Feedback Loop and Organizational Learning
Introduction
This simulation seeks to determine an effective pricing strategy in the competitive solar
energy industry that is characterized by new entrants. It considers pricing strategy decisions of
SunPower Solar in the presence of other competitors as well as entry of new firms.
Pricing Decisions
Decision 1
During the simulations, run #1 simulations decisions were run based on pricing decisions
in terms of module price ($/kWh) using manual pricing mode, in which the prices were set
directly, each period (2-year interval) over the 18 years. Over the 2-year intervals the module
price was manually set at (0.10, 0.12, 0.14, 0.16, 0.18, 0.16, 0.17, 0.13, and 0.08) $/kWh
respectively. The justification of this pricing strategy is based on its ability to allow SunPower
Solar to directly adjust the module prices, in $/kWh, on 2-year period intervals in order to offer
the best prices to counter competition in the market.
Decision 2
MODULE 4 SLP 2
On the other hand, pricing decisions for run #2 simulations were more aggressive and
based on competitor discounting using varied discount percentages in order to attract customers
and achieve competitive advantage in the solar industry. Over the 2-year intervals the competitor
discount percent was set at 10%, 12%, 15%, 20%, 22%, 25%, 21%, 19%, and 20% respectively.
The justification of this pricing strategy is based on the fact that, with entry of new firms with
new technologies and aggressive competitor pricing; SunPower has no option but setting prices
at a certain percentage below the average price the competitor offer in an attempt gain market
share.
The Solar PV Industry Simulation Results
Analysis and discussion of key metrics based the pricing decisions aforementioned and
justified above are presented in this section. Table 1 and Table 2 show the summary of the
analysis followed by brief discussions of the results after each table. Table 1 analysis results are
based on pricing decision #1, while Table 2 analysis results are based on pricing decision #2.
Table 1: Module 4 SLP Simulation Run #1 Result
Years 2007-
2009
2009-2011 2011-2013 2013-
2015
2015-
2017
2017-
2019
2019-
2021
2021-
2023
2023-
2025
Decisions Manual,
($0.10)
Manual,
($0.12)
Manual,
($0.14)
Manual,
($0.16)
Manual,
($0.18)
Manual,
($0.16)
Manual,
($0.17)
Manual,
($0.13)
Manual,
($0.08)
Competitors SP Oth
ers
SP Oth
ers
SP Othe
rs
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
Market Share (%) 4.6
9%
95.
31
%
5.95
%
94.
05
%
6.3
3%
90.7
6%
4.3
0%
85.
95
%
4.2
0%
86.
10
%
3.9
3%
86.
61
%
3.0
7%
82.
42
%
3.0
5%
80.
81
%
6.2
8%
72.
64
%
MODULE 4 SLP 3
Annual Revenue
($/Yr)
$31
6.6
7
$10
.69
B
$655
.62
M
$13
.58
B
$1.
07
B
$16.
33B
$1.
34
B
$20
.11
B
$1.
62
B
$25
.73
B
$2.
22
B
$38
.64
B
$3.
57
B
$62
.98
B
$5.
24
B
$11
1.5
7B
$13
.22
B
$19
9.1
6B
Consumer Net
Price ($/kWh)
$0.
12
$0.
17
$0.1
4
$0.
17
$0.
16
$0.1
7
$0.
18
$0.
16
$0.
20
$0.
16
$0.
18
$0.
15
$0.
19
$0.
14
$0.
15
$0.
13
$0.
10
$0.
11
Unit Direct Cost
($/kWh)
$0.
10
$0.
09
$0.1
0
$0.
08
$0.
09
$0.0
8
$0.
09
$0.
07
$0.
08
$0.
07
$0.
08
$0.
06
$0.
07
$0.
06
$0.
06
$0.
05
$0.
06
$0.
05
Module Price
($/kWh)
$0.
10
$0.
15
$0.1
2
$0.
15
$0.
14
$0.1
5
$0.
16
$0.
14
$0.
18
$0.
14
$0.
16
$0.
13
$0.
17
$0.
11
$0.
13
$0.
10
$0.
08
$0.
09
Cumulative profit
($)
–
$14
9.0
5M
$1.
87
B
$169
.65
M
9.1
4B
$12
4.4
6M
$17.
38B
$80
8.9
7M
$29
.15
B
$1.
51
B
$43
.96
B
$2.
85
B
$66
.35
B
$5.
48
B
$10
3.1
3B
$8.
22
B
$16
4.6
7B
$10
.19
B
$27
2.4
8B
Installed Base
(MW)
324
.07
10.
1K
672.
07
15.
91
K
1.1
6K
22.7
5K
1.7
1K
30.
99
K
2.1
1K
41.
70
K
2.9
0K
58.
67
K
4.1
3K
89.
44
K
6.4
0K
150
.92
K
15.
17
K
280
.78
K
Share of Installed
Base (%)
3.1
1%
96.
89
%
4.05
%
95.
95
%
4.8
3%
94.5
7%
5.1
3%
92.
81
%
4.5
9%
90.
72
%
4.4
1%
89.
6.4
1%
4.0
4%
87.
43
%
3.6
%
84.
83
%
4.3
4%
80.
34
%
Annual Shipments
(MW/Yr)
123
.86
2.8
2K
213.
69
15.
91
K
297
.95
4.33
K
328
.37
5.4
0K
351
.85
7.3
1K
542
.76
11.
67
K
822
.24
20.
83
K
1.5
8K
41.
41
K
6.4
6K
85.
17
K
% of Rev. to
Process Improvn.
(%)
5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
MODULE 4 SLP 4
The run #1 simulation results illustrated in Table 1 above indicate that, low prices in
absence of entry of new firms gave Sun Power a better market share but poor profitability, but
increasing the prices with onset of new firms’ entry showed loss of market share accompanied by
slight improvements in profitability. However, reduced module prices ($/kWh) and entry of new
firms in the industry showed improvements in both the market share and profitability of Sun
Power Solar.
Table 2: Module 4 SLP Simulation Run #2 Results
Years 2007-2009 2009-2011 2011-
2013
2013-2015 2015-
2017
2017-
2019
2019-
2021
2021-
2023
2023-
2025
Decisions Competitor
Discounting
(10%)
Comp.
Discountin
g (12%)
Comp.
Discounti
ng (15%)
Comp.
Discountin
g (20%)
Comp.
Discounti
ng (22%)
Comp.
Discounti
ng (25%)
Comp.
Discounti
ng (21%)
Comp.
Discounti
ng (19%)
Comp.
Discounti
ng (20%)
Competitors SP Othe
rs
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
SP Oth
ers
Market Share
(%)
3.80
%
96.2
0%
4.44
%
95.
56
%
5.1
55
%
92.
45
%
5.40
%
81.
24
%
7.2
5%
74.
69
%
17.
07
%
68.
67
%
31.
60
%
56.
61
%
43.
51
%
44.
80
%
50.
59
%
36.
22
%
Annual
Revenue ($/Yr)
$343
.10
M
$10.
24B
$516
.22
M
$13
.14
B
$72
5.1
4M
$16
.15
B
$952
.81
M
$19
.15
B
$1.
60
B
$25
.19
B
$5.
63
B
$40
.03
B
$25
.12
B
$69
.76
B
481
.84
B
$12
0.0
3B
$18
6.5
0B
$18
4.9
8B
Consumer Net
Price ($/kWh)
$0.1
5
$0.1
7
$0.1
5
$0.
17
$0.
15
$0.
17
$0.1
3
$0.
16
$0.
12
$0.
15
$0.
11
$0.
14
$0.
11
$0.
13
$0.
10
$0.
12
$0.
09
$0.
11
Unit Direct $0.1 $0.0 $0.1 $0. $0. $0. $0.0 $0. $0. $0. $0. $0. $0. $0. $0. $0. $0. $0.
MODULE 4 SLP 5
Cost ($/kWh) 0 9 0 08 09 08 9 07 08 07 07 06 06 06 04 05 03 05
Module Price
($/kWh)
$0.1
3
$0.1
5
$0.1
3
$0.
15
$0.
15
$0.
17
$0.1
3
$0.
16
$0.
10
$0.
13
$0.
09
$0.
12
$0.
08
$0.
11
$0.
08
$0.
10
$0.
07
$0.
09
Cumulative
profit ($)
$0.0
9836
M
$3.0
6B
$23.
78M
$8.
31
B
$80
.11
M
$16
.35
B
$82.
39M
$26
.86
B
$15
.68
M
$39
.56
B
$10
2.7
1M
$59
.95
B
$5.
03
B
$96
.32
B
$41
.15
B
$16
0.3
4B
$15
9.7
1B
$26
0.0
9B
Installed Base
(MW)
297.
19
10.0
3K
549.
21
15.
64
K
906
.90
22.
29
K
1.43
K
30.
25
K
2.3
6K
41.
24
K
5.8
0K
60.
22
K
21.
99
K
96.
56
K
80.
92
K
167
.03
K
241
.15
K
292
.55
K
Share of
Installed Base
(%)
2.88
%
97.1
2%
3.39
%
96.
61
%
3.9
%
95.
92
%
4.41
%
93.
17
%
5.0
4%
88.
01
%
7.8
5%
81.
47
%
16.
38
%
71.
93
%
28.
85
%
59.
56
%
39.
7%
48.
17
%
Annual
Shipments
(MW/Yr)
102.
31
2.75
K
154.
80
3.4
7K
224
.72
4.2
4K
337.
77
5.2
8K
634
.11
7.5
7K
2.5
2K
12.
99
K
11.
42
K
24.
42
K
39.
88
K
46.
25
K
103
.75
K
80.
31
K
% of Rev. to
Process
Improvn. (%)
5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
The run #2 simulation results illustrated in Table 2 above indicate that, at first the
competitor pricing strategy seemed not work to both in terms of market share and profitability,
but with appropriate balancing of competitor discounts coupled with entry of new firms gave
good results, with the best market share and profitability results being observed at 20%
competitor discount. This means that, SunPower set their prices 20% below those offered by
competitors to achieve the best results.
MODULE 4 SLP 6
Comparative Analysis Using Excel
The comparative analysis of simulation run #1 and run #2 was done using key metric data
including market share (%). Table 3 below presents the comparative analysis.
Table 3: Comparative Analysis
SIMULATION RUNS
Run #1 Run #2
Mean 4.64% 4.64%
Market St. dev. 0.0136633 0.012782
Share (%) Max 6.33% 6.33%
Min 3.05% 3.05%
Median 4.25% 4.30%
The above table indicates that there no significant, but a considerable difference between
simulation run #1 and run #2. This reveals that the two pricing decisions had varied implications
of the market share for SunPower Solar.
The highly aggressive pricing strategy used by competitors has led to stiff competition in
the solar industry making SunPower Solar to also follow suit and adopt a more aggressive
strategy in order to ensure it achieves competitive advantage by gaining market share.
The recommendations presented to the newly-hired CFO constitute the following:
MODULE 4 SLP 7
- There is need to combine different pricing strategy decisions in order to gain appropriate
balance between pricing decisions. - It is always essential to leverage on pricing strategy of competitors prior to deciding on
the most effecting pricing strategy. - Comparative analysis of various competitors in the industry to pinpoint their strengths is
essential in order to ensure pricing strategy decisions are made from a point of
information.
MODULE 4 SLP 8
References
Argote, L. (2011). Organizational learning research: Past, present and future. Management
Learning, 42(4), 439–446.
Argote, L. (2012). Organizational learning: Creating, retaining and transferring
knowledge. Norwell, MA: Kluwer Academic Publishers.
