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Tablet Simulation- Price Elasticity

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It's still 2012: 1/2/2012, the beginning of Time Warp 3. You have completed your analysis and revised strategy for the next four years and taken a breather. Just like the last time, you enter your predetermined decisions each year and collect the data for future analysis. Time flies and it is certainly deja vu.

Now it is New Year's Eve, 2015, and you are hoping against hope that Time Warp 3 and all time warps will soon come to an end. You have the results of decisions. How did you do? What was your final score? Once again you celebrate hard, hoping you wake up in 2016.

It's New Year's day, 2016. You just had a great New Year's Eve celebration, you finished another four years of moving Tablet Development through 2012 --2015, and are ready to charge ahead into the future. As you turn on the TV and try to open your eyes, you notice something strange (again?). The TV commentator is saying something about New Year's Day, 2016. Wait, 2016? YES, YES. You did it. You have moved ahead into 2016!!!

You realize that this experience has been invaluable. You know it will help you make better decisions for Tablet Development as you move forward. But before you move ahead, you want to make sure that you have learned what you need to know.

You decide to analyze and compare the last two Time Warp results. You want to see how this last Time Warp results compare to the previous Time Warp results [the results from this run in SLP5 to the results of the run in SLP4.] So you put the results side by side and you put the decisions side by side. And you analyze what happened â?" how the results were different. And you use CVP analysis to help you understand why the results were different.

You think this is very important and you write it all down so you can refer back to it later if you need to as you move forward into 2016 and beyond.

You hope this never happens to you again, even though you realize how valuable this experience has been.

ASSIGNMENT

Run the simulation with the Strategy that you developed in SLP4 for Time Warp3. Access the simulation site Click here. Collect the results for all three products over all four years. Compare the results from Time Warp 3 with those of Time Warp 2. Show the results side by side and show the decisions side by side. Explain how they are different. Use CVP analysis to explain why they are different.

KEYS TO THE ASSIGNMENT

The key aspects of this assignment that should be covered and taken into account in preparing your paper include:

You need to be detailed, clear, and complete.
Using CVP analysis, explain how the different prices and R&D allocations have generated different results.
Celebrate the end of the Time Warps!!!

TIME LINE SUMMARY
SLP1

2015: 12/15 hired. 12/30 turned in first report to Sally a few days early. 12/31 â?" celebrated
SLP2

Time Warp 1 begins: 1/1/2016 WARPS INTO 1/1/2012
You freak out, and then realize you have to make decisions for 2012 â?" 2015, which you do.
12/31/2015 â?" you have gone through all four years, and you write your report to summarize how you did. You are hoping that you will wake up tomorrow and it will be 2016.
SLP3

Time Warp 2 begins: 1/1/2016 WARPS INTO 1/1/2012 (Again)
Now it's 1/1/2012: you decide to use CVP analysis and develop a four year plan for your strategy. You analyze the results of your first decisions in Time Warp 1 and make notes. You use the CVP Calculator to help you develop your strategy and you make more notes explaining your logic and your analysis. Then you take a short breather before you start in again tomorrow.
SLP4

1/2/2012: you begin to implement your four year plan. You follow it and use the pre-determined decisions for each year, through 2015. You keep track of the results, year by year, both financial and marketing.
12/31/2015 - Celebrate
Time Warp 3 begins: 1/1/2016 WARPS INTO 1/1/2012 (Again).
Now it is 1/1/2012 (for the third time.) You do it all over again, one more time. You decide to do the same thing you did the last time and develop a four year plan. You use CVP, analyze your previous results, and make notes explaining what you did and why. Again, you take a breather before diving in with your decisions tomorrow.
SLP5

1/2/2012: you begin to implement your four year plan. You follow it and use the pre-determined decisions for each year, through 2015. You keep track of the results, year by year, both financial and marketing.
12/31/2015 - Celebrate and hope for the best
1/1/2016 - You made it through the Time Warp - you analyze the results, compare this last run with the previous run and write your final report.
1/2/2016 CELEBRATE, AND RESUME A NORMAL LIFE!!

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Solution Preview

I ran the simulation through twice, with different assumptions for price elasticity--one that took a very liberal view of the elasticity of the market, and one that took a very conservative view. These two strategies were compared in the attached report. I hope you find the attached report a useful roadmap to draw conclusion about your specific strategies.

Please find the attachment for better formatted solution.

1
INTRODUCTION & CORPORATE STRATEGY
Tablet Development Corporation (TDC) offers three different products?the budget
conscious X5, the performance focused X6, and the balanced X7. In order to be successful, TDC
has aggressively segmented the target market, while retaining enough product flexibility to
respond to rapid changes in the aggregate tablet market. The levers used to respond to said
changes are product price, and research & development investment. Considering R&D
investment as part of a product's fixed cost?the simplest tool to apply to the pricing question
becomes the application of contribution margin to a cost, volume, profit analysis, (Accounting
for Management, n.d.). The following will report on initial CVP decisions as well as suggest
refinements of these decisions should another time warp occur.
TIME WARP RESULTS SUMMARIZED
Despite this being the fourth iteration of managing TDC strategy between 2011-2015, the
final go around was among the least profitable. Significant miscalculation regarding the price
elasticity of the X6 and X7 resulted in diminished sales volume of 29.5% and 22.1% respectively
from the previous time warp. While an increase in price resulted in the loss of profitability to be
slightly lower than the loss in sales volume, said increase could not begin to make up for the loss
in sales. Aggressive price point leadership and early discontinuation of the X5 is the sole success
story for the final TDC strategy. The most effective results would come from combining the
Time Warp 3 strategy for the X6 and X7 with the Time Warp 4 strategy for the X5. These price
points, and research and development strategies would yield the most profit over 2012-2015 for
TDC.
2
TIME WARP RESULTS COMPARED
Time Warp 3 Year by Year Results
X5 X6 X7 TOTAL
2012
Sales 1,411,392 1,584,906 222,622 3,218,921
Revenue $392,719,954 $698,943,460 $43,411,367 $1,135,074,782
Profit $116,068,046 $242,067,951 (-$19,145,976) $338,990,021
2013
Sales 778,702 1,436,599 389,746 2,605,048
Revenue $227,380,920 $665,145,466 $72,103,099 $964,629,485
Profit $42,469,162 $246,829,654 (-$481,690) $288,817,125
2014
Sales 774,340 814,745 631,145 2,220,230
Revenue $215,266,576 $395,965,839 $116,761,842 $727,994,257
Profit $30,987,247 $139,332,263 $29,693,136 $200,012,646
2015
Sales 0 546,098 895,241 1,441,339
Revenue 0 $265,403,832 $174,571,928 $439,975,759
Profit 0 ...

Solution Summary

Uses a simulation of a Tablet Development Company to illustrate price elasticity and market segmentation strategies. 6 page, APA format with references.

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