Case: Organizational Diagnosis, SLP 2: Time Warp

Introduction

If change is constant and remains consistent with the status quo, what is to be said of an instance of time travel, or a time warp so to speak? This drastic change, inconsistent with the linear path of time brings about the year 2012 once again, and the previously analyzed four years of the business conducted by the Clipboard Tablet Company are now mere memories of a reality passed. In being sent through a time warp to 2012, new opportunities present; enabling the mistakes of the last four years within the company to be remedied. In an effort to avoid the erroneous lack of action on behalf of the pre-time warp vice president, changes will be made throughout the course of the next 4 four years in ensuring a higher total simulation score, which translates into higher cumulative profits for the company.

SLP 2

When conducting SLP 1, it was noted that Joe Schmoe made a nefarious mistake in keeping all pricing and R&D percentage allocations the same throughout the course of 4-6 business years. Even though current research suggested that consumers were adopting more acceptance and use of modern technology such as tablets going into 2012, and continuing through 2015, the actions of the vice president remained unchanged (Venatesh, Morris, Davis and Davis, 2003). Now that it is 2012, the conclusions from the previous analysis can be used to rewrite history as it pertains to the Clipboard Tablet Co.; increasing their cumulative revenue and resulting in a higher total score for the simulation.

In running the second simulation there were changes made in contrast to the first VP of Marketing’s decisions. These changes were based upon the data gathered in the first simulation as a means of outlining any deficiencies in the former decision-making process for price and R&D allocations. In making said changes, the years have passed, and it is now the end of 2015 once again. Each year shall be summarized with necessary changes noted as well as the reasoning behind said changes. At the end of each year, a simulation score will be attained marking the cumulative profits for the company over the years.

Clipboard Tablet Co. 2012 Year End Review

In a year that marked high tablet growth, this was one of the most important years in establishing revenue and a market base for Clipboard Tablet Company. From 2011 to 2012 alone, tablet ownership grew 257% among consumers (Simon, 2013). Pricing and R&D allocation decisions made in 2012 for all three models resulted in many changes. In 2011, the price of the X5 was $285. This is fairly low in comparison with other tablets. Since the price of tablets is on the decline (Apple HP Rumors Indicate Tablet Price War Brewing, 2010), the X5 price was increased to $289; giving this tablet a pricing advantage over the competition. In terms of R&D, this was reduced from 33% to 28%; allowing more R&D to be focused on the X7, as well as the X6.

The X6 will need a higher level of R&D to keep up with high-end performance competitors. As will the X7; new on the market and designed with the budget-savvy consumer in mind as described by Chiang (2012). Both tablets attract performance-driven consumers, whereas the X5 does not. Thus the R&D for the X6 and X7 was increased to 36%. This should aid in the launch of the X7, and keep the X6 competitive.

Another action designed to aid in the launch of the X7 was the lowering of its price from $190 to $119. There is a global trend for affordable laptops/notebooks, and even MIT has a philanthropic program entitled One Laptop per Child (OLPC) which is developing laptops designed for education for $100 each (Abell and Long, 2010). If the Clipboard Tablet Company is able to enter into this market, they will have a competitive advantage. Contemplation previously existed in raising the price of the X7, and/or lowering the price of the X5. Since the performance of the X7 is the lowest among the three, and tablet prices are still fairly high, differentiate between the two is essential. The price of the X7 is set to reach $99 in the future to keep up with market trends. The price for the X6, on the other hand, has changed in a completely different manner.

Since the X6 is of high performance in the marketplace, a high level of R&D was allocated, and the price was increased. The X6 sold for $430 in 2011 and planned to boost its performance in 2012. Thus, the price was set to $649, which is still far below that of competitors. Said changes resulted in a cumulative score of $299,463,641 going into 2013. This was slightly lower than that of Joe Schmoe.

The reason for the revenue decline is likely due to the rise in price for the X6. In examining the data from the X6, one noted that the sales for the tablet were high, and the profit margin was higher. However, there were fewer consumer purchases and a smaller percentage of market share as it relates to these consumers. A higher number of tablets sold would have resulted in larger sales revenue and more customers. Perhaps the percentage of price increase was too drastic. Even though it is below the competition, the price increase was significantly higher than in previous years.

On the opposite end, changes for the X5 and X7 integrated well in raising sales revenue. The X7 showed an increase in sales much higher than if the price were to remain at $190. Such a price adjustment caused the first-year profits to be -30%, not the -70% experienced by Joe Schmoe. Furthermore, the increase in R&D for the X7 appears successful. In the case of the X5, the price increase was not drastic enough to disrupt any positive results, nor was the reduction in R&D for the total year. The X6 is in a growth phase and X7 is beginning to launch. While X5 is experiencing growth as well, it is more mature in the market and expected to react in a consistent manner over the next few years before reaching the stakeout phase.

Clipboard Tablet Company 2013 Year End Review

In considering the changes from the previous year and their effect on profits from Joe Schmoe to the time warp, it has been decided that additional changes are in order. For the 2013 fiscal year, the price of the X5 has been raised to $299, and the price of the X6 lowered to $499. Furthermore, the price of the X7 has been lowered to $109 in attaining the $99 goal. Research and development for this year remained the same as it was feared lowering this for the X5 would result in a premature stakeout phase. The price of the X6 was lowered in an attempt to draw in more customers, and the price of the X5 was raised slightly to test consumer spending.

The results showed that overall profits for the company were lower when compared with Joe Schmoe. The cumulative score entering 2014 totaled $679,093,797. This may have contributed to the price increase of the X5. It did not sell as well in the market with a higher price and lower R&D. The X6 appeared to do well, however, it still did not generate as much revenue as it would have at a lower price, despite more R&D being ingrained into to product.

On a positive note, it is pleased (in retrospect) that the first initial idea of putting at least 50% of R&D into the X7 was decided against. With the modest 36% going into it, sales have reached a much higher point than with Joe Schmoe, and it is reaching the growth phase. Taking 50% of R&D and putting it into one product would entail serious shortages of R&D for the other products; causing a struggle in maintaining competitive demands. Over time, this may be adjusted, but experience is showing that lowering this too much can have an adverse effect on revenue. Especially when paired with a slight increase in price.

Clipboard Tablet Company 2014 Year End Review

Since a majority of changes made in 2013 were a success, only minor adjustments occurred regarding the price for 2014. All R&D allocations remained the same, and price changes included the X5 and X6 being lowered to $279 and $449 respectively. The price of the X7 will remain the same to accommodate for the X5 and X6 price cuts. The results for these decisions give a score of approximately $1.3 million for the year. This is synonymous with that of Joe Schmoe. At least the mistakes made from years past have improved, and there is a year left to correct the deficiencies of Joe Schmoe.

Clipboard Tablet Company Year End Review 2015

For the last year, the aim is to increase revenues and assist the three models as they move through the lifecycles. Up until now, the X5 had reached growth and maturity and is currently at the stakeout phase. One could discontinue the product, or simply reduce the R&D and price, as it still has a fairly large customer base. The X6 reached the growth phase and operates above the competition due to the added R&D. The X7 has reached the growth phase as well and is generating sales higher than the X5, and comparable to that of the X6. In an effort to keep ahead of the competition, it was decided to increase R&D for the X7 and X6 to 38% and 37% respectively. The X7 needs an added boost as it operates below the competition, however, it is also priced much lower. The R&D for the X5 was decreased to 25%, as it is projected to be discontinued in a year.

In terms of price for the products in 2015, there will be a unanimous decrease. The price of the X5 will drop to $259, while the price for the X6 will be set to $399, and the X7 will reach its long-term goal of $99. These changes resulted in the desired results in terms of revenue, and a cumulative simulation score higher than that of Joe Schmoe. The end score for the year came to $2,191,728,843. This was significantly higher than that of Joe Schmoe, which spells success for the Clipboard Tablet Company. Although the revenues were lower than that of Joe Schmoe during the first two years, efforts made improved the overall success of the company. Perhaps a further review of this time warp can aid the vice president in moving forward into 2016.

Discussion

Throughout the course of the simulation, it is clear to see where mistakes were made due to pricing and R&D allocation. X6 received an R&D allocation as high as the X7, which could have been shifted in favor of the X7. This resulted in the X6 performing higher than the competition, while the X7 performed lower. Other changes that could be improved upon include the raising of the price for the X5 and the X6. The first price shift for the X5 was tolerated in the market, but it should have dropped back down after 2012 to a price comparable to what Joe Schmoe set forth. Although the X6 could have been sold for much more, it was priced so low in 2011 that such a shift in price deterred customers from purchasing. If one were to through another time warp, only a slight price increase would have occurred in 2012. Furthermore, X5 should be discontinued before going into 2016. Its resources should be utilized in developing an X8 model, as X7 and X6 are reaching maturity and possible stakeout phases in the market.

Conclusion

Considering the data presented through the simulations, it is clear to see where Joe Schmoe went wrong in keeping prices as they were, and where the time warp decisions were a bit overzealous in terms too high, and perhaps being too conservative with R&D allocations. Joe Schmoe was somewhat right in the pricing of X5 and X6 models, however, bewildered when pricing the X7 and allocating R&D. Perhaps once morning arrives, and it is 2016, the lessons learned through both the mistakes of Joe Schmoe and this time warp dream will inspire this new VP of Marketing in taking Clipboard Tablet Company to successful heights only imagined.

References

Abell, T. and Long, T. (2010). eLearnng in Africa: Transforming Education through Enabling Technologies. Accenture: High performance. Delivered.

Chiang, C.N. (2012). Consumer research for tablet PCs on purchasing factors, market segmentation and marketing strategies. [White paper]. Manila Philippines: Manila Central University.

Shim, R. (2012). Tablets impact the notebook market: Enter the ultrabook. Information Display, 28(2), 12-14.

Simon, H. (2013) 10 Things You Should Know About E-Learning. IBIS Capital. Retrieved February 2, 2013 from: http://edcetera.rafter.com/global-e-learning-industry- overview-infographic/.

Unknown Author, (2010). Apple HP rumors indicate tablet price war brewing 845090. eWeek.

Venkatesh, V., Morris, M.G., Davis, G.B., & Davis, F.D. (2003). User acceptance of information technology: Toward a unified view. MIS Quarterly, 27(3), 425-478.