Purpose
This project consists of a case study and simulation game accompanying it. The purpose is to apply the economic theories learned in the course to a simulation game and solving the case study. The game aims to allow students to experience interactively the challenges of pricing strategy in a market with significant learning curves, knowledge spillovers and the potential entry of new competitors with radical new technologies.
Instructions
1. Read the case study available here for free: http://forio.com/simulation/mit-sloan-solar/downloads/SunPower-Henderson.pdf
2. Watch the instructional video available here: https://mitsloan.mit.edu/LearningEdge/simulations/solar/Pages/Video.aspx
3. Play the simulation game available here: http://forio.com/simulation/mit-sloan-solar/index.htm
4. Submit your 2-page outline of the project briefly highlighting the pricing and strategies that you would like to address in your paper. Below you can find a list of questions keep in mind
Some of the questions that you can address in the outline and ultimately in the final paper.
Describe the SunPower companys main business and the specifics of the industry it operates in. What is the competitive structure of the industry the company operates in?
What are the shapes of the demand and supply curves SunPower is facing? Is the demand elastic? How do you compare marginal cost and average cost of producing the modules?
Is SunPower company profitable? Would inspecting the income statement provide a reasonable answer?
Discuss the cost and product curves of the company.
In Exhibit 8 the drivers of cost savings are listed. Explain three of these drivers and their impact on the cost of the firm is facing.
Is the SunPower company a price setter or is it a price taker? What is the pricing strategy you would recommend for the firm?
Discuss the impact of the macroeconomic environment on the business model and profitability of SunPower.
Discuss the last paragraph of the case study text: The key was choosing and formulating the right strategy. Should, for example, SunPowers strategy focus on the pricing of modules? Or should it focus more on investing in process improvements? Or should the strategy be some combination of the two? If so, what was the right formula based on the multitude of variables that solar cell producers like SunPower faced?
