Module 1 –
SLPSTRATEGIC REVIEW
Overview
The 4-module SLP
sequence for BUS599 requires that you run a simulation over an 18-year period,
and that you analyze the outcome of the decisions you make at each decision
point.
In this course,
we will be using the MIT Solar Power Pricing Simulation.
Read the
following introduction to the SunPower case:
The Industry
Evolution Management Flight Simulator portrays the growth and competition of
firms as an industry evolves. Playing the role of chief executive for one of
the firms in the industry, you make key decisions involving pricing, investment
and marketing in order to succeed in the marketplace.
This version of
the simulator has been customized to portray the solar power industry,
specifically SunPower and other manufacturers of photovoltaic panels (PVs).
While historically the cost of electricity from PV panels has limited them to
niche applications, there is massive potential for growth in the market if
solar power could become a viable alternative to traditional sources of
electricity.
In the
simulator, your job is to maximize SunPower’s cumulative profit over a period
of eighteen years. To do this, you make pricing and investment decisions each
simulated time period.
As a young
company with a new innovation, you will start the game with a technology that
you hope stays proprietary. In theory you can reap the benefits of
technological advancements from the rest of the industry while spreading your
advancements to them.
In addition, you
(or your administrator) have the option of setting several other competitive
and market scenarios, including the sources and rates of learning, the strength
of knowledge spillovers, entry of new competitors, and external incentives that
help to drive consumers towards using solar power.
You will receive
periodic reports including your income statement and industry data. You
need to select your strategies based on those reports, your understanding of
the underlying industry structure, and your best judgment about how your
competitor and customers may respond.
Though the model
has been carefully calibrated and tested, it is not designed to predict the
future or exactly match the history and special circumstances of SunPower.
Rather, it is used to illustrate competitive dynamics important not only in the
photovoltaic panel industry but in other contexts you may face. Instead of
merely “beating the game,” focus on understanding the underlying
industry structure so you can develop robust, successful strategies.
*** Source:
Sterman, J. (2014). Eclipsing the competition: The Solar PV industry
simulation. Forio. Retrieved on November 23, 2014
from http://forio.com/simulation/solar-test/index.htm#page=market_research
Be sure to
review the SunPower case study, as it will provide you with background and
context for the
simulation: http://forio.com/simulation/solar-test/downloads/SunPower-Henderson.pdf
Then, visit the
simulation here:
http://forio.com/simulation/solar-test/index.htm#page=market_research
At the landing
page, click on “Play as an INDIVIDUAL.” Then, choose a Screen ID and click
“Submit.”
Familiarize
yourself with the simulation. This will require that you get an in-depth
understanding of the terminology used in the simulation, as well as the pricing
and cost structure of the product. As you begin this simulation (Year 1), your
market share is only 2.40%. Your role with the company is to expand your
company’s market share over the multi-year period of operations – while
recognizing the highest possible cumulative profit. To do this, you must make
favorable pricing decisions, and you must ensure that you are improving your
product while simultaneously lowering unit costs. Product improvements are
determined by the % of revenue allocated to process improvement (i.e.,
technological advancement = lower unit costs).
Should you need
to brush up on financial analysis, the following presentation provides a very
good overview of financial statement analysis:
http://vrpacioli.loyola.edu/ac102/chapter17/chapter17.ppt
Assignment
Run the
simulation, entering the following data into the simulation for each of four
decision points (NOTE: Do not change the assumptions displayed in the
“Settings” tab):
1) Decision 1:
For Years 2008-2012
a) Pricing
– Manual
b) Module Price
– $0.15
c) Revenue to
Process Improvement – 5%
d) Years to
Advance – 5 years
2) Decision 2:
For Years 2013-2017
a) Pricing
– Manual
b) Module Price
– $0.13
c) Revenue to
Process Improvement – 5%
d) Years to
Advance – 5 years
3) Decision 3:
For Years 2018-2022
a) Pricing
– Manual
b) Module Price
– $0.11
c) Revenue to
Process Improvement – 5%
d) Years to
Advance – 5 years
4) Decision 4:
For Years 2023-2025
a) Pricing
– Manual
b) Module Price
– $0.09
c) Revenue to
Process Improvement – 5%
d) Years to
Advance – To end
At each of the four
(4) decision points above, you are required to analyze the impact of your
Module Price on market share and total profits. You are also required to
determine how process improvements reduce unit costs over time. Be sure to copy
tables and charts into your Word document to support your analysis. You may
need to use Excel to edit the charts and tables. Do notuse figures and
tables as “space fillers” – however; use these only to support and justify your
written report.
Keys to the
Assignment
The key aspects
of this assignment that should be covered and taken into account in preparing
your 5-6 page paper include:
1)
Include discussion and analysis of key metrics at the end of each decision
point (e.g., among other data, be sure to include total market share, revenue,
cumulative profit, consumer net price, modular price, unit cost, etc.). State
clearly the specific analysis (horizontal analysis, or vertical analysis, or
trend analysis) you used. As an MBA, it is your job to identify cause and
effect!
2)
For each decision point, be sure to include comparative tables that include
what you believe to be the most important data. Don’t merely recite the data,
however – instead, analyze the data! As an MBA, what does it tell you?
3)
Make recommendations. What would you have done differently as it relates to
pricing, process improvement, or other?
**** NOTE: The
5-6 page requirement includes written analysis and all supporting tables,
figures, and graphics. However, it does not include Cover or
Reference page. Be sure to adhere to the TUI Writing Guide for formatting all
papers. If you are unsure how to complete a financial analysis, please review
the following sample report:
Gilbert O’Neil
Mushure. (2014). Financial analysis report: Malaysia airlines 2007 –
2011. International Journal of Sciences : Basic and Applied
Research, 14 (2), 148-153.
Also refer to
the following source on business writing:
O’Hara, C.
(2014, November 20). How to improve your business writing. Harvard Business
Review. Retrieved from https://hbr.org/2014/11/how-to-improve-your-business-writing?utm_campaign=Socialflow&utm_source=Socialflow&utm_medium=Tweet
SLP Assignment
Expectations
Your
paper will be evaluated based on the Grading Rubric.
Please note the following tips and suggestions:
- Include a cover page and reference page, in
addition to the 5-6 pages of analysis described above. - Include headings for all papers greater
than two pages (basically all papers), but do not use headings as
“space fillers.” - Cite and reference all sources that you use
in your work, including those that you paraphrase. This means include
citations and quotation marks for direct quotes of more than five words,
and citations for that information which you have “borrowed” or
paraphrased from other sources.
