Congruence Model of Organizational Behavior
The key aspects of this assignment that should be covered and taken into account in preparing your 5-6
page paper include:
- Include discussion and analysis of key metrics at the end of each decision point (e.g., among other
data, be sure to include total market share, revenue, cumulative profit, consumer net price, modular price,
unit cost, etc.). As an MBA, it is your job to identify cause and effect!
- For each decision point, be sure to include comparative tables that include what you believe to be the
most important data. Don�t merely recite the data, however � instead, analyze it! As an MBA, what
does it tell you?
- Using Excel, provide a comparative analysis of key data to demonstrate the differences between SLP2
and SLP3 results. It is your responsibility to determine which data (and which comparisons) are most
salient.
- Explain the significance of new entrants into the PV industry. What is the impact that new competitors
have on your company�s market share? Cumulative profitability? Cost to the consumer? - Make recommendations. What would you have done differently as it relates to pricing, process
improvement, or other?
CONGRUENCE MODEL 2
Introduction
When there is a new entrant into a market, this is often accompanied by changes in the
variables that influence the business performance and an appropriate reaction is envisaged in
order to maintain market position. This is attributable to the fact that the way in which the new
entrant overcomes barriers to entry that exist in the market can guide in strategic approach to
handle the new competition (Rainer & Turban, 2009). As the market changes, there is need to
consider the new entrant’s strengths in order to devise an effective strategy with regards to cost
reduction, pricing, and competition.
For instance, since the new entrant usually require the same materials as you require to
offer the same products or services, in essence this translates to an entry of a new buyer in the
market which often pushes the suppliers to increase their prices (Ireland, Hoskisson & Hitt,
2008). Also pricing strategy is imperative in tackling competition because the new entrant will
often tend to sell their products or offer their services at reduced costs, which requires existing
companies to leverage on other advantages such as location, low labor costs, or product design to
compete on prices (Capon, 2008; Thompson, 2010). According to Ireland, Hoskisson & Hitt
(2008) the manner in which the new entrant chooses to approach competition from other rivals in
the market is crucial in determining how the new entrant affects business in the market as a
whole. Thus, the need to strategically analyze the market competition after a new entrant is
inevitable for a company to continue enjoying its position in the market by achieving competitive
edge (Rainer & Turban, 2009).
Strategic management involves the analysis, formulating and implementing strategies
devised for the creation or sustaining competitive advantages (Capon, 2008; Thompson, 2010).
CONGRUENCE MODEL 3
In the context of this project, analysis will be done from the perspective of the influence of new
entrants into the market and monitor how the company is affected by the new competition arising
from new entrants in the market. Congruence model ssimulations are used to monitor the effect
of new entrants in terms of the company market share and profitability. SunPower limited is
facing stiff competitive in the market but still managing to command a considerable market share
in addition to making satisfactory extent of profits. Therefore, the congruence model will be used
base on Forio Simulation to determine the influence of new entrants also known new competition
with regards to the four strategy decisions taken.
1) Decision 1: For Years 2008-2012
a) Pricing – Manual
b) Module Price – $0.13
c) Revenue to Process Improvement – 5%
d) Years to Advance – 5 years
CONGRUENCE MODEL 4
Maintaining the company’s module price at $0.13 between 2007 and 2012 is projected to
give module price of $0.13 and unit direct cost of $0.10 for SunPower, while for others it gives
module price of $0.15 and unit direct cost of $0.08.
CONGRUENCE MODEL 5
In the same line, the annual revenue is $626.82M and annual net income is $35.85M for
the company, while it is $14.60B and $3.65 for others respectively. The market share has also
grown whereby the share is 4.85% and annual net income is 721.43 for the company, while it is
95.15% and 18.85K for others respectively as shown in figures and table 1 below.
CONGRUENCE MODEL 6
Table 1
SunPower’s Simulation data after five years (2012)
Sun Power (You) Other Solar
Market Share (%) 4.85% 95.15%
Consumer Net Price ($/kWh) $0.15 $0.17
Module Price ($/kWh) $0.13 $0.15
Unit Direct Cost ($/kWh) $0.10 $0.08
Annual Revenue ($/Year) $626.82M $14.60B
Annual Net Income ($/Year) $35.85M $3.65B
Annual Shipments (MW/Yr) 188.59 3.85K
Installed Base (MW) 721.43 18.85K
Share of Installed Base (%) 3.69% 96.31%
Cumulative Profit ($) $51.84M $11.97B
Percent of Rev to Process Imprv (%) 0.05 0.05
Grid Power Price ($/kWh) $0.13
Industry Net Income ($/Yr) $3.68B
CONGRUENCE MODEL 7
Industry Subsidy ($/kWh) $0.12
New Entrants
2) Decision 2: For Years 2013-2017
a) Pricing – Manual
b) Module Price – $0.11
c) Revenue to Process Improvement – 5%
d) Years to Advance – 5 years
The module price between 2013 and 2017 is projected to give module price of $0.11,
$0.13, and $0.11 for the company, other competitors and new entrants and unit direct cost of
$0.08, $0.07, and $0.06 for SunPower, others and new entrants as shown in figures below.
CONGRUENCE MODEL 8
In the same line, the annual revenues are $1.78B, 25.90B and 3.12B for SunPower, others
and new entrants respectively whereas annual net incomes are $124.99M, 7.91B and 877.18M
SunPower, others and new entrants respectively. On the other hand, the market shares are 7.42%,
80.94% and 11.64% for SunPower, others and new entrants respectively whereas installed bases
are 2.46K, 41.30K and 2.64K SunPower, others and new entrants respectively as shown in
figures and table 2 below.
CONGRUENCE MODEL 9
CONGRUENCE MODEL 10
Table 2
SunPower Simulation Data for Years 2013-2017
CONGRUENCE MODEL 11
Sun Power (You) Other Solar New Firms
Market Share (%) 7.42% 80.94% 11.64%
Consumer Net Price ($/kWh) $0.13 $0.16 $0.13
Module Price ($/kWh) $0.11 $0.13 $0.11
Unit Direct Cost ($/kWh) $0.08 $0.07 $0.06
Annual Revenue ($/Year) $1.78B $25.90B $3.12B
Annual Net Income ($/Year) $124.99M $7.91B $877.18M
Annual Shipments (MW/Yr) 633.36 7.42K 1.10K
Installed Base (MW) 2.46K 41.30K 2.64K
Share of Installed Base (%) 5.3% 89.01% 5.69%
Cumulative Profit ($) $146.43M $42.30B $2.12B
Percent of Rev to Process Imprv (%) 0.05 0.05 5.00%
Grid Power Price ($/kWh) $0.13
Industry Net Income ($/Yr) $8.91B
Industry Subsidy ($/kWh) $0.12
New Entrants 4
3) Decision 3: For Years 2018-2022
a) Pricing – Manual
b) Module Price – $0.09
c) Revenue to Process Improvement – 5%
d) Years to Advance – 5 years
Sterman (2011) reiterates that in most technology-oriented companies there is greater
competition and among the most significant sources of positive externality is increasing return
due to costs increase and product attractiveness is associated with the scale of production. The
CONGRUENCE MODEL 12
module price between 2018 and 2022 is projected to give module price of $0.09, $0.11, and
$0.10 for the company, other competitors and new entrants and unit direct cost of $0.05, $0.06,
and $0.06 for SunPower, others and new entrants as shown in figures below.
In the same line, the annual revenues are $34.02B, 81.55B and 15.12B for SunPower,
others and new entrants respectively whereas annual net incomes are $8.23B, 26.39B and 4.08B
SunPower, others and new entrants respectively. On the other hand, the market shares are
CONGRUENCE MODEL 13
33.30%, 55.15% and 11.56% for SunPower, others and new entrants respectively whereas
installed bases are 30.20K, 113.84K and 15.99K SunPower, others and new entrants respectively
as shown in figures and table 3 below.
CONGRUENCE MODEL 14
Table 3
SunPower Simulation Data for Years 2018-2022
CONGRUENCE MODEL 15
Sun Power (You) Other Solar New Firms
Market Share (%) 33.30% 55.15% 11.56%
Consumer Net Price ($/kWh) $0.11 $0.13 $0.12
Module Price ($/kWh) $0.09 $0.11 $0.10
Unit Direct Cost ($/kWh) $0.05 $0.06 $0.06
Annual Revenue ($/Year) $34.02B $81.55B $15.12B
Annual Net Income ($/Year) $8.23B $26.39B $4.08B
Annual Shipments (MW/Yr) 14.78K 28.29K 5.96K
Installed Base (MW) 30.20K 113.84K 15.99K
Share of Installed Base (%) 18.87% 71.14% 9.99%
Cumulative Profit ($) $11.93B $124.29B $12.31B
Percent of Rev to Process Imprv (%) 0.05 0.05 5.00%
Grid Power Price ($/kWh) $0.13
Industry Net Income ($/Yr) $38.69B
Industry Subsidy ($/kWh) $0.12
New Entrants 5
4) Decision 4: For Years 2023-2025
a) Pricing – Manual
b) Module Price – $0.08
c) Revenue to Process Improvement – 5%
d) Years to Advance – To end
According to Thompson (2010) pricing is one of the fundamental strategic decisions that
SunPower can take to achieve competitive edge in the company considering that perfect
CONGRUENCE MODEL 16
elasticity is rare in real world. As a result, pricing strategy influences both the consumers’
decisions to purchase as well as signalling the competitive advantage to competitors of an entity.
The module price between 2023 and 2025 is projected to give module price of $0.08,
$0.09, and $0.09 for the company, other competitors and new entrants and unit direct cost of
$0.03, $0.05, and $0.05 for SunPower, others and new entrants as shown in figures below.
In the same line, the annual revenues are $157.60B, 168.91B and 42.87B for SunPower,
others and new entrants respectively whereas annual net incomes are $66.52B, 54.90B and
CONGRUENCE MODEL 17
10.80B SunPower, others and new entrants respectively. On the other hand, the market shares are
48.61%, 39.58% and 11.81% for SunPower, others and new entrants respectively whereas
installed bases are 172.80K, 252.68K and 51.80K SunPower, others and new entrants
respectively as shown in figures and table 4 below.
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Table 4
SunPower Simulation Data Years 2023-2025
CONGRUENCE MODEL 19
Sun Power (You) Other Solar New Firms
Market Share (%) 48.61% 39.58% 11.81%
Consumer Net Price ($/kWh) $0.10 $0.12 $0.11
Module Price ($/kWh) $0.08 $0.09 $0.09
Unit Direct Cost ($/kWh) $0.03 $0.05 $0.05
Annual Revenue ($/Year) $157.60B $168.91B $42.87B
Annual Net Income ($/Year) $66.52B $54.90B $10.80B
Annual Shipments (MW/Yr) 77.05K 68.26K 18.73K
Installed Base (MW) 172.80K 252.68K 51.80K
Share of Installed Base (%) 36.21% 52.94% 10.85%
Cumulative Profit ($) $125.60B $255.66B $35.24B
Percent of Rev to Process Imprv (%) 0.05 0.05 5.00%
Grid Power Price ($/kWh) $0.13
Industry Net Income ($/Yr) $132.22B
Industry Subsidy ($/kWh) $0.12
New Entrants 6
Conclusion
It is evident that globalization force and technological changes in companies are
imperative in ensuring that they achieve competitive advantages. In the present competition
which is imperfect for solar products and technology sector, Sun Power has the ability to gain
profit from its customers, upon signalling to its competitors about its willingness to focus on
margin rather than market share. This implies that, SunPower should continue with its business
strategy decisions, which have proven to mitigate the threat of new entrants and made it to
continue thriving despite the new competition.
CONGRUENCE MODEL 20
References
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Hall.
Falletta, S. V. (2015). Organizational Diagnostic Models: A Review & Synthesis. New York,
NY: Leader sphere, Inc.
Gregory, B. T., Armenakis, A. A., Moates, K., Albritton, M., & Harris, S. G. (2007). Achieving
scientific rigor in organizational diagnosis: An application of the diagnostic funnel.
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