Finding the Right Sales Strategy

Solar Simulation

Per the parameters given for this assignment, the author of this report ran the solar power economic simulation twice and tweaked the results along the way. The author of this report will describe the adjustments and changes that were made along the way and will also analyze the results that were offered by the website at the conclusion of each simulation. Inclusive of the analysis and work done for this assignment will include a discussion and analysis of key metrics that resulted from each decision, an analysis of key data that would demonstrate the differences between each data run, a common on the more aggressive pricing used by competitors, whether said aggressive pricing would have helped the author's company in the simulation and so forth. Finally, there will be a recitation of the recommendations the author of this report would make regarding this simulation and how to remain competitive in general.

Simulation One

The above are the results from the first simulation. As one can see, the author's company very much stayed with the pack when it came to revenue per year and was only slightly distinguished from the others when it came to net income per year. Indeed, the author initially kept in line with the other solar companies as the price was the precise same as the competitor and so was the investment in new capacity. Results were positive with that approach and that was indeed the tactic for the few years. However, the author then dropped the unit price of electricity down by one cent and also upped the investment in new capacity and this caused the profit, as a matter of percentage, to soar quite high. After initially being in the ten percent range, it got as high as thirty percent and more by slightly undercutting the bigger solar companies and increasing capabilities and capacity along the way. When the new entrants came into the picture, they undercut the prices of all of us even more. However, this clearly did not get the desired results as their metrics, while very close to the author of this report, were not better and the bigger solar industry blew away everyone else including the author. The overall metrics of the first run can be seen below:

A couple of metrics above jump out to the author of this report. Capacitiy utilization was the same for all three groups. Annual shipments were a little low as compared to the other groups. However, return on sales as a fraction of revenue was 0.43 for the author while it was 0.31 or below for both of the other groups. This puts the author's simulated amounts at nearly forty percent higher than either of the other two groups. Further, gross margin was 0.61 for the author which was nearly thirty percent higher than the closest competitor and more than that for the other group. Consumer net price and unit direct cost was the highest for the author and it was not close on the consumer net price part of things. Annual net income for the author was much higher than the big industry group as it was 31.47% for the big group and 41.12% for the author of this report.

Simulation II

On the second simulation, there were two major shifts. First, the price per unit ended up being a lot lower because, for whatever reason, the pricing of the competitors started to fall as the years went on. As each interval was hit, the author undercut the big solar group by a cent per unit. Investment in capacity was kept at a solid ten percent regardless. Some results stayed very much the same but there were some notable differences. First, when looking at the net income per year and revenue per year, there is a clear showing that the author's company outpaced everyone but the large group when it came to the overall performance. Rather than being just above or with the pack, there was instead a clear separation. The author's company was the fairly clear winner when it came to profit margin. The author's company had a profit percentage of 34% while the big solar company had 32%. The startup companies collectively came in at 23.37%. Looking at the whole picture, the big solar company was still the clear winner but the author's overall metrics and pattern is going to be better in the long haul.

The aggressive pricing strategy of the competitors led to the author of this report lowering unit prices to match. If the author had allowed them to undercut the unit price, it would almost certainly lead to less profit. The author was clearly more aggressive the second time when it came to expanding capacity and that seemed to pay off as that was the only major difference between the first pass and the last pass. The other difference was that the undercutting of the competitors didn't happen the first few years for the author on the first pass. Instead, the author just matched the big solar company. The effects for the author of this report were not stellar in terms of market share and overall cost as compared to the other companies. However, profits were clearly superior and the author was clearly ahead of everyone's curve except the big solar company.

Conclusion