Tablet Development Simulation #3- CVP Analysis
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SCENARIO based:
It is now 1/2/2012 (again), still at the beginning of Time Warp 2. You have just completed your revised strategy using CVP analysis, and you are ready to charge ahead. You implement your decisions for 2012 and time flows by quickly. You see the results at the end of the year and you collect these results to use later. Again, you implement your decisions that you have already made for 2013 and collect the results at the end of the year. You do the same for 2014 and 2015, hoping this time that you can finally move ahead into 2016.
It is now New Year's Eve, 2015, what you hope is the end of Time Warp2 and more than that, what you hope is the end of the time warps altogether. You have the results of your decisions. How did you do? What was your final score? You are ready to celebrate. You want to celebrate hard and forget this crazy time warp stuff. Will it finally be 2016 when you wake up?
It's New Year's day, 2016. You just had a great New Year's Eve celebration, you finished another four years of moving Handheld 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, 2012. You have a sinking feeling, and sure enough, it's back to 1/1/2012. You groan and curse. When will this time warp end? You are now in Time Warp 3.
Maybe you need to keep improving Handheld's performance so that you can finally move ahead. You avow to do better this time. And you think your best approach is to develop your four year strategy like you did the last time.
You analyze the results of your last set of decisions from 2012 to 2015. You have the data, you kept it all. And you are going to use CVP analysis again to help you determine your new strategy. And you have a tool to use, the CVP Calculator. You are going to get better at it.
You analyze the results from Time Warp2 using CVP and develop your complete four year strategy. You decide to make notes about your analysis and your reasoning process, just in case you have to do this again (You are praying that you can finally move ahead this time when you get to 2016.)
You finish your report that shows the strategy that you are going to use these next four years, Time Warp 3. And you stop and take a big breath before you move ahead into 2012. (In other words - don't run this strategy in the simulation, yet. Just turn in this report.)
Now, run the simulation with the Strategy that you developed for Time Warp2. Access the simulation site. Review and analyze these results (Time Warp 2 decisions) and develop a revised strategy for Time Warp 3. Make a case for this new strategy using analysis and relevant theories.
Key:
The revised strategy consists of the Prices, R&D Allocation %, and any product discontinuations for the X5, X6, and X7 PDAs for each of the four years: 2012, 2013, 2014, and 2015.
You must present a rational justification for this strategy. In other words, you must Make a Case for your proposed strategy using financial analysis and relevant theories.
Use the CVP Calculator and review the PowerPoint that explains CVP and provides some examples.
You need to CRUNCH some numbers (CVP Analysis) to help you determine your prices and R&D allocations.
Make sure your proposed changes in strategy are firmly based in this analysis of financial and market data and sound business principles.Your goal is to practice using CVP and get better at it. Present your analysis professionally making strategic use of tables, charts and graphs.
TIME LINE SUMMARY
2015: 12/15 hired. 12/30 turned in first report to Sally a few days early. 12/31 - celebrated
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 - 2015, which you do.
12/31/2015 - 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.
Time Warp 2 begins: 1/1/2016 WARPS INTO 1/1/2012 (Again)
Now its 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.
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.
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Solution Summary
6 Pages. APA format with references and tables.
Solution Preview
Please find the attachments.
Introduction & Corporate Strategy
Tablet Development Corporation (TDC) offers three different productsâ??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 costâ??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 #3 RESULTS
Heading into 2012 (for the third time), the previously designed strategy (illustrated in
Table 1) was run with results summarized in Table 2.
Table 1: Time Warp 2 Strategy for implementation during Time Wrap 3
Time Warp 3 Year by Year Decisions: Pricing & R&D Allocations
2012 2013 2014 2015
X5
Price $278 Price $292 Price $278 Price N/A
R&D % 0% R&D % 0% R&D % 0% R&D % 0%
Discontinue? N Discontinue? N Discontinue? N Discontinue? Y
X6
Price $441 Price $463 Price $486 Price $499
R&D % 40% R&D % 40% R&D % 40% R&D % 0%
Discontinue? N Discontinue? N Discontinue? N Discontinue? N
X7
Price $195 Price $185 Price $ Price $
R&D % 60% R&D % 60% R&D % 60% R&D % 60%
Discontinue? N Discontinue? N Discontinue? N Discontinue? N
TABLET DEVELOPMENT: TIME WARP 3 2
Table 2: Time Warp 2 Strategy results during Time Wrap 3
X5â??MATURE, BUDGET ORIENTED OFFERING
The X5 begins 2012 (each time) enjoying significant growth from the year prior. It is an
established product in an emerging market and as such, is attractive to liberal consumers. Liberal
decision makers are "regularly looking for new solutions, willing to make changes... if the
benefit can be shown," (Center for Business Planning, 1994). The X5 targets these early
adopters' budget as the vehicle for illustrating the benefits of a tablet computer. As such, X5
demand is extremely elastic in relation to price. Alternatively, such a focus does not require
much research and development into performanceâ??as the target market segment is more
concerned with price point than performance. For this reason, X5 technology will not receive
further R&D investment, rather the X5 will be marketed as a complete offering, with little room
for growth in the next few years.
This ...
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