GENERAL SLP SCENARIO:
The module SLP sequence 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.
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).
Be sure to review the SunPower case study, as it will provide you with background and context for the simulation:
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.
Should you need to brush up on financial analysis, the following presentation provides a very good overview of financial statement analysis:
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.). 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 it! As an MBA, what does it tell you?
3. Using Excel, provide a comparative analysis of key data to demonstrate the differences between SLP2 and SLP3 results. It is your responsibility to determine which data (and which comparisons) are most salient.
4. Explain the significance of new entrants into the PV industry. What is the impact that new competitors have on your company's market share? Cumulative profitability? Cost to the consumer?
5. 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 of all papers.