The MBET Experience

The University of Waterloo – Master of Business, Entrepreneurship and Technology Program

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Capstone – Team Chester Had the Blueprint to a Billion

April 5th, 2007 · 1 Comment

We wrapped up the Capstone business simulation a couple weeks ago. Our company, Chester, continued its dominance of the sensor industry. We fell just short of half a billion in sales, and with our stock price soaring to $233, we had a market cap of just over $1 billion!! Our cumulative profits were $280 million, with the next closest team at $125 million.

A few people have asked me what our secret was to doing so well. First of all, we had one team member, Steve, who was REALLY into the game. He spent a lot of time analysing the practice rounds and figuring out the model. Our strategy in the first couple years was to have the best product in each market segment. We focused on the customer buying criteria, and aimed to beat the competition on the customer’s top two buying criteria. In the low-end market, which was extremely price sensitive, we invested in automation which allowed us to undercut our competitors at a reasonable margin.

In the later years, we took advantage of the growth in the market, and some interesting strategy choices by other teams. Two market segments, size and performance, were abandoned by other teams. It was like shooting fish in a barrel – the markets were underserved, and even with two products in each, we couldn’t make enough. We ended up with 70% and 80% shares in those markets.

In my opinion, the biggest thing we did was continually invest in plant capacity. For a number of years, we literally couldn’t keep up with growth in the markets. We needed to raise a lot of money, in both debt and equity financing, to fund growth to grow sales. Our strong performances meant that we could raise more money from the markets.

To “manipulate” our stock price, we paid some big dividends in the last few years. In Year 8, we paid $25 / share, almost $60 million in total, in dividends. This drove our share price up by $77 though! We also left the company in good shape, continuing to invest right through to the end.

All in all, Capstone was a lot of fun and a good learning experience. It was a cool way to learn about the kind of decisions executives need to make, and the level at which they are made. Hopefully our success will translate over to the real world!!! 🙂

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1 response so far ↓

  • 1 Karen // Apr 9, 2007 at 12:53 am

    Hey, thanks for the interesting recap. We’re about to start this simulation in the next course I’m taking, so I’m sure it’ll be very interesting.