Feedback Loop and Organizational Learning Order Instructions: Module 4 – SLP
FEEDBACK LOOP AND ORGANIZATIONAL LEARNING
Overview
In 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 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 company’s 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:
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. 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. Don’t merely recite the data you’ve collected, however – instead, analyze the data! As an MBA, what does it tell you?
3. 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, a cost to consumer, etc.)?
4. 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 the 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 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

Feedback Loop and Organizational Learning and 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.

Feedback Loop and Organizational Learning Sample Answer

Introduction

This simulation seeks to determine an effective pricing strategy in the competitive solar energy industry that is characterized by new entrants. It considers pricing strategy decisions of SunPower Solar in the presence of other competitors as well as the entry of new firms.

Pricing Decisions

Decision 1

During the simulations, run #1 simulations decisions were run based on pricing decisions in terms of module price ($/kWh) using manual pricing mode, in which the prices were set directly, each period (2-year interval) over the 18 years. Over the 2-year intervals the module price was manually set at (0.10, 0.12, 0.14, 0.16, 0.18, 0.16, 0.17, 0.13, and 0.08) $/kWh respectively. The justification of this pricing strategy is based on its ability to allow SunPower Solar to directly adjust the module prices, in $/kWh, on 2-year period intervals in order to offer the best prices to counter competition in the market.

Decision 2

On the other hand, pricing decisions for run #2 simulations were more aggressive and based on competitor discounting using varied discount percentages in order to attract customers and achieve a competitive advantage in the solar industry. Over the 2-year intervals the competitor discount percent was set at 10%, 12%, 15%, 20%, 22%, 25%, 21%, 19%, and 20% respectively. The justification of this pricing strategy is based on the fact that, with an entry of new firms with new technologies and aggressive competitor pricing; SunPower has no option but setting prices at a certain percentage below the average price the competitor offer in an attempt gain market share.

The Solar PV Industry Simulation Results

Analysis and discussion of key metrics based on the pricing decisions aforementioned and justified above are presented in this section. Table 1 and Table 2 show the summary of the analysis followed by brief discussions of the results after each table. Table 1 analysis results are based on pricing decision #1, while Table 2 analysis results are based on pricing decision #2.

Table 1: Module 4 SLP Simulation Run #1 Result

The run #1 simulation results illustrated in Table 1 above indicate that low prices in absence of entry of new firms gave Sun Power a better market share but poor profitability, but increasing the prices with the onset of new firms’ entry showed loss of market share accompanied by slight improvements in profitability. However, reduced module prices ($/kWh) and entry of new firms in the industry showed improvements in both the market share and profitability of Sun Power Solar.

 Table 2: Module 4 SLP Simulation Run #2 Results     

The run #2 simulation results illustrated in Table 2 above indicate that, at first the competitive pricing strategy seemed not to work to both in terms of market share and profitability, but with appropriate balancing of competitor discounts coupled with entry of new firms gave good results, with the best market share and profitability results being observed at 20% competitor discount. This means that SunPower set their prices 20% below those offered by competitors to achieve the best results.

Comparative Analysis Using Excel

The comparative analysis of simulation run #1 and run #2 was done using key metric data including market share (%). Table 3 below presents the comparative analysis.

Table 3: Comparative Analysis

The above table indicates that there no significant, but a considerable difference between simulation run #1 and run #2. This reveals that the two pricing decisions had varied implications of the market share for SunPower Solar.

The highly aggressive pricing strategy used by competitors has led to stiff competition in the solar industry making SunPower Solar to also follow suit and adopt a more aggressive strategy in order to ensure it achieves competitive advantage by gaining market share.

The recommendations presented to the newly-hired CFO constitute the following:

1. There is a need to combine different pricing strategy decisions in order to gain an appropriate balance between pricing decisions.
2. It is always essential to leverage on pricing strategy of competitors prior to deciding on the most affecting pricing strategy.
3. Comparative analysis of various competitors in the industry to pinpoint their strengths is essential in order to ensure pricing strategy decisions are made from a point of information.

Feedback Loop and Organizational Learning References

Argote, L. (2011). Organizational learning research: Past, present, and future. Management Learning, 42(4), 439–446.

Argote, L. (2012). Organizational learning: Creating, retaining and transferring knowledge. Norwell, MA: Kluwer Academic Publishers.

Bellinger, G. (2014). Introduction to system thinking. Retrieved on March 26, 2016, from http://www.systems-thinking.org/intst/int.htm.

Easterby-Smith, M., & Lyles, M. A. (eds). (2003). The Blackwell Handbook of Organizational Learning and Knowledge Management. Oxford: Blackwell Publishing.

Fudenberg, D., & Tirole, J. (2000) Pricing a Network Good to Deter Entry. Journal of Industrial Economics, 48(4), 373-390.

Garvin, D. A. (2014). Learning in Action: A Guide to Putting the Learning Organization to Work. Boston, MA: Harvard Business School Press.

Henderson, R., Conkling, J., & Roberts, S. (2007) SunPower: Focused on the future of solar power. Retrieved on March 26, 2016, from http://mitsloan.mit.edu/LearningEdge/sustainability/SunPower.

Hjalager, A.-M. (2014). Interorganizational Learning Systems. Human Systems Management, 18(1), 23-25.

Larsen, K., McInerney, C., Nyquist, C., Santos, A., & Silsbee, D. (1996). Learning Organizations (Part IV: Systems Thinking). Retrieved on March 26, 2016, from http://leeds-faculty.colorado.edu/larsenk/learnorg/index.html.

Lieberman, M. (2004). The Learning Curve and Pricing in the Chemical Processing Industries. RAND Journal of Economics, 15(3), 218-228.

Mushure, G. O. (2014). Financial analysis report: Malaysia airlines 2007-2011. International Journal of Sciences: Basic and Applied Research, 14(2), 148-153

O’Hara, C. (2014). How to improve your business writing. Harvard Business Review. Retrieved on March 26, 2016, from https://hbr.org/2014/11/how-to-improve-your-business-writing?utm_campaign=Socialflow&utm_source=Socialflow&utm_medium=Tweet

Sterman, J. (2014). Eclipsing the competition: The Solar PV industry simulation. Forio.  Retrieved on March 26, 2016, from http://forio.com/simulation/solar-test/index.htm#page=market_research