh \up0 \expndtw-3\charscalex100 capacity this period to manufacture it for the following period will we be penalized in any way? \par\pard\ql \li1079\sb0\sl-2 53\slmult0 \par\pard\ql\li1079\sb15\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You and your team can choose among the following op tions: \par\pard\ql \li1079\sb1\sl-237\slmult0 \up0 \expndtw-2\charscalex100 1) Postpone production. Cost is a period delay in building brand equity, sales, e tc. \par\pard\ql \li1079\ri1404\sb13\sl-250\slmult0 \up0 \expndtw-2\charscalex10 0 2) Produce over-capacity. Any production above capacity will be assessed an over-capacity charge which is \up0 \expndtw-2\charscalex100 calculated automatic ally. The team may want to weigh that cost against lost margin on the sales an d \line \up0 \expndtw-4\charscalex100 postponement of the launch. \par\pard\ql \ li1079\sb0\sl-250\slmult0 \par\pard\ql\li1079\ri871\sb20\sl-250\slmult0 \up0 \ex pndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 How do you calculate over-capa city charge? We were under the impression that development center would \up0 \ expndtw-3\charscalex100 increase our capacity. But, apparently it didn't. We are coming up with 2 models this period and will be \up0 \expndtw-3\charscalex100 s hort on capacity by 200K. How much will the over-capacity charge for 200K be? \par\pard\qj \li1079\ri930\sb250\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \u l0\nosupersub\cf4\f5\fs22 The over-capacity charge is calculated for you on the Manufacturing Decisions screen, and shown as a line item \up0 \expndtw-2\charsca lex100 under Plant Capacity. You can just enter vehicle production amounts tha t total more than your capacity to see the \up0 \expndtw-3\charscalex100 amount of the charge. \par\pard\ql \li1079\sb0\sl-253\slmult0 \par\pard\ql\li1079\sb15\ sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What fa ctors might impact the manufacturing overhead other than an overcapacity charge? \par\pard\ql \li1079\ri886\sb247\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ ul0\nosupersub\cf4\f5\fs22 The factors in relating to manufacturing overhead are depreciation, maintenance costs (these are broken out on the \up0 \expndtw-2\ch arscalex100 team income statements), and retooling costs. Depreciation goes up as capacity increases, and maintenance costs \up0 \expndtw-2\charscalex100 go u p as the plant ages. Retooling also impacts depreciation and plant maintenanc e by adding to plant \line \up0 \expndtw-2\charscalex100 investment and updates the plant, increasing depreciation and decreasing maintenance costs somewhat. The \line \up0 \expndtw-3\charscalex100 overcapacity charge is not included unde r manufacturing costs, but under "other" on the financial summary, and \up0 \exp ndtw-3\charscalex100 under "extraordinary items" on the firm income statement, a llowing the firm to view a line item for overcapacity \up0 \expndtw-4\charscalex 100 charge (by clicking on the extraordinary items link). \par\pard\ql \li1079\s b247\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Ho w are the consumer customer forecasted sales determined? \par\pard\qj \li1079\sb 0\sl-240\slmult0 \par\pard\qj\li1079\ri961\sb38\sl-240\slmult0 \up0 \expndtw-3\c harscalex100 \ul0\nosupersub\cf4\f5\fs22 The forecasts are based on the best eco nomic forecasts money can buy, and are just as reliable as those in the real \up 0 \expndtw-4\charscalex100 world. Remember that vehicle forecasts are based on what YOU enter. \par\pard\qj \li1079\sb0\sl-250\slmult0 \par\pard\qj\li1079\ri9 27\sb22\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 At the end of a cycle for a car model that is about to be upgraded, all unsold inventory is sold for a loss of \line \up0 \expndtw-2\charscalex100 up to 20% of f of cost of goods. How does this work, and does this written-off inventory co

mpete with other \line \up0 \expndtw-3\charscalex100 products? \par\pard\ql \li1 079\sb248\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs 22 The % is based on how much inventory there is (higher amounts will result in a higher loss percentage). These \par\pard\ql \li1079\ri902\sb10\sl-250\slmult 0 \up0 \expndtw-2\charscalex100 sales do not impact the marketplace. It is str ictly a way to clear out the old model quickly (selling off to car rental \up0 \ expndtw-2\charscalex100 companies, CarMax, overseas, etc.). So it does always result in a loss to you (but perhaps not as high as the \line \up0 \expndtw-2\ch arscalex100 opportunity loss of not going with the new model) and no loss to the competition. \par\pard\ql \li8800\sb109\sl-276\slmult0 \up0 \expndtw-3\charscal ex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 8 \par\pard\sect\sectd\fs 24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg9}{\bkmkend Pg9}\par\par d\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard \ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\q l\li1080\sb79\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f 9\fs22 Can you upgrade a vehicle without writing off previous inventory? \par\pa rd\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li1080\ri921\sb20\sl-250\slmult0 \ up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 No. It is important t o note that when upgrading a vehicle, the current inventory will not be sold in the market, but \up0 \expndtw-2\charscalex100 instead be written off at a loss t o the company. If inventory is very high, you may want to consider delaying th e \up0 \expndtw-2\charscalex100 upgrade a year and lowering production to minimi ze inventory levels before initiating the upgrade. \par\pard\qj \li1080\ri1164\s b242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We made an\ul0\nosupersub\cf4\f5\fs22 \ul0\nosupersub\cf8\f9\fs22 upgrade to our Awesome car. In the decision summary report there is a * next to current \line \up0 \expndtw-2\charscalex100 inventory with a note that the inventory will be written off. We are curious when this write-off will take \line \up0 \expndtw3\charscalex100 place - can we lower our price in the next decision to try to se ll all the inventory and avoid the write-off? \par\pard\qj \li1080\ri880\sb249\s l-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Since th e upgrade is replacing your current platform now (see Input Decisions/Product De velopment), all sales for \up0 \expndtw-3\charscalex100 the coming period will u se the upgrade and all existing inventory will be written off. Lowering the pric e will not \up0 \expndtw-2\charscalex100 affect the inventory write-off, but sim ply reduce the price on the updated vehicle. Depending on the amount of \up0 \ expndtw-3\charscalex100 inventory, you may want to consider changing from a mino r upgrade (inventory write-off in current period) to a \up0 \expndtw-4\charscale x100 major upgrade (inventory write-off next period) \par\pard\qj \li1080\sb0\sl -240\slmult0 \par\pard\qj\li1080\ri992\sb39\sl-240\slmult0 \up0 \expndtw-2\chars calex100 \ul0\nosupersub\cf8\f9\fs22 Will I always produce between 0-120 invento ry if I have my flexible production box checked? Why such a \up0 \expndtw-3\ch arscalex100 range? Is this correct or does this kick in at a different level? \par\pard\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li1080\ri951\sb22\sl-250\sl mult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 No, the flexible production box will only modify up to 10%, so it is possible for inventory not to get within the 0-\line \up0 \expndtw-2\charscalex100 120 day range. For exa mple, if you end up with 240 days of inventory, the 10% flex production will bri ng you \up0 \expndtw-3\charscalex100 down to around 210 days. \par\pard\qj \li10 80\ri1543\sb242\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8 \f9\fs22 I should not check the flexible production box if I think I can hit dem and, and I want to introduce an \up0 \expndtw-4\charscalex100 upgrade in the nex t period, right? \par\pard\qj \li1080\ri992\sb249\sl-250\slmult0 \up0 \expndtw-3 \charscalex100 \ul0\nosupersub\cf4\f5\fs22 There is an outside chance that by ch ecking the flexible production box you'll end up with more inventory than if \up 0 \expndtw-2\charscalex100 you don't check it, but for the most part checking it makes sense (and potentially under-producing). Just be sure \up0 \expndtw-2\c harscalex100 to take into consideration potential lost sales and possible over-c apacity charges. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1 376\sb39\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs2

2 If we begin development of a new vehicle do the development costs cover increa se in capacity, or do we \up0 \expndtw-4\charscalex100 need to also factor that in and plan for it? \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ ri1455\sb40\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\ fs22 If you believe the sales/production of the new vehicle will take you over c apacity, you will need to consider \up0 \expndtw-3\charscalex100 adding some. Development costs do not cover adding capacity or retooling costs. \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slmult0 \par\pard\ql\l i1080\sb239\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf9\f10 \fs24 TOOLS, RESEARCH, AND CUSTOMERS \par\pard\ql \li1080\sb0\sl-253\slmult0 \pa r\pard\ql\li1080\sb10\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupers ub\cf8\f9\fs22 We can\u8217?t get our markets to pop! Help! \par\pard\ql \li1080 \ri1044\sb250\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f 5\fs22 Marketing expenditures are not the only requirement for developing a new segment; you must also provide the \up0 \expndtw-3\charscalex100 customer with a good product at the right price. Though you do not have a lot of information on new customers, \up0 \expndtw-3\charscalex100 you can estimate the size and expe cted price of the new product, as well as determine what attribute is most \up0 \expndtw-2\charscalex100 important to the customer. There is one other point tha t is (perhaps) unique to the game: only one new customer \up0 \expndtw-2\chars calex100 can pop each period - whichever one has a product that best meets its n eed and is well supported. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\ li1080\ri1191\sb39\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\ cf8\f9\fs22 Does the new Customers list change every period or is the set of new customers remain static throughout \up0 \expndtw-4\charscalex100 our test perio d? \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\slmul t0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The new customer li st stays the same until a new customer "pops" and then it is replaced with the n ext one. \par\pard\ql \li8800\sb0\sl-276\slmult0 \par\pard\ql\li8800\sb32\sl-276 \slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 9 {\shp {\*\shpinst\shpleft1080\shptop11218\shpright5580\shpbottom11241\shpfhdr0\s hpbxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz258\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 4500}}{\sp{\sn geoBottom}{\sv 23}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(4500,0);(4500,23);(0,23)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g10}{\bkmkend Pg10}\par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\s b0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0 \sl-253\slmult0 \par\pard\ql\li1080\sb79\sl-253\slmult0 \up0 \expndtw-2\charscal ex100 \ul0\nosupersub\cf8\f9\fs22 When a new customer pops up, it is at the expe nse of some of the existing segments? \par\pard\ql \li1080\sb0\sl-253\slmult0 \p ar\pard\ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosuper sub\cf4\f5\fs22 No, this is new business. \par\pard\qj \li1080\ri1019\sb242\sl-2 60\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We are tryi ng to determine how dedicated each new customer would be to the vehicle class li sted for it (i.e. \up0 \expndtw-2\charscalex100 could other car classes 'steal' new customers despite being a different class). \par\pard\ql \li1080\sb246\sl-25 3\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 A vehicle MU ST be created in the class that the new customer report shows for that customer in order for the \par\pard\qj \li1080\ri931\sb0\sl-260\slmult0 \up0 \expndtw-2\c harscalex100 customer to pop. After the new customer pops, they will buy other v ehicles, including other classes, on the market \up0 \expndtw-2\charscalex100 th at meets their needs, just like the other consumer customers. The numbers will v

ary based on how well the new \up0 \expndtw-3\charscalex100 vehicle meets their overall needs. \par\pard\ql \li1080\sb228\sl-253\slmult0 \up0 \expndtw-3\charsca lex100 \ul0\nosupersub\cf8\f9\fs22 How do we get perceived product attributes, p erceived price, etc? \par\pard\qj \li1080\ri1097\sb247\sl-253\slmult0 \up0 \expn dtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Focus groups will provide you wi th customers\u8217? perceptions of products of interest. Thus, you may not be listed \up0 \expndtw-3\charscalex100 under 1T (b/c you don't offer any trucks), but your Alec product will be listed under 1E (b/c it is an economy \up0 \expndt w-3\charscalex100 vehicle). For perceived price, see the column in focus group s "cost". Actual average retail and MSRPs can be \up0 \expndtw-4\charscalex100 seen on the product detail report. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par \pard\qj\li1080\ri1318\sb38\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no supersub\cf8\f9\fs22 4M is a new emerging segment. However there is no option to run a focus group on 4M. Does this mean \up0 \expndtw-4\charscalex100 that this segment still hasn't completely entered the market? \par\pard\qj \li1080\sb0\sl -240\slmult0 \par\pard\qj\li1080\ri1043\sb40\sl-240\slmult0 \up0 \expndtw-2\char scalex100 \ul0\nosupersub\cf4\f5\fs22 Focus groups are only available for custom ers that have "emerged". However, a company can run a concept test \up0 \expnd tw-3\charscalex100 on one of the emerging customers, which provides some similar information. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1012 \sb40\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 C an we assume that consumer preferences definitely change over time and thus that focus group will show \up0 \expndtw-4\charscalex100 different results every per iod? \par\pard\qj \li1080\ri905\sb244\sl-260\slmult0 \up0 \expndtw-2\charscalex1 00 \ul0\nosupersub\cf4\f5\fs22 You can assume that both customer preferences and competition changes each period. Some periods there will be \up0 \expndtw-3\c harscalex100 more change than others. \par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Are there tools with w hich to measure satisfaction? \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf4\ f5\fs22 The main measures of customer satisfaction in StratSim are: \par\pard\qj \li1080\ri1027\sb0\sl-260\slmult0 \up0 \expndtw-3\charscalex100 Consumer prefer ence: Overall satisfaction measure for the firm. In effect, which company do consumers prefer \up0 \expndtw-4\charscalex100 to do business with? \par\pard\q j \li1080\ri3511\sb0\sl-240\slmult0 \up0 \expndtw-2\charscalex100 Dealer Ratings : A measure of consumer satisfaction with the dealership experience. \up0 \exp ndtw-3\charscalex100 Focus Groups: specific feedback on various aspects of the product. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb16\sl-25 3\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Is selling p rice on the concept test equal to MSRP or Average Sale price or dealer price? \p ar\pard\qj \li1080\ri1292\sb242\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul 0\nosupersub\cf4\f5\fs22 The selling price you enter on the concept test assumes that MSRP and the sales price to the consumer are the \up0 \expndtw-3\charscale x100 same without any dealer discounting. This is unlikely to occur in reality , so plan accordingly. \par\pard\qj \li1080\ri901\sb246\sl-253\slmult0 \up0 \exp ndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 When we conducted a concept tes t, the report showed best on all our product attributes. However it was \up0 \ expndtw-3\charscalex100 worst on the price attribute. We ran another concept tes t with the lowest price range and still got worse on \up0 \expndtw-3\charscalex1 00 price attribute. Can we assume a trend and lower the prices further or is it possible that customers prefer a \up0 \expndtw-4\charscalex100 higher price rang e for the concept? \par\pard\qj \li1080\ri913\sb250\sl-250\slmult0 \up0 \expndtw -3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The customers are comparing the con cept to other vehicles in the marketplace. They are ranking the price as worst \ up0 \expndtw-3\charscalex100 because it is the highest. This is OK as long as yo u are within the price range of the new customer and the overall \up0 \expndtw-4 \charscalex100 likely to buy is high enough. \par\pard\ql \li8680\sb0\sl-276\slm ult0 \par\pard\ql\li8680\sb93\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\ nosupersub\cf1\f2\fs24 StratSim FAQs - Page 10 \par\pard\sect\sectd\fs24\paperw1 2240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg11}{\bkmkend Pg11}\par\pard\qj \li

1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li10 80\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1665\sb142\sl-240\slmult0 \up0 \expn dtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What is this error? On the con joint screen, it shows \u8220?You may not enter the same value twice for a \up0 \expndtw-4\charscalex100 dimension\u8221?. \par\pard\ql \li1080\sb0\sl-253\slmul t0 \par\pard\ql\li1080\sb17\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no supersub\cf4\f5\fs22 With the conjoint, all combinations are considered, so ther e is no need to enter any value 2x. \par\pard\ql \li1080\sb247\sl-253\slmult0 \u p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Are we limited to 4 stud ies per team per period? Or 4 studies in the life of the game? \par\pard\ql \li1 080\sb247\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf4\f5\fs 22 4 studies per year (period) per team, as stated on the report. \par\pard\ql \ li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Each study costs 500K? That means fo ur studies cost 2 million. Am I correct? \par\pard\ql \li1080\sb247\sl-253\slm ult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Correct, 4 x $500 K would be $2 million. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-4 \charscalex100 \ul0\nosupersub\cf8\f9\fs22 Which line item is impacted when repo rts are purchased? \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-3\cha rscalex100 \ul0\nosupersub\cf4\f5\fs22 An expense line item is produced for repo rts which can be viewed by clicking on the extraordinary items link. \par\pard\q j \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1082\sb38\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 If we run a conceptual tes t, can anyone else see that we have run it and what we have run it on? Ditto f or \up0 \expndtw-3\charscalex100 the Conjoint analysis? Not sure of how "open" the market is. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17 \sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Your c onjoint analysis and conceptual tests are private and can only be viewed by memb ers of your team. \par\pard\qj \li1080\ri1043\sb250\sl-250\slmult0 \up0 \expndtw -3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 In buying a Conjoint report, when a sked for specifications what is the best way to input numbers in order \up0 \exp ndtw-2\charscalex100 to receive the most valuable and relevant information? We kept numbers consistent (i.e. 1/1/1/1) and the \up0 \expndtw-4\charscalex100 re sult did not tell us very much. \par\pard\qj \li1080\ri906\sb248\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Creating a well-design ed study is essential for getting useful information from conjoint analysis. F or a start on \line \up0 \expndtw-2\charscalex100 choosing good values for the s tudy, carefully read "Tools - Conjoint Analysis," in the manual. The idea behi nd \line \up0 \expndtw-3\charscalex100 conjoint is to find out what trade-offs y our customers are willing to make, so you\u8217?ll want to design the study such \line \up0 \expndtw-2\charscalex100 that it yields that type of information. For instance, you might choose 1/1/1/1 and 2/2/2/2 and prices of $15,000 \line \ up0 \expndtw-3\charscalex100 and $16,000 to see if a particular consumer is will ing to pay $1000 for the improvement in vehicle specifications. \line \up0 \expn dtw-2\charscalex100 On the specifications in particular, you might select 3/1/ 1/1 and 1/3/1/1 which can help you analyze which higher \line \up0 \expndtw-3\ch arscalex100 attribute is preferred. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par \pard\qj\li1080\ri1112\sb38\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no supersub\cf8\f9\fs22 Your exhibit 1.2 says Alec has market share of 63%. But foc us group has Alec with a different unit share. \up0 \expndtw-3\charscalex100 Is it different because focus group results are wrong and not reliable? \par\pard\q j \li1080\sb0\sl-250\slmult0 \par\pard\qj\li1080\ri1414\sb22\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Market Share in exhibit 1. 2 is referring to share of class (Alec's share of all economy vehicles sold), wh ereas \up0 \expndtw-3\charscalex100 focus groups (and several other studies) are referring to share of a particular customer (in your example 1E -\line \up0 \ex pndtw-4\charscalex100 Value Seekers who prefer an economy class vehicle). \par\p ard\qj \li1080\ri1752\sb242\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no supersub\cf8\f9\fs22 According to exhibit 1.4, 363,000 units of cars are sold to 4F and 4L customers. How do I know the \up0 \expndtw-4\charscalex100 breakdown?

\par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no supersub\cf4\f5\fs22 You will need to look in the software and drill down to on the consumer customer report and the customer detail. \par\pard\qj \li1080\sb0\s l-240\slmult0 \par\pard\qj\li1080\ri1016\sb38\sl-240\slmult0 \up0 \expndtw-3\cha rscalex100 \ul0\nosupersub\cf8\f9\fs22 On the product contribution report, Alfa\ u8217?s dealer sales are $9680. But product detail shows dealer price is \up0 \e xpndtw-4\charscalex100 $20199. Aren\u8217?t they supposed to be same? \par\par d\qj \li1080\ri1109\sb244\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosu persub\cf4\f5\fs22 The product contribution report is overall, not cost/unit. Take the total dealer sales ($) divided by units and it is \up0 \expndtw-2\chars calex100 approximately 20199. Note: because values are in 000s, there will be some rounding. \par\pard\qj \li1080\ri982\sb240\sl-260\slmult0 \up0 \expndtw-3\c harscalex100 \ul0\nosupersub\cf8\f9\fs22 When clicking on some of the "customer detail" screens, there is a "secondary" desired class listed. How is \line \up0 \expndtw-3\charscalex100 this achieved? More specifically, when creating a new c oncept for a vehicle that you know will span two \par\pard\ql \li8680\sb107\sl-2 76\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FA Qs - Page 11 \par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\ bkmkstart Pg12}{\bkmkend Pg12}\par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\ qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj \li1080\ri1652\sb142\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersu b\cf8\f9\fs22 vehicle classes, can you give it both a primary and secondary clas s? Or does this just happen via the \up0 \expndtw-3\charscalex100 simulation? \p ar\pard\ql \li1080\sb0\sl-250\slmult0 \par\pard\ql\li1080\ri946\sb22\sl-250\slmu lt0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The secondary just means that the customers will also consider a second class of vehicle along wit h the primary... \line \up0 \expndtw-2\charscalex100 they still prefer the prima ry, but they are also considering the secondary class. In product development, you will \line \up0 \expndtw-2\charscalex100 still need to choose one class or the other... generally, you'll want to select the primary class, but there may b e \line \up0 \expndtw-2\charscalex100 situations where you might try to serve tw o customers with one vehicle, in which case you might consider the \line \up0 \e xpndtw-3\charscalex100 secondary class. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb15\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosup ersub\cf8\f9\fs22 How do you identify which vehicle class has the highest growth potential? \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1211\s b18\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You 'll need to go in the software and look at historical trends and consider custom ers who are interested in that \up0 \expndtw-3\charscalex100 class and their exp ected growth rates. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\ sb17\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Wh at is the meaning of Market - Consumer Customers? \par\pard\qj \li1080\ri1435\sb 242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Con sumer customers are the intersection of consumer segments (report: Industry - Co nsumer Segments) and \up0 \expndtw-2\charscalex100 vehicle classes (report: Indu stry - Vehicle Classes), and allow finer segmentation of the market. \par\pard\q l \li1079\ri1076\sb249\sl-250\slmult0\fi0 \up0 \expndtw-3\charscalex100 \ul0\nos upersub\cf8\f9\fs22 This question is about the statistic in \u8220?consumer cust omers\u8221? and \u8220?vehicle class\u8221? information. If I compare \line \up 0 \expndtw-3\charscalex100 the number of unit sales between the two statistics, they don\u8217?t match. For example, focus group of 3S \line \up0 \expndtw-3\cha rscalex100 (single for Sport) showed the unit sales of 339 units, and vehicle cl ass showed 112 unit sales for Sport. \par\pard\qj \li1079\sb0\sl-250\slmult0 \pa r\pard\qj\li1079\ri1374\sb20\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\n osupersub\cf4\f5\fs22 The 3S will buy vehicles other than sports - sports vehicl es are preferred, but not necessarily their decision. \up0 \expndtw-3\charscalex 100 (Likewise, other consumers will buy sports class vehicles, even though they may prefer say, a truck). Use the \up0 \expndtw-3\charscalex100 vehicle sales by customer and the customer detail to better understand this. \par\pard\ql \li107 9\ri891\sb249\sl-252\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f

9\fs22 We had a couple questions on the "Delivery" vehicle. Is this considered to be an existing platform if you \up0 \expndtw-3\charscalex100 are in the truc k space already? I think in the vehicle description, it is described as a covere d truck. The \up0 \expndtw-2\charscalex100 answer to this impacts development ti mes. There is little consumer information given on what the specs for \up0 \ex pndtw-3\charscalex100 the Delivery vehicle are. Did we miss these specs? We see a wide range on price and size - not much else. Is \up0 \expndtw-2\charscalex100 there somewhere we can go to learn more about the Delivery vehicle? Finally, is the Delivery vehicle only a \up0 \expndtw-2\charscalex100 B2B vehicle? Basica lly, we are wondering, if we build it, where do we sell it? \par\pard\qj \li1079 \sb0\sl-250\slmult0 \par\pard\qj\li1079\ri924\sb20\sl-250\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 "...the Delivery is designed for the fleet buyer (B2B). Each of these classes represents a unique configuration th at \up0 \expndtw-2\charscalex100 requires a significant expenditure in R&D to de velop." Since the delivery class is unique, your experience with \up0 \expndtw -2\charscalex100 trucks will not shorten development time. There is no consume r information, because it is a B2B-only vehicle. \up0 \expndtw-3\charscalex100 Y ou will need to purchase market information on the B2B contracts or target these contracts with salespeoplet to \up0 \expndtw-4\charscalex100 get information on delivery vehicle specs. \par\pard\qj \li1079\sb0\sl-240\slmult0 \par\pard\qj\li 1079\ri1234\sb39\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf 8\f9\fs22 I guess my only other question is: If you go ahead and enter this Deli very vehicle class, will the contracts \up0 \expndtw-4\charscalex100 start to ap pear? This seems pretty risky. \par\pard\ql \li1080\sb0\sl-250\slmult0 \par\pard \ql\li1080\ri1010\sb22\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosuper sub\cf4\f5\fs22 You will likely want to get more information by purchasing resea rch before making a decision. In the context of \up0 \expndtw-3\charscalex100 StratSim, if you get an invitation to bid on a contract, that contract will not go away over the course of the \line \up0 \expndtw-3\charscalex100 simulation so long as you continue to target it with your salesforce, and you can develop a v ehicle to fit the \line \up0 \expndtw-2\charscalex100 specifications, should you deem it worthwhile. You will, however, have to keep up your B2B activity to b e able \up0 \expndtw-4\charscalex100 to bid on the contract(s) in future periods . \par\pard\qj \li1080\ri903\sb246\sl-255\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 As you are aware, we exited Camini Minivan from the market last period. Though we were making about \line \up0 \expndtw-3\charscalex 100 600M annually on Caminis, that car did not fit in our world of high-image, h igh-feature, high-price cars. \line \up0 \expndtw-3\charscalex100 We were hoping that market would see that as a very positive sign that would significantly imp act our sales \line \up0 \expndtw-2\charscalex100 of other cars and our overall firm preference. Of course, we did not see that happen. I know that within a \ line \up0 \expndtw-2\charscalex100 segment, if my car is not positioned competit ively with other cars from other companies, my car's share in \par\pard\ql \li86 80\sb108\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs2 4 StratSim FAQs - Page 12 \par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard \sb0\sl-240{\bkmkstart Pg13}{\bkmkend Pg13}\par\pard\ql \li1080\sb0\sl-253\slmul t0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\ri943\sb92\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul 0\nosupersub\cf8\f9\fs22 that particular segment will be adversely affected. My question is how important is good or bad positioning \up0 \expndtw-2\charscalex1 00 of one car for other cars of the same company (not from strategy perspective, but from the software \line \up0 \expndtw-2\charscalex100 perspective) - or ver y straight-forwardly, did we make a mistake by exiting Camini just because it wo uld \up0 \expndtw-3\charscalex100 have adversely affected our overall company im age (in Stratsim World). \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw -2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 When you take over a firm, you take over its customer base along with the product portfolio, competitors, \par\pard \ql \li1079\sb7\sl-253\slmult0 \up0 \expndtw-2\charscalex100 development capabil ities and financial position. Your vision of the company may or may not match the actual \par\pard\ql \li1079\sb1\sl-237\slmult0 \up0 \expndtw-2\charscalex100

company that you are managing, and changes that you make will not change others ' view of the company \par\pard\ql \li1079\sb10\sl-253\slmult0 \up0 \expndtw-3\c harscalex100 overnight. You could wind up alienating your customer base pretty quickly, though. Here are a few observations: \par\pard\ql \li1079\ri861\sb24 7\sl-254\slmult0 \up0 \expndtw-2\charscalex100 Dropping a brand is always someth ing that needs to be done with care, since you have built up equity in the brand \up0 \expndtw-2\charscalex100 that can only be replaced at great expense over a long period of time. Consider the fact that BMW thought it better \up0 \expndtw -2\charscalex100 to buy the Mini Cooper and build on it rather than develop its own brand from scratch. \line \up0 \expndtw-2\charscalex100 Reduced unit sales m ay be acceptable if your goal is profitability and the margins are better at the lower volume. \up0 \expndtw-2\charscalex100 Did the results match your expectat ion? Why or why not? With the Carnival, you introduced a vehicle that has \lin e \up0 \expndtw-2\charscalex100 great appeal to 4M customers. But 2M customers do not want to buy the Carnival; they preferred the Camini. \line \up0 \expndtw -2\charscalex100 Why? Could you have satisfied both segments? Take a close loo k at minvan sales to see where the lost sales \line \up0 \expndtw-3\charscalex10 0 went. Is there anything you could have done about this? \par\pard\ql \li1079 \ri859\sb248\sl-252\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9 \fs22 Can you help me reconcile "projected demand" on consumer segments/consumer detail page and "chg" on \up0 \expndtw-2\charscalex100 consumer segments page? Is chg a leading indicator for chg, i.e. expected change in future OR is it \l ine \up0 \expndtw-3\charscalex100 lagging? For example- "chg" in Consumer segm ents / Singles is 5%. I take it that units sold to this \line \up0 \expndtw-2\ charscalex100 consumer segment is growing by 5%. Now projections (through "proje cted demand" on consumer \line \up0 \expndtw-2\charscalex100 segments/consumer) are growing down for this segment. Does this mean projection is a prediction o f \line \up0 \expndtw-3\charscalex100 decline as opposed to growth in the past? \par\pard\ql \li1080\ri886\sb245\sl-256\slmult0 \up0 \expndtw-2\charscalex100 \u l0\nosupersub\cf4\f5\fs22 Projected demand on customer detail is a forward-looki ng indicator of the estimated units expected to be sold to \up0 \expndtw-2\chars calex100 that customer. Where you see "change" it is only the year over year g rowth (or decline) for that segment or \line \up0 \expndtw-2\charscalex100 custo mer. Thus, on customer detail you have two values, one "change from previous y ear" that shows actual \line \up0 \expndtw-2\charscalex100 change during the pas t year and one "projected demand" that is forward looking. From your example i n singles, it \up0 \expndtw-2\charscalex100 sounds like you have it, just be sur e to include all the customers in your analysis, as the singles segment is \line \up0 \expndtw-3\charscalex100 comprised of more than one customer. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\ li1080\sb241\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9 \fs22 TECHNOLOGY \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb1 4\sl-253\slmult0 \up0 \expndtw-3\charscalex100 Explain this technology thing to me again. \par\pard\ql \li1080\ri988\sb248\sl-252\slmult0 \up0 \expndtw-2\charsc alex100 \ul0\nosupersub\cf4\f5\fs22 There is a difference between the styling, q uality, interior, etc., of a vehicle and the size and horsepower. For the \up0 \expndtw-3\charscalex100 former, more is always better. Who doesn\u8217?t want a better quality vehicle? But for size and performance \line \up0 \expndtw-2\cha rscalex100 (horsepower), the customer does not always want more. If I am looki ng for an economy vehicle, I do not want a \up0 \expndtw-3\charscalex100 250 hor sepower engine, because I won\u8217?t be able to get the gas economy I want. Lik ewise, a bigger car means \up0 \expndtw-2\charscalex100 more weight and lower fu el economy. So, on the interior, styling, safety, quality, more is always bett er whereas \up0 \expndtw-2\charscalex100 for size and performance, each customer has a more specific preference. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pa rd\qj\li1080\ri1067\sb38\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosup ersub\cf8\f9\fs22 When upgrading the technology capabilities, what do "Est. cost savings of increase" apply to? Is this per \up0 \expndtw-5\charscalex100 year ? Or per product? Is this indefinite? \par\pard\ql \li1080\sb250\sl-253\slmu lt0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The estimated savi

ngs is per year for the entire firm, based on your current product line, sales v olume, and \par\pard\qj \li1080\ri1028\sb2\sl-260\slmult0 \up0 \expndtw-3\charsc alex100 technology profile. Note that investing in your technology capabilitie s has two benefits: Your firm will be able \line \up0 \expndtw-3\charscalex100 to develop products with better attributes, and higher capabilities reduce the base cost of products, all else equal. \par\pard\ql \li8680\sb0\sl-276\slmult0 \ par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb55\sl-276\slmult0 \u p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 13 {\shp {\*\shpinst\shpleft1080\shptop10162\shpright2680\shpbottom10183\shpfhdr0\s hpbxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz251\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 1600}}{\sp{\sn geoBottom}{\sv 21}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(1600,0);(1600,21);(0,21)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g14}{\bkmkend Pg14}\par\pard\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li1080\s b0\sl-250\slmult0 \par\pard\qj\li1080\sb0\sl-250\slmult0 \par\pard\qj\li1080\ri1 056\sb104\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs 22 How can we estimate return on investment if we decide to change the technolog ical capabilities. How can \up0 \expndtw-2\charscalex100 we estimate savings in the long run? We know that it is a way of lowering development costs but is this for \up0 \expndtw-3\charscalex100 all vehicles or just for the new ones in deve lopment going forward? \par\pard\ql \li1080\sb269\sl-276\slmult0 \up0 \expndtw-2 \charscalex100 \ul0\nosupersub\cf3\f4\fs24 On the input screen for technology, t here is an estimate of the yearly savings based on their current \par\pard\ql \l i1080\sb4\sl-276\slmult0 \up0 \expndtw-2\charscalex100 product line and volume. This is for all vehicles currently in production. Please note, that the \par\p ard\qj \li1080\ri1134\sb1\sl-280\slmult0 \up0 \expndtw-2\charscalex100 technolog y investment only affects the COGS, not the development costs. Also note that o ther factors \up0 \expndtw-3\charscalex100 also affect COGS (volume, specificati ons, inflation, etc.) \par\pard\qj \li1080\ri1366\sb237\sl-260\slmult0 \up0 \exp ndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Other than increasing technolog y capability, is there any other way to decrease any costs (Mfg, COGS, \up0 \exp ndtw-3\charscalex100 SG&A, and other costs)? \par\pard\qj \li1080\ri958\sb240\sl -260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 During th e product upgrade process, your development team will (automatically) try to reengineer your products \line \up0 \expndtw-2\charscalex100 to reduce the base co st of production (COGS). SG&A is directly related to the quantity of vehicles you sell. \par\pard\qj \li1080\ri1069\sb240\sl-260\slmult0 \up0 \expndtw-2\chars calex100 \ul0\nosupersub\cf8\f9\fs22 Do the savings associated with improvements to tech capabilities accrue only during product development \up0 \expndtw-3\cha rscalex100 or also during manufacturing? \par\pard\qj \li1080\ri1088\sb240\sl-26 0\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 During manuf acturing only. They will impact the COGS in the results for that decision peri od. Note, however, \up0 \expndtw-4\charscalex100 that inflation will be pushin g costs up each period. \par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 If also upgrading the firm\u8217?s t echnology, does the firm get a double benefit from the minor/major upgrade? \par \pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosuper sub\cf4\f5\fs22 Not on the specification of the vehicle. Increasing your techn ology capabilities will not directly impact the \par\pard\qj \li1080\ri1218\sb10 \sl-250\slmult0 \up0 \expndtw-3\charscalex100 specifications of any existing pro duct, but it will give you the capability to develop products with higher specs. \up0 \expndtw-3\charscalex100 Investing in technology will impact your COGS tho ugh, so in that way, investing in technology and doing an \up0 \expndtw-4\charsc

alex100 upgrade will have a double benefit. \par\pard\ql \li1080\sb0\sl-250\slmu lt0 \par\pard\ql\li1080\ri905\sb20\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We see some numbers for est. cost savings under inpu t decisions-> technology. If we were to invest in those \up0 \expndtw-3\charsc alex100 technology decisions, are those numbers all we can expect in cost saving s? What do these cost savings \line \up0 \expndtw-4\charscalex100 affect? - COGS ? Manufacturing? \par\pard\ql \li1080\sb248\sl-253\slmult0 \up0 \expndtw-4\chars calex100 \ul0\nosupersub\cf4\f5\fs22 Those changes impact COGS across all your v ehicles on a yearly basis. \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\ li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slmult0 \par\pard\ql\li 1080\sb240\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf9\f10\ fs24 UPGRADES AND NEW PRODUCT DEVELOPMENT \par\pard\qj \li1080\ri1001\sb238\sl-2 60\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 If our comp etitors decide to upgrade/create new platform/enter new class, will we be able t o see this before \up0 \expndtw-4\charscalex100 the change hits the market place ? \par\pard\ql \li1080\ri1099\sb249\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Only the new class entries will be seen by competit ors a year before they hit the market. The others are internal \up0 \expndtw-2 \charscalex100 only. However, you may want to think about other clues for disc erning whether firms are active in R&D \line \up0 \expndtw-4\charscalex100 devel opment or not. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb15\ sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Do any firms have products in development at the start of the game? \ul0\nosupersub\cf 4\f5\fs22 No \par\pard\qj \li1080\ri1426\sb242\sl-260\slmult0 \up0 \expndtw-3\c harscalex100 \ul0\nosupersub\cf8\f9\fs22 Can you upgrade specs of a new car whil e it is in middle of being built? (So if there is a new car that is \up0 \expndt w-4\charscalex100 taking 3 yrs to build, can we upgrade specs in 3rd yr?) \par\p ard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersu b\cf4\f5\fs22 Yes, you can make minor changes to the specs through the 3rd year. \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb152\sl-276\slmult 0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 14 {\shp {\*\shpinst\shpleft1080\shptop10850\shpright6799\shpbottom10873\shpfhdr0\s hpbxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz244\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 5719}}{\sp{\sn geoBottom}{\sv 23}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(5719,0);(5719,23);(0,23)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g15}{\bkmkend Pg15}\par\pard\ql \li1080\sb0\sl-250\slmult0 \par\pard\ql\li1080\s b0\sl-250\slmult0 \par\pard\ql\li1080\sb0\sl-250\slmult0 \par\pard\ql\li1080\ri9 37\sb104\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs2 2 Our proposal for a new truck for the x market offered a horsepower rating of x HP. We were interested in \up0 \expndtw-2\charscalex100 pursuing a larger eng ine for this market, but only have the option of adding 5 HP/year. Are there a ny \line \up0 \expndtw-3\charscalex100 other options to increase this parameter that we are not seeing? \par\pard\ql \li1080\ri855\sb242\sl-260\slmult0 \up0 \ex pndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You have 3 options. One is t o \u8220?tweak\u8221? by 5HP per period using a minor upgrade. Two is to use a major upgrade, \up0 \expndtw-2\charscalex100 which will allow a greater change and will take two years. Three is to introduce a new product from scratch, \li ne \up0 \expndtw-3\charscalex100 which will also take two years to develop. \par \pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosuper sub\cf8\f9\fs22 When doing a minor or major upgrade how do you know which attrib utes are being upgraded? \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw

-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You choose which attributes are bei ng upgraded. You may choose to upgrade none, one, multiple, or all \par\pard\q j \li1080\ri941\sb18\sl-240\slmult0 \up0 \expndtw-3\charscalex100 attributes, pl us size and HP. There are constraints in terms of how far you may upgrade. S ee the manual or intro \up0 \expndtw-4\charscalex100 slides for details. \par\pa rd\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\slmult0 \up0 \e xpndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Do we get a choice of which o f attributes we want to upgrade? How many can be upgraded at once? \par\pard\q l \li1080\ri1083\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosuper sub\cf4\f5\fs22 Yes, you choose. The choice of attributes will impact both the cost of the upgrade itself as well as the COGS. \up0 \expndtw-2\charscalex100 W hen you go through the upgrade process you will see the costs as illustrated on page 58. Size, Engine, \line \up0 \expndtw-3\charscalex100 Attributes (Int/Sty /Safety/Qual) and COGS will also be impacted automatically based on product deve lopment's \up0 \expndtw-4\charscalex100 ability to engineer costs out of the pro duct and the upgrade itself. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \exp ndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Do we know what the cost of upg rade is before making the decision? The text gives a wide range. \par\pard\ql \l i1080\sb0\sl-246\slmult0 \par\pard\ql\li1080\ri1249\sb27\sl-246\slmult0 \up0 \ex pndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yes, you are able to select th e upgrade, view and modify it as often as you like (think of it as a discussion with \up0 \expndtw-3\charscalex100 your product development engineers), consider all the ramifications of the change, and ultimately cancel the \up0 \expndtw-3\ charscalex100 project if you don't like what you see (freeing up the development center when cancelled), or keep it in the \up0 \expndtw-4\charscalex100 develop ment center if you do like it. \par\pard\qj \li1080\sb0\sl-260\slmult0 \par\pard \qj\li1080\ri1154\sb3\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupers ub\cf8\f9\fs22 If we have a 3-year development cycle, do the expenses all occur in the first year, or are they spread over \up0 \expndtw-4\charscalex100 the thr ee-year period. If spread, are they spread equally? \par\pard\ql \li1080\sb246 \sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf4\f5\fs22 They a re spread evenly over three years. \par\pard\qj \li1080\ri1298\sb242\sl-260\slmu lt0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We noticed our pro duct base costs decrease even with development costs. Is this because of produ ction \up0 \expndtw-5\charscalex100 efficiencies? \par\pard\qj \li1080\ri1204\sb 240\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Eac h time you go through the product upgrade process, your development team also tr ies to reduce costs by re\up0 \expndtw-3\charscalex100 engineering the product i n ways that only impact the cost, not the overall "quality" of the product. \par \pard\ql \li1080\ri912\sb245\sl-255\slmult0 \up0 \expndtw-3\charscalex100 \ul0\n osupersub\cf8\f9\fs22 We are trying to do a minor upgrade to one of our products . In the decision summary, it says 'launch now'. \up0 \expndtw-2\charscalex100 I t also says that the current inventory of that model will be written off at a pa rticular cost. On the other \up0 \expndtw-3\charscalex100 hand, the manual sta tes that a minor upgrade will be complete in one year. If that is true, current \line \up0 \expndtw-3\charscalex100 inventory can still be sold in the next year , and for this one-year period, we can produce just enough units \up0 \expndtw-4 \charscalex100 of this model to minimize inventory write-off. Which one is cor rect? \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \u l0\nosupersub\cf4\f5\fs22 The development timelines can indeed be a bit confusin g. You may find it helpful to look at page 12 of the \par\pard\ql \li1080\sb7\ sl-253\slmult0 \up0 \expndtw-2\charscalex100 manual when making development deci sions. You are currently in period 1, making decisions for period 2. \par\pard \ql \li1080\ri822\sb0\sl-252\slmult0 \up0 \expndtw-3\charscalex100 Whenever the manual talks about a development project taking "one year," it means that your d ecision now will \up0 \expndtw-3\charscalex100 affect the next period results. The "launch now" is meant to remind you of this fact. With that in mind, if y ou \up0 \expndtw-3\charscalex100 decide to go ahead with the upgrade now, the ex isting inventory will be written off before the upgraded vehicle is \up0 \expndt w-3\charscalex100 sold in period 2. If you have inventory that you do not wish

to write off, then do not upgrade now. Instead, adjust \up0 \expndtw-2\charsc alex100 your production mix and turn flexible production off so the plant will p roduce only what you decide. Then you \up0 \expndtw-2\charscalex100 can upgrad e the vehicle next period for period 3, which seems to be your intention. \par\p ard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb81\sl-276\slmult0 \up0 \ expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 15 \par \pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg16}{\ bkmkend Pg16}\par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb92\sl-2 53\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 It seems to know the results before they have happened. I think this question is related to the first one \par\pard\qj \li1080\ri1003\sb0\sl-260\slmult0 \up0 \expndtw-2\ charscalex100 where I don't fully understand the timing of upgrades. My unders tanding is that we input decisions at the \up0 \expndtw-2\charscalex100 beginnin g of a period, and a minor upgrade takes one year. So how would the ending inv entory be known \up0 \expndtw-3\charscalex100 in advance? \par\pard\ql \li1080\s b228\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yo u must be referring to the pro-forma here. Ending inventory is projected based on your production and your \par\pard\qj \li1079\ri823\sb18\sl-240\slmult0 \up0 \expndtw-3\charscalex100 forecast. The production is known (since you set it) ; the forecast is an estimate. Actual inventory won't be known \up0 \expndtw-4 \charscalex100 until the simulation is advanced. \par\pard\ql \li1079\sb0\sl-253 \slmult0 \par\pard\ql\li1079\sb17\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ ul0\nosupersub\cf8\f9\fs22 If we decide to introduce a new car at the end of P1/ this session and it has a development cycle of 2 yrs \par\pard\ql \li1079\ri870\ sb0\sl-253\slmult0 \up0 \expndtw-2\charscalex100 (existing class), when does the manufacturing capacity have to be on line? Based on the table in the case, it \up0 \expndtw-2\charscalex100 appears that we have to have all the capacity for this new automobile (assuming increase in output \line \up0 \expndtw-2\charscal ex100 demands) on line in P3 yet the product does not reach market until P4. I s the assumption that you have to \up0 \expndtw-2\charscalex100 have the capacit y on line the yr prior to product launch or the same yr as product launch OR the same year \up0 \expndtw-2\charscalex100 as in market? Stated another way, do we build all the product the year prior to "in market," hence using \up0 \expndt w-2\charscalex100 all the capacity, or do we make sure we have the capacity on l ine to support the volume in P4. We want to \up0 \expndtw-3\charscalex100 make s ure we do not overbuild capacity prior to the need for capacity. \par\pard\ql \l i1079\ri964\sb234\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\c f4\f5\fs22 The table in the case is the right place to look for development time lines, but one point needs to be clarified: your \up0 \expndtw-2\charscalex100 p roject will reach market in P3, the period the product is launched, not P4, so y ou will need to have your \line \up0 \expndtw-2\charscalex100 increased capacity online in P3. To make this happen, be sure to input your decision to increase capacity now so \up0 \expndtw-2\charscalex100 that it will be available next pe riod for your initial production of the vehicle. \par\pard\qj \li1079\sb0\sl-250 \slmult0 \par\pard\qj\li1079\ri1006\sb20\sl-250\slmult0 \up0 \expndtw-2\charscal ex100 \ul0\nosupersub\cf8\f9\fs22 If a team starts a new product in a new produc t class in year 2 it should be on the market in year 5. If this \up0 \expndtw2\charscalex100 team wanted to start a new product in this same new class in yea r 3 would they still have to wait 3 years \up0 \expndtw-2\charscalex100 because it is a new class or simply 2 years because it is a new product, same class? \pa r\pard\qj \li1079\ri1083\sb250\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0 \nosupersub\cf4\f5\fs22 If this team wanted to start another new product in the same new class, it would still take 3 years unless the first \line \up0 \expndtw -2\charscalex100 product is already on the market. So, once their new vehicle is on the market, if they created another one in that \line \up0 \expndtw-2\char scalex100 same class it would take 2 years. If they create the other one befor e the first is on the market, it will take 3. \par\pard\ql \li1079\sb0\sl-250\sl mult0 \par\pard\ql\li1079\ri1028\sb20\sl-250\slmult0 \up0 \expndtw-2\charscalex1 00 \ul0\nosupersub\cf8\f9\fs22 We are wondering if the simulation accounts for "

synergies" between auto classes. For instance, if we are \up0 \expndtw-2\chars calex100 currently in the truck class, and we are considering the utility class, is there any advantage there because \up0 \expndtw-2\charscalex100 they can use the same frame or many of the same features. Basically, does the simulation a ccount for the \up0 \expndtw-2\charscalex100 fact that it would be easier to des ign a utility vehicle starting with a truck than it would to go from an \line \u p0 \expndtw-3\charscalex100 economy car to a utility truck. \par\pard\ql \li1080 \sb0\sl-253\slmult0 \par\pard\ql\li1080\ri862\sb15\sl-253\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 No, just because trucks and SUVs are similar, it would not be easier to design and manufacture. They are separate \u p0 \expndtw-3\charscalex100 classes and there would be no advantage. There is only an advantage within the same class. That is, the 2\ul0\super\cf13\f14\fs2 1 nd\ul0\nosupersub\cf4\f5\fs22 (and \up0 \expndtw-2\charscalex100 subsequent) vehicles you develop within a class where you already have an existing vehicle w ill take less time \up0 \expndtw-3\charscalex100 and cost less money to develop. \par\pard\ql \li1080\ri885\sb246\sl-255\slmult0 \up0 \expndtw-3\charscalex100 \ ul0\nosupersub\cf8\f9\fs22 We put a new model (not a new class) in development l ast period. It is supposed to take two years. After \line \up0 \expndtw-3\ch arscalex100 the simulation advanced, it is still in development. That seems to make sense. However it is being \line \up0 \expndtw-3\charscalex100 "launched " this period. What does that mean? I see that for the next round of decisio ns it shows up in \line \up0 \expndtw-3\charscalex100 forecast, manufacture, and so on. Is it just for us to build up an inventory to begin selling next perio d? Or \line \up0 \expndtw-3\charscalex100 will it be on the market in this per iod? I guess what I'm asking for is a definition of "launched." \par\pard\ql \ li1080\ri916\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\ cf4\f5\fs22 Presuming this is a new vehicle in a class that you already have or a major upgrade: Basically, in the last year of a \up0 \expndtw-2\charscalex100 development project you are both completing the development (in the development center) and launching the \line \up0 \expndtw-2\charscalex100 vehicle (making th e marketing decisions and producing it). It will be in your next period result s (and be included \up0 \expndtw-3\charscalex100 in your pro-forma). \par\pard\q l \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql \li8680\sb56\sl-276\slmult0 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf1\f2 \fs24 StratSim FAQs - Page 16 \par\pard\sect\sectd\fs24\paperw12240\paperh15840\ pard\sb0\sl-240{\bkmkstart Pg17}{\bkmkend Pg17}\par\pard\qj \li1080\sb0\sl-253\s lmult0 \par\pard\qj\li1080\sb0\sl-253\slmult0 \par\pard\qj\li1080\sb0\sl-253\slm ult0 \par\pard\qj\li1080\ri979\sb92\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Is there any way to delay introduction of a model? If yes, what is the cost? Will that release development \up0 \expndtw-2\charsc alex100 center for other work? For example, we like to delay Aspire's release to period 5. Can we suspend Aspire's \up0 \expndtw-2\charscalex100 work for one pe riod and use that center to upgrade Alfa. In period 5, resume Aspire's work and release in \up0 \expndtw-3\charscalex100 period 6. What are the cost implication s in this approach? \par\pard\ql \li1080\ri867\sb250\sl-250\slmult0 \up0 \expndt w-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You can delay introduction of a ne w model once it has been developed, by leaving the price at 0. However, there \line \up0 \expndtw-2\charscalex100 is currently no option to delay development of a new model. You can cancel the project, but you will need to start \line \ up0 \expndtw-2\charscalex100 over again when you decide to start working on it a gain. The other thing to consider is opening a new \line \up0 \expndtw-2\chars calex100 development center (which I believe you have started) so that there are enough centers to develop the vehicles you \line \up0 \expndtw-3\charscalex100 want next period. \par\pard\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li1080\ri 1080\sb20\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs 22 To what degree does the software mimic the real business world. For some spec ific sample questions, in \up0 \expndtw-3\charscalex100 reality, corporate brand ing is more important to a premium brand company like BMW while product\up0 \exp ndtw-3\charscalex100 related marketing is more important to Ford; In reality, if a BMW-type company launch a economy class \up0 \expndtw-2\charscalex100 car, it

would confuse the customers\u8230?. Are these questions over-thought by us, o r the software already \up0 \expndtw-4\charscalex100 incorporate these general r ules from reality? \par\pard\ql \li1080\sb0\sl-251\slmult0 \par\pard\ql\li1080\r i1027\sb19\sl-251\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\f s22 Although the simulation is certainly a simplification of reality, you should run the company in a realistic way. \line \up0 \expndtw-2\charscalex100 With re gard to the BMW question specifically, look at how BMW launched the mini-cooper. Yes, it is an \line \up0 \expndtw-3\charscalex100 economy car, but they clear ly differentiated it from other economy vehicles through premium features (for a n \line \up0 \expndtw-2\charscalex100 economy vehicle - styling, engine, etc.) t hat fits more with BMW's overall image. Finally, they also offered it \line \u p0 \expndtw-2\charscalex100 under a different brand (mini-cooper). Though you don't have all of these options, I think you are right to take \line \up0 \expnd tw-2\charscalex100 into consideration your company's overall positioning when de veloping new product lines in StratSim. And yes, \line \up0 \expndtw-2\charsca lex100 StratSim does take into account a company\u8217?s overall positioning. It is much more difficult for a firm that is \line \up0 \expndtw-3\charscalex100 known for its economy products to successfully launch a new luxury vehicle (for example). \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-27 6\slmult0 \par\pard\ql\li1080\sb237\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf9\f10\fs24 DEVELOPMENT CENTERS \par\pard\ql \li1080\sb243\sl253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Why don\u8 217?t we have any development centers available this period? \par\pard\ql \li108 0\sb0\sl-253\slmult0 \par\pard\ql\li1080\ri1092\sb14\sl-253\slmult0 \up0 \expndt w-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 If you do not have any available d evelopment centers, that is because your group has used up your development \up0 \expndtw-2\charscalex100 capacity with on-going projects that have been continu ed from previous periods. All firms start with two \line \up0 \expndtw-2\chars calex100 development centers. That development capacity can be increased up to five over the course of the game (max \up0 \expndtw-4\charscalex100 increase of 1/period). \par\pard\qj \li1080\ri1121\sb242\sl-260\slmult0 \up0 \expndtw-3\cha rscalex100 \ul0\nosupersub\cf8\f9\fs22 Since it takes 3 years to build a new pro duct but one year for plant, can I wait for 2 years before adding a \up0 \expndt w-4\charscalex100 development center? \par\pard\qj \li1080\ri1012\sb246\sl-253\s lmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The product dev elopment centers are for designing new products. Thus, you may need more, depe nding on your \up0 \expndtw-2\charscalex100 new product development plans (e.g. an upgrade + a new class would use up all your centers). New plants are \up0 \ expndtw-3\charscalex100 only necessary to increase your overall production capac ity, which may or may not be necessary, depending on \up0 \expndtw-4\charscalex1 00 the expected demand for all your product lines combined. \par\pard\ql \li1080 \sb247\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Can the decision to build a development center be reversed? It appears that I ca n't delete Dev Ctr 3. \par\pard\qj \li1080\ri1141\sb242\sl-260\slmult0 \up0 \exp ndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You may "undo" the decision to build a development center by clicking the Dev. Center button and unchecking \up 0 \expndtw-2\charscalex100 Add Development Center. Once the simulation has adv anced, however, and the new center has been built, you \up0 \expndtw-4\charscale x100 will not be able to make it go away. \par\pard\qj \li1080\ri889\sb240\sl-26 0\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 How long doe s it take to add a development center? In other words, if we add one in the se t of decisions for \up0 \expndtw-3\charscalex100 the period, when can we use it? \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb31\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 17 {\shp {\*\shpinst\shpleft1080\shptop8436\shpright4153\shpbottom8458\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz185\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 3073}}{\sp{\sn geoBottom}{\sv 22}}

{\sp{\sn pVerticies}{\sv 8;4;(0,0);(3073,0);(3073,22);(0,22)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g18}{\bkmkend Pg18}\par\pard\qj \li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\s b0\sl-260\slmult0 \par\pard\qj\li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\sb0 \sl-260\slmult0 \par\pard\qj\li1080\ri1118\sb46\sl-260\slmult0 \up0 \expndtw-2\c harscalex100 \ul0\nosupersub\cf4\f5\fs22 If you make the decision to add a devel opment center this period, you will be able to use it next period. It takes \u p0 \expndtw-3\charscalex100 one year to build the development center. \par\pard\ qj \li1080\ri1060\sb240\sl-260\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupe rsub\cf8\f9\fs22 Can we dump our third development center? How would this be d one? We are assuming we would see a \up0 \expndtw-4\charscalex100 one-time hit here. \par\pard\qj \li1080\ri1230\sb240\sl-260\slmult0 \up0 \expndtw-3\charscal ex100 \ul0\nosupersub\cf4\f5\fs22 You can\u8217?t discontinue a development cent er once it has been built, but there is no on-going cost for having it if \up0 \ expndtw-4\charscalex100 you don't use it. \par\pard\ql \li1080\sb246\sl-253\slmu lt0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Can one license th e infrastructure (like development centers)? \par\pard\ql \li1080\ri990\sb247\sl -253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Not direc tly, but close. Infrastructure cannot be licensed as such, but licensing a veh icle offers many of the same \line \up0 \expndtw-2\charscalex100 benefits. The partners first negotiate a license agreement covering the specifications and th e cost of the \line \up0 \expndtw-2\charscalex100 development project. Then th e licensee enters the new specifications for the vehicle along with the price, u nits \line \up0 \expndtw-2\charscalex100 and licensing fee (including developmen t cost). The licensor must then upgrade the nameplate to meet the \line \up0 \ expndtw-2\charscalex100 specifications before accepting the agreement. In effe ct, the licensee licenses the development center for the \line \up0 \expndtw-2\c harscalex100 upgrade (as well as the production of the vehicle). The key aspec t that is centered on a licensed product does \line \up0 \expndtw-3\charscalex10 0 create some limitations. \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\ li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slmult0 \par\pard\ql\li 1080\sb240\sl-276\slmult0 \up0 \expndtw-5\charscalex100 \ul0\nosupersub\cf9\f10\ fs24 DEALERSHIP AND DISTRIBUTION \par\pard\ql \li1080\sb243\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 How do dealerships work and what affects their ratings? \par\pard\ql \li1080\sb0\sl-252\slmult0 \par\pard\q l\li1080\ri923\sb16\sl-252\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub \cf4\f5\fs22 Dealerships make the actual sales to customers. They are set up o n a regional basis (North, South, East, and \line \up0 \expndtw-3\charscalex100 West). Dealer ratings (1-100 scale) reflect customer experience at the dealers hip. Product offerings, training, \up0 \expndtw-2\charscalex100 education, and profitability affect these ratings. Profitability provides information about how well the dealership \up0 \expndtw-2\charscalex100 is able to operate on the margins and volume that are generated. So, if you squeeze margins and/or lose sales \up0 \expndtw-2\charscalex100 volume (per dealer), ratings will eventually go down. Dealer ratings are long-term in nature, so if you squeeze in \up0 \e xpndtw-2\charscalex100 a given year, the ratings won\u8217?t suffer drastically, but in the long-run, they will. \par\pard\qj \li1080\ri1003\sb248\sl-253\slmult 0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Our group is reviewi ng increasing the number of dealers to qualify for B2B sales. It seems there sho uld be \up0 \expndtw-3\charscalex100 an increased sales benefit by increasing th e number of dealers. Is this a correct assumption? Is there a way \up0 \expndtw3\charscalex100 to analyze the potential benefit? From the StratSim book it isn' t good to have too much coverage, but we \up0 \expndtw-4\charscalex100 shouldn't be close to that point yet. \par\pard\qj \li1080\ri874\sb245\sl-256\slmult0 \up 0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Increasing dealerships wi

ll provide you with improved coverage of sales areas. Dealerships are added in location \line \up0 \expndtw-2\charscalex100 based on decreasing sales potentia l. In other words, the first dealership is added in the best sales area and so on... \line \up0 \expndtw-2\charscalex100 So, as one increases dealerships, eac h one adds a little less than the previous one. The other thing that happens i s \line \up0 \expndtw-2\charscalex100 that some of these dealers will be in over lapping areas. Thus, when one new dealership is added, it might hurt the \line \up0 \expndtw-3\charscalex100 sales from some of the surrounding dealerships, e ven though, as a group, that region's sales will increase, sales per \line \up0 \expndtw-3\charscalex100 dealer might actually decrease. This impacts the "suc cess" of an individual dealership as that individual \par\pard\ql \li1080\sb1\sl -236\slmult0 \up0 \expndtw-2\charscalex100 dealership may have less revenues to run their business. This, in turn, may impact dealer service as that dealer \p ar\pard\qj \li1080\ri849\sb13\sl-250\slmult0 \up0 \expndtw-2\charscalex100 may h ave to make cuts in expenditures (staff, compensation, investments, etc.) if the ir revenues go down. So it is \up0 \expndtw-3\charscalex100 a complex cycle. The B2B aspect adds another dimension to the issue. However, that is a clearl y known impact -\line \up0 \expndtw-4\charscalex100 either you have the required coverage or not. ' \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\ sb15\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Ho w do you identify why the dealer ratings are low and how to improve? \par\pard\q l \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql \li8680\sb236\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f 2\fs24 StratSim FAQs - Page 18 {\shp {\*\shpinst\shpleft1080\shptop7194\shpright5054\shpbottom7216\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz145\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 3974}}{\sp{\sn geoBottom}{\sv 22}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(3974,0);(3974,22);(0,22)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g19}{\bkmkend Pg19}\par\pard\qj \li1080\sb0\sl-253\slmult0 \par\pard\qj\li1080\s b0\sl-253\slmult0 \par\pard\qj\li1080\sb0\sl-253\slmult0 \par\pard\qj\li1080\ri9 44\sb92\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The experience at the dealer is driven by many factors... most important is pro bably the success of the dealership \up0 \expndtw-2\charscalex100 which is the r evenues they bring in (difference between retail price and the dealer invoice) x the units sold at that \up0 \expndtw-3\charscalex100 particular dealership. T hey are independent businesses and their success impacts your success. You may also \up0 \expndtw-3\charscalex100 find that training the employees at the deal erships will make a difference. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \ expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Is there a cost associated w ith changes to the distribution network? \par\pard\ql \li1080\sb247\sl-253\slmul t0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yes, check the inpu t screen for the exact amount. Part is an on-going cost and part is for the ch ange. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb14\sl-253\sl mult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Distribution sti ll shows up in the dealerships. I thought I owned all of it? \par\pard\ql \li1 080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs 22 You do own it, but it does show up so you can see inventory on a per dealer b asis. Don't double count this. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We invested in increasing d istribution. How come it didn't go up? \par\pard\ql \li1080\sb247\sl-253\slmul t0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Please note that it takes 1 year to open/close a dealership. For example, if you make the decision

to add \par\pard\qj \li1080\ri1418\sb2\sl-260\slmult0 \up0 \expndtw-2\charscalex 100 dealerships in period 1 (results for period 1), it will not impact results u ntil the results for period 3. Pending \line \up0 \expndtw-2\charscalex100 deale rship openings/closings will appear on the "Scheduled Change" line on the distri bution decision screen. \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1 080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb215\sl-276\slmult0 \up0 \expndtw-3\ charscalex100 \ul0\nosupersub\cf9\f10\fs24 ENTERING DECISIONS \par\pard\qj \li10 80\ri1365\sb258\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8 \f9\fs22 We were playing with the studies and input the wrong price by mistake. Can they be reversed and the \up0 \expndtw-3\charscalex100 information that we have learned made available to all? \par\pard\qj \li1080\sb0\sl-240\slmult0 \pa r\pard\qj\li1080\ri916\sb17\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\no supersub\cf4\f5\fs22 Studies are purchased by each team for its own use and cann ot be returned or refunded or made available for other \up0 \expndtw-3\charscale x100 teams to use. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\r i1194\sb40\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\f s22 If a team is experimenting with options and they upload an option to Interpr etive for a team to view, can \up0 \expndtw-3\charscalex100 they revert to the o riginal data after this? \par\pard\qj \li1080\sb0\sl-250\slmult0 \par\pard\qj\li 1080\ri1237\sb22\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf 4\f5\fs22 If you mean marketing or production decisions, they can change their d ecisions as much as they want until the \up0 \expndtw-2\charscalex100 decision d eadline. Some decisions, however, such as the purchase of a study or the accep tance of a license \up0 \expndtw-3\charscalex100 decision, cannot be reversed. \ par\pard\ql \li1080\sb248\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosu persub\cf8\f9\fs22 If indeed one team member submits a decision to the server, i s it possible to go "backwards". In other \par\pard\ql \li1080\sb7\sl-253\slmu lt0 \up0 \expndtw-2\charscalex100 words, can we "take away" a decision that was previously submitted (before the simulation is advanced)? \par\pard\qj \li1080\r i1659\sb242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\ fs22 There is one set of decisions for the entire team, and each change automati cally affects all team members' \line \up0 \expndtw-2\charscalex100 decisions. Except for market research studies, you "take away" a decision simply by enteri ng new input. \par\pard\ql \li1080\ri1140\sb245\sl-255\slmult0 \up0 \expndtw-2\c harscalex100 \ul0\nosupersub\cf8\f9\fs22 When I get to the pro forma step, is th ere a way to output all this forecasted information to a spreadsheet \up0 \expnd tw-2\charscalex100 file? I tried the File -> Print Reports from the pro forma sc reen, but it gave me the original data. I would \up0 \expndtw-2\charscalex100 li ke to be able to input multiple sets of decisions and then save their pro formas to a spreadsheet for \line \up0 \expndtw-2\charscalex100 comparisons in order f or the group to make decisions. Can this be done? I think having to type this in by \up0 \expndtw-3\charscalex100 hand will take too long. \par\pard\qj \li1080\ ri1145\sb250\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5 \fs22 You can select Edit - Copy from the drop down menus from any report and th en paste that into a spreadsheet. \up0 \expndtw-2\charscalex100 You'll probably want to do that on the forecast page and whichever pro-forma reports give you an insight. You \up0 \expndtw-3\charscalex100 may also want to copy and paste th e decision summary. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\ sb15\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Ho w do the students get charged for the studies when they do them? \par\pard\ql \l i8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb32\sl-276\slmult0 \up0 \expndtw-1 \charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 19 {\shp {\*\shpinst\shpleft1080\shptop6664\shpright3740\shpbottom6687\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz132\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 2660}}{\sp{\sn geoBottom}{\sv 23}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(2660,0);(2660,23);(0,23)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} }

{\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g20}{\bkmkend Pg20}\par\pard\qj \li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\s b0\sl-260\slmult0 \par\pard\qj\li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\sb0 \sl-260\slmult0 \par\pard\qj\li1080\ri1319\sb46\sl-260\slmult0 \up0 \expndtw-2\c harscalex100 \ul0\nosupersub\cf4\f5\fs22 Before students view any conjoint or fo cus group studies, they will get a prompt confirming that they want to \up0 \exp ndtw-2\charscalex100 purchase the study. The study will then be added to their list, and the cost will show up under Extraordinary \up0 \expndtw-2\charscalex1 00 Items on the Income Statement. The detail will show the cost as "Reports." \par\pard\qj \li1080\ri1085\sb240\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ ul0\nosupersub\cf8\f9\fs22 When are you charged for doing a cost analysis, can y ou be charged for multiple analyses? (If 2 different \up0 \expndtw-2\charscale x100 team members do the same/similar conjoint analysis, does it count as two?) \par\pard\ql \li1079\ri868\sb249\sl-250\slmult0\fi0 \up0 \expndtw-2\charscalex10 0 \ul0\nosupersub\cf4\f5\fs22 Each time you order a study, it is added to the li st of available studies, and all team members can access it. If two \up0 \expn dtw-2\charscalex100 team members are doing exactly the same study at the same ti me, there is a chance that you will be charged twice \up0 \expndtw-3\charscalex1 00 for the same thing. There is also nothing to prevent you from ordering the same thing twice. I would recommend \up0 \expndtw-2\charscalex100 that you div ide up the work and pay attention to what the team has already purchased so that you do not waste \line \up0 \expndtw-3\charscalex100 resources on duplicated ef fort. \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slm ult0 \par\pard\ql\li1080\sb257\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0 \nosupersub\cf9\f10\fs24 B2B MARKETING \par\pard\qj \li1080\sb0\sl-240\slmult0 \ par\pard\qj\li1080\ri1413\sb34\sl-240\slmult0 \up0 \expndtw-3\charscalex100 \ul0 \nosupersub\cf8\f9\fs22 B2B Markets: How do we find out more about potential c ontracts in the B2B market? There is some \up0 \expndtw-3\charscalex100 genera l information under the Market menu, but nothing about specifics. \par\pard\ql \ li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 If you decide that you want to explo re the B2B market opportunities, you may either purchase detailed \par\pard\qj \ li1080\ri946\sb0\sl-260\slmult0 \up0 \expndtw-1\charscalex100 information in the contract requirements through the MARKET - B2B CONTRACTS or by targeting partic ular \up0 \expndtw-2\charscalex100 contracts in your B2B decisions. This will hire a sales force who will go out and get a request for proposal which \up0 \ex pndtw-3\charscalex100 will also include all the requirements. \par\pard\ql \li10 80\sb228\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs2 2 B2B Markets: How are contracts awarded and how do we know what a \u8220?pref erred\u8221? provider is? \par\pard\qj \li1080\ri1098\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 There is a guaranteed quant ity that will be awarded to each qualifying team that bids on a contract. Howe ver, \line \up0 \expndtw-3\charscalex100 only one qualifying firm will be select ed as a \u8220?preferred\u8221? supplier and be awarded twice the guaranteed uni ts (if \line \up0 \expndtw-2\charscalex100 there is sufficient production). Th e preferred supplier is the one who meets all the requirements at the lowest \li ne \up0 \expndtw-4\charscalex100 price. \par\pard\ql \li1080\ri1159\sb245\sl-256 \slmult0 \up0 \expndtw-2\charscalex100 Company fleet buyers have a significantly different purchase process than individuals. First, B2B buyers have \up0 \exp ndtw-2\charscalex100 specific requirements that must be met in order for a manuf acturer to qualify for a contract. These include \line \up0 \expndtw-3\charsca lex100 meeting or being less than a maximum price, meeting or exceeding dealer c overage in all regions to provide an \up0 \expndtw-3\charscalex100 adequate serv ice network, being within a particular range for size and performance, and meeti ng or exceeding \up0 \expndtw-2\charscalex100 particular attributes (interior, s tyling, safety, and quality). Second, their purchase is direct from a manufact urer \up0 \expndtw-4\charscalex100 rather than through a dealership. \par\pard\q

j \li1080\ri1805\sb241\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosuper sub\cf8\f9\fs22 B2B Markets: If no one qualifies for a contract, will it be aw arded to the supplier with the closest \up0 \expndtw-4\charscalex100 product/ser vice offering or will the contract be abandoned? \par\pard\ql \li1080\sb246\sl-2 53\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You must qu alify for a contract in order to sell any units, and you must submit a bid. On the B2B marketing \par\pard\qj \li1080\ri1086\sb18\sl-240\slmult0 \up0 \expndtw -3\charscalex100 decision screen you will see all the contracts for which your s ales force received a request for bid, and if you bid \up0 \expndtw-3\charscalex 100 on the contract, it will show a \u8220?yes\u8221? under the qualify column i f you have qualified for the contract. \par\pard\ql \li1080\sb0\sl-253\slmult0 \ par\pard\ql\li1080\ri1111\sb17\sl-253\slmult0 \up0 \expndtw-3\charscalex100 If t he contract is not awarded for this period, it will remain in the market going f orward with approximately the \line \up0 \expndtw-2\charscalex100 same demand th roughout the course of the game. Thus, you can plan on these B2B contracts bei ng part of your \up0 \expndtw-2\charscalex100 strategy going forward (or not). However, you MUST meet ALL requirements or the contract will not be \line \up0 \expndtw-4\charscalex100 awarded to you. \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb236\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 20 {\shp {\*\shpinst\shpleft1080\shptop5422\shpright3112\shpbottom5445\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz116\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 2032}}{\sp{\sn geoBottom}{\sv 23}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(2032,0);(2032,23);(0,23)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g21}{\bkmkend Pg21}\par\pard\qj \li1080\sb0\sl-253\slmult0 \par\pard\qj\li1080\s b0\sl-253\slmult0 \par\pard\qj\li1080\sb0\sl-253\slmult0 \par\pard\qj\li1080\ri1 230\sb92\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs2 2 With regard to the specialty fleets: one student has the situation in which a contract requires a MSRP of \up0 \expndtw-2\charscalex100 20K for a minivan. How ever their current retail price is 28K. They are wondering whether they have to \up0 \expndtw-2\charscalex100 input 20K to qualify or does the bidding process a llow to keep 28K for the dealerships and 20K for the \up0 \expndtw-3\charscalex1 00 specialty fleets? Or does the system only allow one price? \par\pard\qj \li10 80\ri958\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\ f5\fs22 These are two different markets with different purchase processes. The B2B is direct and requires a maximum of \up0 \expndtw-2\charscalex100 the price listed in the B2B contract requirements. This does not have to be related to the consumer market (and \up0 \expndtw-2\charscalex100 typically is not). Gene rally, the fleet buyers want a lower price for the volume that they purchase (al so note there \up0 \expndtw-3\charscalex100 is no dealer discount deducted from the contract price). \par\pard\qj \li1080\ri1073\sb242\sl-260\slmult0 \up0 \expn dtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 How much does it cost us every p eriod to support B2B? For example, we are bidding for Corp Car Rental \up0 \expn dtw-2\charscalex100 with an alliance. How much support do these guys need from d ealers, and what is the cost to us? \par\pard\qj \li1080\ri1155\sb240\sl-260\slm ult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The only direct c ost is the sales force. However, overhead, retooling, product development, exp anding dealers, \up0 \expndtw-2\charscalex100 etc., may all also come into play also, depending on how B2B impacts demand for your vehicles. \par\pard\qj \li108 0\ri957\sb246\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f 9\fs22 I have a question about B2B business. We're trying to assess the possible

costs/benefit trade-off of pursuing \up0 \expndtw-2\charscalex100 B2B business. If we choose to pursue B2B sales, is there any impact on consumer perception of our brand? \up0 \expndtw-2\charscalex100 Are we at risk of putting our brand im age / equity at risk in the consumer space (our primary target) by \up0 \expndtw -3\charscalex100 selling cars to B2B customers? \par\pard\ql \li1080\sb247\sl-25 3\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 No. You shou ld not expect any negative impact. Two separate markets. \par\pard\qj \li1080\ sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1108\sb38\sl-240\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What happens with the contract that we won last period? Are we going to continue winning in this period \up0 \expndt w-2\charscalex100 or do we have to re-bid? In other words, is the sale fixed for lifetime of this game? \par\pard\qj \li1080\ri911\sb244\sl-260\slmult0 \up0 \ex pndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 The default decision is to rebid on the contract at the same price. You may, however, change your bid price . To \up0 \expndtw-4\charscalex100 withdraw from the bidding enter 0 for the p rice. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb13\sl-253\sl mult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Do all firms see the same B2B contracts available for bidding? \par\pard\ql \li1080\sb247\sl-253 \slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yes. \par\par d\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\ cf8\f9\fs22 I want to double-check my understanding of winning a contract. At wh at point do you have to start \par\pard\ql \li1080\ri995\sb10\sl-250\slmult0 \up 0 \expndtw-2\charscalex100 production of the promised vehicle? For example, if y ou don't have enough production when you make the \up0 \expndtw-2\charscalex100 bid but will have enough at the next decision point, is that all right? You do n ot start production of that \up0 \expndtw-3\charscalex100 vehicle unless you kno w you have won it, correct? \par\pard\qj \li1080\ri1127\sb246\sl-255\slmult0 \up 0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 If the B2B screen says, " yes" to qualify for the contract, you will sell units when the simulation is adv anced, so \up0 \expndtw-2\charscalex100 you will need to produce additional vehi cles now. But you have to have that "yes" in the qualify column on the \up0 \e xpndtw-2\charscalex100 B2B decisions. Also, units for B2B contracts are first priority - that is production is set aside for B2B contracts \up0 \expndtw-2\cha rscalex100 first, then consumer markets. So, if you do not produce enough to s ell in both B2B and consumer markets, it is \up0 \expndtw-2\charscalex100 the co nsumer market that will be short-changed, as the B2B market is a contractual obl igation. \par\pard\qj \li1080\ri1090\sb241\sl-260\slmult0 \up0 \expndtw-2\charsc alex100 \ul0\nosupersub\cf8\f9\fs22 How do decisions in period2 affect B2B biddi ng? For example, if we decided to upgrade a car in period2, \up0 \expndtw-3\ch arscalex100 can we use upgraded specs to bid for the contract in period2? \par\p ard\qj \li1080\ri1092\sb246\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\no supersub\cf4\f5\fs22 Yes. When you actually go into the B2B marketing decision s for a particular contract and place a bid, you will \up0 \expndtw-2\charscalex 100 see if you qualify on the main page. If you get a "yes," you can count on those sales for the coming period (and \up0 \expndtw-3\charscalex100 possibly do uble if you are the preferred supplier). If "no," you will not get them. (Pl ease note that if you get a \up0 \expndtw-3\charscalex100 "yes" and then change the upgrade so you don't meet the requirements anymore, you won't qualify). \par \pard\qj \li1080\ri964\sb242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\n osupersub\cf8\f9\fs22 We are increasing our dealer coverage this period. This is necessary to meet a particular contract. Can we \up0 \expndtw-2\charscalex100 bid for this contract in this period, since we are making a decision to increas e dealer coverage now? \par\pard\ql \li8680\sb107\sl-276\slmult0 \up0 \expndtw-1 \charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 21 \par\pard\sec t\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg22}{\bkmkend P g22}\par\pard\qj \li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\sb0\sl-260\slmul t0 \par\pard\qj\li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\sb0\sl-260\slmult0 \par\pard\qj\li1080\ri1044\sb46\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \u l0\nosupersub\cf4\f5\fs22 It takes a year to open dealerships, so they will not be ready to fulfill the requirements of the contract this period. \up0 \expndtw-

2\charscalex100 If you increase your coverage now, you will be able to bid and q ualify next period. \par\pard\qj \li1080\ri983\sb240\sl-260\slmult0 \up0 \expndt w-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Is the B2B contract volume listed per year? In other words, Corp Car Rental is looking for 25K cars; if the \up0 \ expndtw-3\charscalex100 contract is assigned, do they buy 25K per year for all p eriods? \par\pard\qj \li1080\ri1535\sb240\sl-260\slmult0 \up0 \expndtw-2\charsca lex100 \ul0\nosupersub\cf4\f5\fs22 Yes, if you qualify, that 25K is a guaranteed quantity for the coming year, and, at this point, all fleet buyers \up0 \expndt w-2\charscalex100 expect that demand to remain approximately the same for the fo reseeable future. \par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-2\char scalex100 \ul0\nosupersub\cf8\f9\fs22 Does it mean that if we win this contract, Corp Car Rental will buy from us for all rest of the periods? \par\pard\ql \li1 080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs 22 As long as you qualify each period and place a bid, yes. For instance, if y ou closed some of your dealerships \par\pard\qj \li1080\ri907\sb2\sl-260\slmult0 \up0 \expndtw-2\charscalex100 (didn't qualify on coverage), or lowered your spe cs, etc. and no longer qualified, you would not sell any cars. The \up0 \expnd tw-2\charscalex100 key thing is to make sure that each period you go into the B2 B screen and check to see that you still qualify. \par\pard\ql \li8680\sb0\sl-27 6\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\ slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\sl mult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmu lt0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult 0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \p ar\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par \pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\p ard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\par d\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\l i8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8 680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li868 0\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\ sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb 0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\ sl-276\slmult0 \par\pard\ql\li8680\sb31\sl-276\slmult0 \up0 \expndtw-1\charscale x100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 22 \par\pard\sect\sectd\fs 24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg23}{\bkmkend Pg23}\par\p ard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb0\sl-276\slmult0 \par\pa rd\ql\li1080\sb0\sl-276\slmult0 \par\pard\ql\li1080\sb24\sl-276\slmult0 \up0 \ex pndtw-3\charscalex100 \ul0\nosupersub\cf9\f10\fs24 LICENSING \par\pard\ql \li108 0\sb243\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 I'd like to begin negotiations on potential licensing agreements. How do I co ntact potential partners? \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndt w-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Email, phone, in person. \par\pard \ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb14\sl-253\slmult0 \up0 \exp ndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Can I license across industries ? \ul0\nosupersub\cf4\f5\fs22 No \par\pard\ql \li1080\sb247\sl-253\slmult0 \up 0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Is this license renewed a nnually or can we set it up for a multiyear term? \par\pard\qj \li1080\ri1331\sb 242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 In terms of the software, both teams must agree to the license terms annually. Ho wever, you may negotiate a \up0 \expndtw-2\charscalex100 long-term agreement tha t is then implemented annually in the simulation. \par\pard\qj \li1080\ri960\sb2 40\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Can either party withdraw from the agreement? Are there any penalties for withdraw ing from a licensing \up0 \expndtw-2\charscalex100 agreement? If we are licens ing a particular product, will we automatically get any upgrades? \par\pard\qj \ li1080\ri894\sb249\sl-250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\

cf4\f5\fs22 No, you license a particular set of specifications, not the upgrades . Again, with regard to the simulation, you will \up0 \expndtw-2\charscalex100 update license terms each year, but you could have an agreement that specifies different terms over time including \up0 \expndtw-3\charscalex100 access to upgr ades and penalties for withdrawing from the agreement. \par\pard\ql \li1080\sb0\ sl-253\slmult0 \par\pard\ql\li1080\sb15\sl-253\slmult0 \up0 \expndtw-2\charscale x100 \ul0\nosupersub\cf8\f9\fs22 We would like to license a vehicle without ANY commitment of volumes. Is this possible? \par\pard\qj \li1080\ri1142\sb250\sl -250\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You must enter the units, which transfer into the production decision. Someone has to c ommit to making the \line \up0 \expndtw-2\charscalex100 vehicles, just as you do when you input your production volumes. The firm will then sell that many veh icles to \up0 \expndtw-3\charscalex100 you to resell. \par\pard\qj \li1080\sb0\s l-240\slmult0 \par\pard\qj\li1080\ri951\sb39\sl-240\slmult0 \up0 \expndtw-2\char scalex100 \ul0\nosupersub\cf8\f9\fs22 With regard to licensing, is there a mecha nism included which gives a penalty if the licensor doesn't deliver \up0 \expndt w-3\charscalex100 the cars that were in the contract? \par\pard\ql \li1080\sb0\s l-250\slmult0 \par\pard\ql\li1080\ri969\sb22\sl-250\slmult0 \up0 \expndtw-2\char scalex100 \ul0\nosupersub\cf4\f5\fs22 In licensing, the licensor must deliver th e vehicles by contract. Once a license agreement is in place (both parties \li ne \up0 \expndtw-2\charscalex100 agree), the productive capacity is set aside to make sure the vehicles are available. Each year this is updated \line \up0 \e xpndtw-2\charscalex100 (though the parties may agree to a longer term deal, in S tratSim, the license must be agreed to each period). \par\pard\qj \li1080\ri1262 \sb242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Could you give us some guidance on how to determine penalties when one doesn't s tick to a (multi-year) \up0 \expndtw-3\charscalex100 licensing agreement? \par\p ard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersu b\cf4\f5\fs22 If the teams agree on a multi-year contract, we would recommend ha ving them build a penalty into their \par\pard\qj \li1080\ri1126\sb7\sl-253\slmu lt0 \up0 \expndtw-2\charscalex100 negotiations should one of the teams opt out o f the contract early. They should probably provide that licensing \up0 \expndt w-2\charscalex100 agreement to you (including the agreed-upon penalty), in writi ng. For example, they might agree that if one of \up0 \expndtw-2\charscalex100 the teams breaks the contract, they will incur a $2 million penalty (and if thi s happens, your professor can let us \up0 \expndtw-2\charscalex100 know and we w ill add negative $2 million in exceptional income to that team). \par\pard\ql \l i1080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\ fs22 Both teams will be able to sell a licensed vehicle, although we will sell u nder different brand name, right? \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Correct. Your licensed v ehicle will start with no brand awareness. \par\pard\ql \li1080\sb0\sl-253\slmul t0 \par\pard\ql\li1080\sb14\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\no supersub\cf8\f9\fs22 Price is fixed for 2 periods. Is there any way to enforce this? \par\pard\ql \li1080\ri917\sb250\sl-250\slmult0 \up0 \expndtw-2\charscale x100 \ul0\nosupersub\cf4\f5\fs22 Price to market would have to be checked using the competitive products page and you might negotiate terms in a \up0 \expndtw-2 \charscalex100 contract between your two firms. Lots of additional terms can b e created in a contract, but the inputs remain \line \up0 \expndtw-2\charscalex1 00 simple. You'll also need to re-enter each period (even if a multi-year agre ement). \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\s lmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb21\sl-276\sl mult0 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs Page 23 {\shp {\*\shpinst\shpleft1080\shptop1329\shpright2427\shpbottom1352\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz17\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 1347}}{\sp{\sn geoBottom}{\sv 23}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(1347,0);(1347,23);(0,23)}}

{\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g24}{\bkmkend Pg24}\par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\s b0\sl-240\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1 181\sb142\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs 22 The vehicle will need to be upgraded to our specs. These are minor and henc e they can upgrade and sell \up0 \expndtw-3\charscalex100 through us simultaneou sly. Can we put upgraded specs? \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\ pard\qj\li1080\ri890\sb40\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosu persub\cf4\f5\fs22 In your "offer," you will let the firm know what specs you ne ed in order for the license to be valid. If they have to \up0 \expndtw-2\chars calex100 upgrade to do so, then they will upgrade, or they can refuse the contra ct. \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\slmu lt0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Our deal with the other firm is that THEY will be incurring all inventory costs if sales don't rea ch to the \par\pard\qj \li1080\ri883\sb0\sl-260\slmult0 \up0 \expndtw-2\charscal ex100 forecasted mark. So if we enter units, then we would be committing to bu y those # of units which will mean \up0 \expndtw-2\charscalex100 if sales don't hit that mark, we will be incurring inventory costs, contrary to the deal. Is there anyway to \line \up0 \expndtw-3\charscalex100 get around it? \par\pard\ql \li1080\ri1134\sb231\sl-250\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersu b\cf4\f5\fs22 In the StratSim licensing deal, they will produce the vehicles and deliver them to you, who will market them \line \up0 \expndtw-2\charscalex100 t hrough their dealer network or use them to fulfill a B2B contract. If you wish to recover the cost of the \line \up0 \expndtw-2\charscalex100 inventory, you c an certainly do that by using the annual fee input for the licensing agreement. Normally, a per\up0 \expndtw-3\charscalex100 period fee paid by one firm to th e other is entered there, but by entering a negative number, funds can be \line \up0 \expndtw-4\charscalex100 transferred the other direction. \par\pard\ql \li1 080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb15\sl-253\slmult0 \up0 \expndtw-3\c harscalex100 \ul0\nosupersub\cf8\f9\fs22 This complicates the deal, and I\u8217? m not sure if both teams will agree to a fixed fee (negative annual fee) at \par \pard\qj \li1080\ri911\sb0\sl-260\slmult0 \up0 \expndtw-3\charscalex100 this jun cture, since both of us are risk averse in the deal. Thus, it sounds like team A will need to take a risk \up0 \expndtw-4\charscalex100 that was not scoped in o ur deal. \par\pard\qj \li1080\ri1308\sb222\sl-260\slmult0 \up0 \expndtw-3\charsc alex100 \ul0\nosupersub\cf4\f5\fs22 The "fixed fee" can be changed every year, s o there is no more risk than in the way you wanted to structure it. \up0 \expndt w-3\charscalex100 The only cost is that you wait a year before being reimbursed for the possible inventory cost. \par\pard\ql \li1080\sb246\sl-253\slmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Are there any additional co sts with licensing a vehicle? \par\pard\ql \li1080\ri896\sb245\sl-256\slmult0 \u p0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Any time you add or upgr ade a new vehicle to the manufacturing mix, you will incur retooling costs. In StratSim, \line \up0 \expndtw-3\charscalex100 when you produce a vehicle under license, you do not simply use the old production line and slap a different \lin e \up0 \expndtw-3\charscalex100 nameplate on the vehicles as they come off the l ine. Rather, while you do benefit from the experience with the \line \up0 \expnd tw-3\charscalex100 vehicle it is based on, you are still creating a new producti on line, allowing you to do upgrades of the licensed \line \up0 \expndtw-2\chars calex100 vehicles (as per your agreement), independent of your own products. I n other words, producing a product under \line \up0 \expndtw-3\charscalex100 lic ense is not cost-free. \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-3 \charscalex100 \ul0\nosupersub\cf8\f9\fs22 If we continue to license this vehicl e to our competitor in subsequent periods, will we keep incurring \par\pard\qj \ li1080\ri1182\sb18\sl-240\slmult0 \up0 \expndtw-2\charscalex100 retooling costs?

Additionally, I am unable to find in the manual how to calculate/project reto oling costs. \up0 \expndtw-4\charscalex100 Can you provide the formula to us? \p ar\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\slmult0 \u p0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Once a production line h as been established, retooling costs are incurred only when there is an increase in \par\pard\ql \li1079\ri1003\sb0\sl-253\slmult0 \up0 \expndtw-3\charscalex100 production or the vehicle is upgraded. The easiest way to calculate the cost of retooling for the licensed vehicle is \up0 \expndtw-3\charscalex100 to enter in creased production for the vehicle it is based on by the amount of the license a greement, and see what \up0 \expndtw-3\charscalex100 the retooling cost will be. Be sure to reduce the production input for the base vehicle once you have the \ line \up0 \expndtw-4\charscalex100 information you need. \par\pard\qj \li1079\sb 0\sl-250\slmult0 \par\pard\qj\li1079\ri1047\sb7\sl-250\slmult0 \up0 \expndtw-2\c harscalex100 \ul0\nosupersub\cf8\f9\fs22 We are planning to upgrade our vehicle next period. Our understanding is that if we do a minor upgrade \up0 \expndtw3\charscalex100 next period, the same upgrade will also apply to the licensed ve hicle that we will be supplying to the other \up0 \expndtw-4\charscalex100 firm. Is that correct? \par\pard\ql \li1079\ri868\sb249\sl-252\slmult0 \up0 \expndt w-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 No. The development process in t his version of StratSim is tied to vehicle nameplates. When you do an upgrade, \line \up0 \expndtw-2\charscalex100 you upgrade a nameplate. When you license a vehicle, you create a new nameplate that can only be sold to your \line \up0 \expndtw-2\charscalex100 licensing partner. Therefore, upgrading your vehicle next period will not automatically upgrade the licensed \line \up0 \expndtw-4\ch arscalex100 vehicle. \up0 \expndtw-2\charscalex100 (Often this is a benefit.) If you want to upgrade the licensed vehicle as well, simply have your partner \l ine \up0 \expndtw-3\charscalex100 input the new specs in the license agreement n ext period along with funds for developing the upgrade in the \line \up0 \expndt w-4\charscalex100 licensing fee. \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pa rd\ql\li8680\sb93\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\c f1\f2\fs24 StratSim FAQs - Page 24 \par\pard\sect\sectd\fs24\paperw12240\paperh1 5840\pard\sb0\sl-240{\bkmkstart Pg25}{\bkmkend Pg25}\par\pard\ql \li1080\sb0\sl253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-25 3\slmult0 \par\pard\ql\li1080\sb92\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We licensed a vehicle from another firm last period. At this time we have an inventory of 4K. \par\pard\qj \li1080\ri1855\sb0\sl-260 \slmult0 \up0 \expndtw-2\charscalex100 Hypothetically, if we don't renew license , can we still sell the 4K units that we already have in our \up0 \expndtw-3\cha rscalex100 dealerships? \par\pard\ql \li1080\sb228\sl-253\slmult0 \up0 \expndtw2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yes, you can still sell the 4K vehic les unless your agreement specifies otherwise. \par\pard\qj \li1080\sb0\sl-240\s lmult0 \par\pard\qj\li1080\ri871\sb38\sl-240\slmult0 \up0 \expndtw-2\charscalex1 00 \ul0\nosupersub\cf8\f9\fs22 We will license a product as long as we win the b 2b contract. We like to do this without any commitment of \up0 \expndtw-3\char scalex100 volumes, since we don't know if we will win. \par\pard\ql \li1080\ri87 9\sb249\sl-254\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 There is no question about whether you will get the B2B contract: if you qualif y for any contract you bid on, you \up0 \expndtw-2\charscalex100 will get the sa les. Just make sure you meet the dealer coverage requirements for the contract , then enter specs that \up0 \expndtw-2\charscalex100 meet the vehicle requireme nts for the contract when you create your license agreement. If your partner c annot \line \up0 \expndtw-2\charscalex100 meet the specs, they will not be able to accept the license agreement and you will not qualify for the contract. If \up0 \expndtw-2\charscalex100 they can meet the specs and accept your offer, you r bid will qualify for the contract, and you will sell the vehicles. \up0 \expnd tw-2\charscalex100 They only thing you cannot know is whether you will be the to p supplier and receive additional sales. (See the \up0 \expndtw-2\charscalex10 0 note under Market/B2B Segments.) If you do not want to risk holding the inve ntory, only order enough units \line \up0 \expndtw-3\charscalex100 from your par tner to satisfy the guaranteed B2B contract. \par\pard\ql \li1080\ri952\sb245\sl

-256\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Suppose w e license one of our cars out to another company, and they ask for 60,000 units. Do we need to \up0 \expndtw-2\charscalex100 adjust our sales forecast and sched uled production upwards by 60,000? Or, should we just consider our \up0 \expndtw -2\charscalex100 numbers (from sales to our dealers) when deciding on sales and production for next period assuming that \up0 \expndtw-2\charscalex100 the licen sed volume of 60,000 will be automatically produced. Also in the latter case, by undertaking 60,000 \up0 \expndtw-2\charscalex100 units of additional production for licensing, do we need to increase our production capacity if necessary \up0 \expndtw-3\charscalex100 (or, would that also be automatically increased)? \par \pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosuper sub\cf4\f5\fs22 When you accept the license agreement (by clicking the Accept bu tton), the licensed vehicle and units will \par\pard\qj \li1080\ri934\sb0\sl-253 \slmult0 \up0 \expndtw-2\charscalex100 automatically be added to your production schedule, and you will not be able to change the number, since you are \up0 \ex pndtw-2\charscalex100 bound by contract to deliver the vehicles. Increasing th e production capacity, on the other hand, is a decision you \up0 \expndtw-2\char scalex100 make separately. Keep in mind that if you increase capacity this perio d, it will not be available until next decision \up0 \expndtw-3\charscalex100 pe riod, so you may be running over capacity for a year. \par\pard\qj \li1080\sb0\s l-240\slmult0 \par\pard\qj\li1080\ri945\sb25\sl-240\slmult0 \up0 \expndtw-2\char scalex100 \ul0\nosupersub\cf8\f9\fs22 If we request a licensing for a vehicle wi th 3/3/3/3 (say luxury from firm B) and the vehicle it's based on has \up0 \expn dtw-3\charscalex100 attributes 5/5/5/5, what are the attributes of the vehicle w e receive? \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-2 53\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 In a licens ing agreement, the class, size and engine attributes you specify must match exac tly, but the interior, \par\pard\qj \li1080\ri928\sb0\sl-260\slmult0 \up0 \expnd tw-2\charscalex100 styling, safety and quality are minimums. The attributes of the licensed vehicle will be the same as the vehicle on \up0 \expndtw-2\charsca lex100 which it is based. In this case, even though the request is for a luxur y vehicle with 3/3/3/3, the licensed vehicle \up0 \expndtw-3\charscalex100 will be the same as the base: 5/5/5/5. \par\pard\ql \li1080\sb228\sl-253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Let me ask you similar (bu t different) question.. can we license a vehicle that has 5555 interior/styling. .. \par\pard\qj \li1080\ri873\sb18\sl-240\slmult0 \up0 \expndtw-3\charscalex100 attributes and size 51 at a certain price from Firm B and then modify that vehic le to size=46 and attributes\up0 \expndtw-4\charscalex100 higher or lower as we wish? What all can we do? \par\pard\qj \li1080\sb0\sl-252\slmult0 \par\pard\qj \li1080\ri952\sb19\sl-252\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\ cf4\f5\fs22 Yes, you can license a vehicle and then have your partner change the attributes. Development can occur in your \line \up0 \expndtw-2\charscalex100 partner's firm or you can start modification in your own center. When having your partner upgrade the vehicle, \line \up0 \expndtw-2\charscalex100 you enter the new attributes in your license decision, and your partner must match the cha nges. The constraints \line \up0 \expndtw-3\charscalex100 are the same as for any other minor upgrade: +/-2 on the size, +/-5 on the engine, and +/-1 for the other attributes. \line \up0 \expndtw-3\charscalex100 So, if you licensed the ve hicle at size 51, your partner could only reduce the size to 49 in the next year , to 47 the \line \up0 \expndtw-4\charscalex100 year after, etc. \par\pard\qj \l i1080\ri1350\sb250\sl-250\slmult0 \up0 \expndtw-3\charscalex100 When you begin y our own development of a licensed vehicle (by clicking the Develop button in the license \up0 \expndtw-3\charscalex100 screen), you control the changes the same way you would any other development project, and your specs will \up0 \expndtw4\charscalex100 replace the license specs as soon as the project is ready. \par\ pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb93\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 25 \pa r\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart Pg26}{ \bkmkend Pg26}\par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\sb0\sl -240\slmult0 \par\pard\qj\li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri915\sb

142\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Bec ause of all the different options open to you, this is definitely one of the mor e complex areas of the simulation. \up0 \expndtw-3\charscalex100 If you have fur ther questions, do not hesitate to ask. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1153\sb40\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul 0\nosupersub\cf8\f9\fs22 Regarding the price and quantity of the units to the li censee, can the price change year to year or are you \up0 \expndtw-3\charscalex1 00 stuck with the purchase price for the length of the contract? \par\pard\qj \l i1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1045\sb40\sl-240\slmult0 \up0 \ex pndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 These values are input / agree d to each year. You may specify it as part of a long-term contract between the two \up0 \expndtw-2\charscalex100 parties, or just make it a 1-year renewable c ontract that is renegotiated each year. \par\pard\qj \li1080\sb0\sl-240\slmult0 \par\pard\qj\li1080\ri1049\sb40\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul 0\nosupersub\cf8\f9\fs22 Can we do a co-brand deal where our distribution channe l is selling someone else's vehicle? I am guessing \up0 \expndtw-2\charscalex100 this will be a different type of licensing agreement. Is this acceptable with in the StratSim software? \par\pard\ql \li1080\sb250\sl-253\slmult0 \up0 \expndt w-2\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Yes, this is doable, but it is sol d as your vehicle, under your brand name (e.g. even if it is made by Izuzu, it i s a \par\pard\qj \li1080\ri873\sb2\sl-260\slmult0 \up0 \expndtw-2\charscalex100 Honda brand). You'll need to make an offer to the firm that is selling the bra nd that you'd like to sell through your \up0 \expndtw-3\charscalex100 firm, and they will need to accept. \par\pard\ql \li1080\ri926\sb246\sl-253\slmult0 \up0 \ expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 We are trying to arrange a d eal where we license one of our vehicles to a competitor, who then bids for a \u p0 \expndtw-2\charscalex100 B2B contract with that vehicle we licensed out to it . Is it possible to do such a transaction? If so, is it \line \up0 \expndtw-2\ charscalex100 possible to immediately terminate the license if the competitor do esn't win the contract? We don't want the \up0 \expndtw-2\charscalex100 competit or to have those vehicles in stock if they are not selling to a fleet manager. \ par\pard\qj \li1080\ri1001\sb242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \u l0\nosupersub\cf4\f5\fs22 As part of the agreement, you can specify that they on ly sell the vehicles into the B2B market. They just have to \up0 \expndtw-3\ch arscalex100 be sure to unclick on the "sell into consumer market" button. Then it will only sell to B2B market. However, \up0 \expndtw-4\charscalex100 they shouldn't make you an offer for vehicle specs that don't qualify. \par\pard\qj \ li1080\ri1030\sb240\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub \cf8\f9\fs22 Does this mean that if the competitor doesn't win the contract, the y'll have surplus inventory? Or will the \up0 \expndtw-3\charscalex100 license end, and cars be returned back to us? \par\pard\qj \li1080\sb0\sl-240\slmult0 \ par\pard\qj\li1080\ri1074\sb17\sl-240\slmult0 \up0 \expndtw-2\charscalex100 \ul0 \nosupersub\cf4\f5\fs22 The inventory will be theirs and either disposed of or s old to the B2B market (or consumer markets if allowed in \up0 \expndtw-3\charsca lex100 your agreement). \par\pard\ql \li1080\sb0\sl-276\slmult0 \par\pard\ql\li1 080\sb15\sl-276\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf9\f10\fs 24 MISCELLANEOUS \par\pard\ql \li1080\ri903\sb238\sl-260\slmult0 \up0 \expndtw-2 \charscalex100 \ul0\nosupersub\cf8\f9\fs22 It appears as though the other 50% of our grade is based upon net income. The syllabus states that this will \up0 \ex pndtw-2\charscalex100 be our cumulative net income. Is net income in year 1 eq uivalent to net income in year 10, or is it \line \up0 \expndtw-3\charscalex100 discounted? If there is a discount rate, what is that rate? \par\pard\ql \li10 80\sb246\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf4\f5\fs2 2 We use straight cumulative net income - no discount rate. \par\pard\qj \li1080 \ri903\sb242\sl-260\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9 \fs22 Are we in the beginning of period 1, making decisions for period 1, or the end of period 1, making decisions \up0 \expndtw-3\charscalex100 for period 2? How does this affect the timing of upgrades, etc? \par\pard\ql \li1080\sb246\sl -253\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 You are m aking decisions at the end of period 1, for period 2, and you will have period 2

results when the \par\pard\qj \li1080\ri1337\sb18\sl-240\slmult0 \up0 \expndtw3\charscalex100 simulation is run forward. Look at pg. 12 in the manual\u8212?th is shows a timeline that may be more helpful than \up0 \expndtw-4\charscalex100 words! \par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb17\sl-253\s lmult0 \up0 \expndtw-4\charscalex100 \ul0\nosupersub\cf8\f9\fs22 What are the dr ivers of firm preference? \par\pard\ql \li1080\sb247\sl-253\slmult0 \up0 \expndt w-3\charscalex100 \ul0\nosupersub\cf4\f5\fs22 Firm preference is determined by d ealer ratings, range of products offered, firm technology capabilities, age of \ par\pard\qj \li1080\ri928\sb18\sl-240\slmult0 \up0 \expndtw-3\charscalex100 prod ucts, actual sales, and firm publicity -- in short, all the things that make a c ustomer want to do business with a \line \up0 \expndtw-4\charscalex100 firm. \pa r\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par \pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb3\sl-276\slmult0 \up0 \ expndtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 26 {\shp {\*\shpinst\shpleft1080\shptop9194\shpright3184\shpbottom9217\shpfhdr0\shp bxpage\shpbypage\shpwr3\shpwrk0\shpfblwtxt1\shpz211\shplid0 {\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{ \sn geoRight}{\sv 2104}}{\sp{\sn geoBottom}{\sv 23}} {\sp{\sn pVerticies}{\sv 8;4;(0,0);(2104,0);(2104,23);(0,23)}} {\sp{\sn pSegmentInfo}{\sv 2;10;16384;45824;1;45824;1;45824;1;45824;24577;32768} } {\sp{\sn fFillOK}{\sv 1}}{\sp{\sn fFilled}{\sv 1}}{\sp{\sn fillColor}{\sv 0}}{\s p{\sn fLine}{\sv 0}}{\sp{\sn lineType}{\sv 0}}{\sp{\sn fArrowheadsOK}{\sv 1}}{\s p{\sn fBehindDocument}{\sv 1}}{\sp{\sn lineColor}{\sv 0}} }}\par\pard\sect\sectd\fs24\paperw12240\paperh15840\pard\sb0\sl-240{\bkmkstart P g27}{\bkmkend Pg27}\par\pard\ql \li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\s b0\sl-253\slmult0 \par\pard\ql\li1080\sb0\sl-253\slmult0 \par\pard\ql\li1080\sb9 2\sl-253\slmult0 \up0 \expndtw-2\charscalex100 \ul0\nosupersub\cf8\f9\fs22 Our t eam is trying to figure out how the simulation thinks about the end of the game, and whether we \par\pard\ql \li1080\sb1\sl-237\slmult0 \up0 \expndtw-2\charscal ex100 should do a lot of cost cutting then, to try to maximize our position. W hat is the best way to approach this? \par\pard\ql \li1080\sb0\sl-252\slmult0 \p ar\pard\ql\li1080\ri957\sb19\sl-252\slmult0 \up0 \expndtw-2\charscalex100 \ul0\n osupersub\cf4\f5\fs22 Remember that your firm performance is a function of your performance within industry and across industry on \up0 \expndtw-2\charscalex100 net income and market value. The stock market is determining the value of you r firm into the future by assessing \up0 \expndtw-2\charscalex100 the discounted value of your future cash flows. These assessments are made each period, incl uding the final \line \up0 \expndtw-2\charscalex100 period. In other words, ev en though we are ending the game at period 10, the market's assessments of your firm \up0 \expndtw-2\charscalex100 continues to be forward looking as it has bee n throughout the game. So perhaps the question your team should \up0 \expndtw2\charscalex100 consider is what is impacting the market's assessment of your fi rm's future value. \par\pard\ql \li1080\sb269\sl-276\slmult0 \up0 \expndtw-2\cha rscalex100 \ul0\nosupersub\cf9\f10\fs24 How does the simulation deal with increa sing or decreasing demand for different cars? Are \par\pard\qj \li1080\ri1168\sb 1\sl-280\slmult0 \up0 \expndtw-2\charscalex100 current US data used in some way? Moving average of some time frame, for instance, or some \up0 \expndtw-2\charsc alex100 published forecasts? Same question about short-term and long-term inter est rates on borrowed \up0 \expndtw-3\charscalex100 money. What's the connection to current US rates? \par\pard\ql \li1080\sb264\sl-276\slmult0 \up0 \expndtw-2\ charscalex100 \ul0\nosupersub\cf3\f4\fs24 Demand data is only very loosely based on North America, so faculty and students should only use \par\pard\qj \li1080\ ri1098\sb1\sl-280\slmult0 \up0 \expndtw-2\charscalex100 historical perspectives in the US as a way of relating to the market, rather than for analytical purpose s. \up0 \expndtw-2\charscalex100 Same for interest rates. Generally, what we ar e trying to provide is an even opportunity experience for \up0 \expndtw-2\charsc alex100 all students thats reflects, in a simplified way, a realistic market and market dynamics. \par\pard\ql \li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb

0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\ sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl -276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-2 76\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276 \slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\s lmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slm ult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmul t0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \ par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \pa r\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\ pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pa rd\ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard \ql\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb0\sl-276\slmult0 \par\pard\q l\li8680\sb0\sl-276\slmult0 \par\pard\ql\li8680\sb168\sl-276\slmult0 \up0 \expnd tw-1\charscalex100 \ul0\nosupersub\cf1\f2\fs24 StratSim FAQs - Page 27 \par\pard \sect\sectd\fs24}