PDA SIM Final for the Capstone Project

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To run this simulation again, it is clear that the R&D for the X6 must be maintained. In terms of fundamental business theory, this makes sense. The X6 is a premium product, and the demand for this product is more likely to be derived from features than from price. This was learned early when it was determined that price elasticity of demand was low. Elasticity of demand from features was high. While taking R&D funding away from this product to plugging it into the X7 resulted in an increase in X7 sales, that increase was not sufficient to negate the decline in sales of the X6. The result was a decline in total profit in 2009 in Sim III and Sim IV.

While the final run of the simulation was the strongest of the group, it could have been made stronger by blending some of the strategies from Sim II and Sim III. This would have allowed for a stronger 2009-year, which would have increased the total results. The strategy for the X7 was fairly strong, and the product was a major contributor to profit in all three simulation runs. The optimal price point was easier to understand for this product because it is less dependent on R&D investment. Thus, the adjustments to price on the X7 translate more directly to profit than price adjustments on the X6. R&D adjustments on the X7 are more difficult to determine, and early R&D strategy may have been a weak point in the running of these different simulations. However, the understanding that the X7 had margins that were too high initially was probably the biggest success in the entire simulation, as that added hundreds of millions to the bottom line immediately. Everything after that was tinkering.

Each round of adjustments increased the profit, something that can also be viewed as a success.

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It is believed that further rounds would continue to increase profit, especially as our understanding of the relationship between R&D investment and demand is understood with the X6 and the X7. It is hypothesized based on the first three runnings of the simulation that more R&D investment in the X6 may allow that product to near saturation, which would be the ideal scenario. It is entirely possible that this may not come at the expense of profit on the X7, as long as the price of that product is kept low.

The X5 strategy was not changed. The X5 enters the simulation in the growth phase. The R&D is best used to help the other two products grow, since the X5 is only profitable for three years. In addition, while some profit improvement may occur with changes to the X5's price, the differences are unlikely to be significant. The product finishes at 98% saturation, so there is more downside risk with making changes to that product than there is upside potential.

Overall, this round should be considered a success. The focus was on improving the performance of the X6 and the changes resulted in success. There were no changes to the other elements of the plan, so the fact that the increase in profit was relatively small is understandable. There is still room to optimize this strategy further, and those adjustments would be made if there were more simulations with which to work. Thus, progress has been made and there is still room for more progress, indicating success in both the short-term and over the long-term as well......

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