BUS599 Module 3 SLP SunPower
Background
In this particular discussion, a similar pricing model as that adopted in SLP2 will be used. However, unlike was the case in SLP2, SunPower will have to come to terms with the reality of new players joining the industry. The new entrants present new competition. It would be interesting to see the impact new competitors entering the Solar Power industry will have on SunPower’s market share, cost to the consumer, as well as cumulative profitability.
Discussion
Decision 1: Beginning of Year 1: 2007 (See Appendix 3)
SLP3 Module Price: $0.13
SLP2 Module Price: $0.13
SunPower’s market share is typical of a firm at its stage. To enhance its market share, the firm ought to make sound strategic decisions in the light of the prevailing market conditions. The firm could in this case adopt an innovative approach whereby it out-competes rivals in the industry by offering products the competition cannot match in terms of quality and ability to satisfy consumer needs. It is also important to note that the company ought to make well-informed pricing decisions to be able to effectively compete in this space. At this point in time, the company’s end consumer net price for a PV system (installed) is lower than the industry average. However, its unit direct cost is higher than that of other firms in the industry. This is something that the company ought to address from the onset. To be effective as a cost leader, which appears to be SunPower’s preferred strategy, there is need to rein in costs so as to make reasonable profits for each unit of PV system installed. Conclusions made in SLP2 regarding the other variables (i.e. gross margin and return on sales) remain valid at the current price level. However, going forward, even with the price levels remaining identical as those of SLP2 at every decision stage, the said variables are likely to change with the introduction of new competitors.
Decision 2: For Years 2013 – 2017 (See Appendix 4)
SLP3 Module Price - $0.11
SLP2 Module Price – 0.11
At the current price level, the company’s market share increases by 2.4 percentage points. The growth in market share is in this case slower than that of SLP2 whereby the increase in market share was by 3.61 percentage points. The said slow growth on this front could be a consequence of the entry of new competitors whose share of the market is captured as 12.76%. SunPower’s revenue growth is largely impressive in this...
References
Godfrey, R. (2015). Strategic Management: A Critical Introduction. New York, NY: Routledge
Heisinger, K. (2009). Essentials of Managerial Accounting. Mason, OH: Cengage Learning.
Miltenburg, J. (2005). Manufacturing Strategy: How to Formulate and Implement a Winning Plan (2nd ed.). New York, NY: Productivity Press.
Morden, T. (2016). Principles of Strategic Management (3rd ed.). New York, NY: Routledge.
Moschandreas, M. (2000). Business Economics (2nd ed.). Mason, OH: Cengage Learning.
Tracy, J.A. & Tracy, T. (2014). The Comprehensive Guide on How to Read a Financial Report. Hoboken, NJ: John Wiley & Sons.
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