BUS599 MOD 02: SLP Organizational Diagnostic Models

BUS599 MOD02_SLPModule 2 – SLP Organizational Diagnostic Models
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Institution
Date
Key Metrics and data analysis
Decision 1: For Years 2008-2012- Module Price - $0.13
In the second module, the module price ($k/Wh) was $ 0.13 compared to $ 0.15 in the previous module. This alters the market share and the cumulative profits, based on the assumption that more people are willing to choose Sun Power over the competitors. Subsequently, the market share is now 4.85% (Sterman, 2014). The annual revenue ($/year) is $ 626.82 M, and a gross profit of $154.44M, while the annual revenue net income ($/ year) was $356.85M (Sterman, 2014). The Consumer Net Price for Sun Power was $0.15 compared to $0.17 for the other solar companies, while the cumulative profit was $51.84 M (Sterman, 2014).


Since the cumulative profit indicates the ability of the company to maintain profitability in the short-term and long-term, it is a measure that determines competitiveness. It is expected that the company will increase investment. At 4.85% market share, the competitors were outperforming Sun Power, but considering the other key metrics then Sun Power performed better and a Gross profit margin of 0.26 was expected to improve. The return on sales was 0.07, and this was low compared to the industry standards (0.26) (Sterman, 2014). The return on sales is an important indicator of the pricing policies that influence positioning in a competitive industry. Intense competition lowers the ROS of the solar PV industry being lower, while it may indicate the demand and supply forces interactions (Platzer, 2015). Even though, there was startup losses of -$11.0 M improved performance will likely result in higher profitability, and the lower module price of $0.13 compared to SLP1 at $0.15, indicates that the changes have been effective in improving profitability and better market share.
Decision 2: For Years 2013-2017- Module Price - $0.11
In the second decision the market share improved to 8.46% compared to 4.85% from the previous decision (Sterman, 2014). On the other hand, the Consumer Net Price reduced to $ 0.13, the annual revenue was $1.17 B, the annual net income was $110.86M, while the cumulative profit increased to $134.36M (Sterman, 2014). The process development expenditure was $ 78.09, and while the other solar companies also increased their expenditure efforts are made to improve the quality of products. The assumption is that consumers are both concerned with quality and price. Since the revenue allocated to process development is 0.05%. Higher revenue translates to higher process development expenditure, but this also results in higher revenue in subsequent years. Since the market share has increased to 8.46% similarly, the share of installed based was 5.66% a 1.97% increase from the previous period indicated the benefits of tweaking the price to meet customer needs while also improving operations and efficiency.
Decision 3: For Years 2018-2022- Module Price - $0.09
The market share under decision 3 then increased to 32.88%, while the Consumer Net Price then reduced to $0.11 (Sterman, 2014). Reducing the module price resulted in higher market share increased than the previous two decisions. Additionally, the revenue increased to $21.53 B, and the annual net income was $4.24B. The cumulative profit increased to $5.84B in the years 2018-2022, representing more than $5.7 billion increase in profits (Sterman, 2014). Products that are in the research and development phase are not considered for analysis, but process improvement may have a more profound impact on sales. Since the market share increased to 32.8% where only the price module price was lower for Sun Power, the decision analysis meets the goal of improving profitability and increasing the market share. Additionally, the consumer net price for Sun Power was lower than the other solar companies. Improved performance is also reflected by improving share of installed base now standing at 16.87%, and this is closely linked with higher market share penetration.
Decision 4: For Years 2023-2025- Module Price - $0.08
Lowering the module price increased the market share of Sun Power to 54.45%, even as the Consumer Net Price was reduced to $0.10 (Sterman, 2014). Even after maintaining the revenue to process improvement at 5%, altering the module price has a long term positive effect on Sun Power (Sterman, 2014). The annual revenue was $128.4B, cumulative profit $83.04B and annual net income $48.96B (Sterman, 2014). As the annual revenue increased over the 18 years so did the cost of goods sold ($/year), which was $63.10 billion for decision 2025. Despite reducing the module price by $0.01 and not $0.02 like in the previous two decisions, SunPower has improved the company’s profitability.
Make recommendations- pricing, process improvement
Commitment to innovation is crucial to the success of business entities, and the process improvement can give the company a competitive edge. The long-term goal is to be competitive, and achievable goals and targets are met when then there is increased market share penetration. According to Falletta (2005) managers ought to address the impact of the external environment on performance. At the same time, taking into account system dynamics then helps to identify interdependencies as systems also affect the viability of strategies (Systems Thinking and Learning Organizations, n.d.). Pricing is one strategy to increase market share, but the management also needs to be responsive to changes in the PV industry. As such, analyzing the operational systems is crucial to sustaining business growth.
I would have reduced the costs further and focus on improving efficiency to support long-term growth, as process improvement is associated with improved performance. To create value for money, it may be necessary to identify costs and...