This is a paper on the Time Warp simulation with the tablets. The paper is about the third round on this simulation. It tests a strategy that was formulated in the last paper. The results are very good, and the paper outlines these results in detail. There is a brief explanation of the techniques.
¶ … strategy for the Time Warp 3 was formulated based on careful analysis of the results of Time Warp 2, which provided insight into buyer behavior at different price points for the three tablets. The strategy was set to optimize the profits for all three products at pre-set levels of R&D allocation. There may be better R&D levels, but for Time Warp 3 these were not explored. The strategy for this Time Warp was as follows:
Discontinued
The results were as follows. In the first year, the X5 sold 1.859 million units and delivered a total profit of 151.182 million. The X6 sold 1.237 million units and delivered a total profit of 217.837 million. The X7 sold 0.740 million units and delivered a loss of around $4.8 million. The total income was 364.210 million for the year. The market saturation of the X5 is 54%, for the X6 it is 37% and for the X7 it is just 3%. There is significant room for growth in the X7 at this point, while the other two products are driving profitability. The total profitability is 655,785,354.
The second year saw the following results. The cumulative score at this point is 1,086,107,574. The X5 sold 1.292 million units and delivered a profit of 83.101 million. The X6 sold 1.514 million units and had a profit of 277.041 million dollars. The X7 sold 2.055 million units, delivering its first profit, which was 70.179 million dollars. The market saturation of the X5 was 80%, indicating that there is one viable year left of this product, as predicted. The market saturation of the X6 is 57%, indicating that there are two viable years left of this product, and the X7 saturation is just 8%. This indicates that, as predicted, it is growth in the X7 that will be the major contributor to company profitability going forward.
The third year saw the following results. The cumulative score at this point is 1,602,649,463. The X5 sold 0.703 million units and delivered a profit of 6.7 million. The X6 sold 1.242 million units and delivered a profit of 229 million. The X7 sold 5.929 million units and delivered a profit of 280 million. The total combined income was 516 million dollars. The market saturation of the X5 is 95%, indicating that it is time to discontinue this product. The market saturation of the X6 is 80% and the market saturation of the X7 is 20%.
The fourth year saw the following results. The cumulative score was 2,022,287,680. This is 96.2% of the maximum score. The X5 did not sell any units. The X6 sold 0.439 units and delivered a profit of 58 million. The X7 sold 7.361 million units and delivered a profit of 361 million dollars. The total profit was 419 million for the year. The market saturation of the X5 was 100%, the X6 was 96% and the X7 was 57%. The saturation figures are important because they indicate that the objective of profit maximization for the X6 was successful, even though it came at the expense of achieving 100% saturation. When the objective was 100% saturation for this product, there was less total profit. The X7 reached 57% saturation, a statistics that it incredible and indicative that this product is enjoying the strong growth that was its potential all along. The strategy of maximizing profit for this product has not resulted in 100% saturation, but has resulted in a high level of sales that has pushed the company very close to peak performance.
Overall, the different strategies that were employed have been very successful. All of these products delivered high levels of sales and profits, although the X7's performance in the first year (a loss) was slightly disappointing. Overall, however, the pursuit of short-term profit for this product would not have resulted in a better long-term profit level.
The performance of these products is essentially maximized for these R&D allocations. For a different set of R&D allocations, new price points for profit maximization would need to be calculated and implemented. The results that this Time Warp delivered were far superior to those of the previous Time Warp. There was very little change in the performance of the X5, but it was determined that since this product began the simulation towards the end of its useful life at the maturity stage of the product life cycle, that there was little upside. There was upside in the X6 product, and increasing the price has made that product more profitable. As expected, sales were a little bit lower with the X6 as the result of the price increase, but the sales decline was not particularly dramatic. This confirms the prediction that buyers of this product have a relatively low price sensitivity level.
The X7 was the focal point of the strategy. Last time, the price was lowered in order to spur sales while retaining profits. The results were encouraging. The data provided allowed for the calculation of the price point of maximum profit. This was significantly lower than the price level of Time Warp 2. The results are very positive, as the end result indicates. Sales were strong and the profit level was very high. If the simulation had run another year, profits would have been very strong in that year as well. The X7 strategy was very successful.
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