General slp scenario

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GENERAL SLP SCENARIO:

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.

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

GET FAMILIAR WITH THE SIMULATION

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 companys 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).
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:

At the landing page, click on Play as an INDIVIDUAL. Then,

choose a Screen ID and click Submit.

Explore the interface and get familiar with it and the information it
provides. The menu on the left-hand side shows these options:

NEED TO BRUSH UP ON CVP ANALYSIS?

You were introduced to this method in your previous courses, but this
link will provide a refresher.

Fundamentals of Cost-Volume-Profit Analysis (n.d.).

Should you need to brush up on financial analysis, the following

presentation provides a very good overview of financial statement
analysis:

Module 4 - SLPFEEDBACK LOOP AND ORGANIZATIONAL

LEARNING

Overview

In the Module 4 SLP, you will develop your own pricing strategy,
running the simulation at least twice. Your objective is to earn the
highest cumulative profit, and to expand market share to the greatest
extent possible. In this final SLP, you will continue to compete with
new entrants; in SLP4, however, the pricing policy of competitors
will be more aggressive (i.e., competitors will be increasingly inclined
to undercut your pricing).

Assignment

For this final SLP, go to Settings page, and change the following:
1) Competitor Price Policy Low

2) Entry for New Competitors On

3) Be sure to SAVE your changes.

For the Module 4 SLP, you are asked to complete the simulation,
making pricing decisions at 2-year intervals. Leave the process
improvement percentage at 5%. Note that you will again need to
monitor the market share and financial performance of new entrants
into the Solar Power industry. Also, you will now find competitors
pricing to be more highly aggressive.

Run the complete 18-year simulation two times. For each simulation
run, keep track of the pricing decisions you make at each of the four
decision intervals. Also, keep your results (note key metrics like
market share of new entrants vs. your companys market share,
revenue, margins, profitability, etc). Give justification for your
pricing decisions, and using key data, compare your results between
Simulation Run #1 and Simulation Run #2.

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:

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.). As an MBA, it is your job to identify cause and effect!

Using Excel, provide a comparative analysis of key data to

demonstrate the differences between the results of Simulation Run #1
vs. Simulation Run #2 at key decision points. It is your job to
determine which data (and which comparisons) are most significant.
Dont merely recite the data youve collected, however instead,
analyze the data! As an MBA, what does it tell you?

Comment on the impact of the more highly aggressive pricing

strategies used by competitors. What has been the effect of aggressive
competitor pricing on your results (profitability, market share, cost to
consumer, etc.)?

What recommendations would you give to a newly-hired CFO who

will be responsible for setting pricing for the company going forward?
If you were responsible for orientation of the new CFO, what lessons
learned, pricing/ marketing strategies, and other recommendations
might you have? Be specific.

**** 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 of 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:

OHara, 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_m
edium=Tweet

SLP Assignment Expectations

Your paper will be evaluated based on the 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.

Hints for success!

Throughout this SLP, you will be asked to make business decisions

under conditions of incomplete information and uncertainty. To do so,
you will need to make assumptions based on what you have learned
throughout the MBA program about how markets operate. Thus, your
strategies in approaching this decision need to rely on models,
financial analysis, and theories from such classes as Economics,
Finance, Accounting, Marketing, Strategy, and Quantitative Analysis.
In addition, the simulation will give you some additional market
information as you progress.

Be sure to explicitly draw on concepts and theories from the courses

you have taken throughout the MBA program. That means you need
to "think like an MBA" and use the financial data you are given. You
will have to crunch some numbers and present your data analysis
professionally by creating some simple tables, charts and graphs.