Topic:

Regulus Solar Power Inc. Price Demand Elasticities

Submitted By:
Group 1 - PGDM-BM 34
34BM01 - Aakanksha Katarya
34BM02 - Abhisek Patra
34BM03 - Abhishek Upadhyay
34BM04 - Amit Agarwal
34BM05 - Amit Sharma
34BM06 - Ananya Pani
 RSP Company Background
 Offered solar power design and installation services, for residential and commercial applications.
 Solar power sector continued to grow, but RSP’s revenue flattened in 2018 because of introduction of new player in the competitive
market.
 RSP’s technique to outsmart competitor's:
 Attractive price point
 Efficient installation procedures
 Which was not market best as competitor's installation period was 1 day comparing to 1.5 days of RSP’s installation period.
 Primary focus was on RSP’s revenue challenges.
 Headquarter in Arizona was a primary player in solar panel installation market.
 Last 5 years witnessed strong growth. But for year 2018, sales were flattened due to increase in competition and lower solar panel
prices.
 Higher management needed an explanation.
 Urbane reported just 2% increase in revenue from 2017 to 2018.
Had competitive advantage of 1 day installation
not done enough to embrace the growing environmental movement.
 Johnson’s recommendations
lower prices to stay in competitive market.
one day installation to reduce costs
 Urbane believed 10% price drop would be more than offset by an increase in demand volume.
 Urbane suggested RSP to improve its image WRT environmental movement groups to remain competitive.
 The solar power industry
What were some key factors driving the solar power industry as described in the case?
 Divided into 2 segments
 Photovoltaic units(solar panels)
 Concentrated solar thermal
 Capacity to produce 10000 times more than the current electrical needs.
 Global solar energy industry was expected to reach from 86 billion to 422 billions from 2015 to 2022.
 However the growth was driven by environmental pollution concerns, government initiatives and utility buy
back schemes.
 Solar panel side of the market had 2 segments
 manufactures – key players located in China and Canada
 installers- highly fragmented market
 Solar panel installation cost had decreased by 70% making them affordable both for residential and
commercial applications.
 Highly implemented in public and private schools
 Price elastic of demand
 Price Elasticity of demand = % change in quantity demanded / % change in price

 Negative sign indicating-it is negatively sloped.

 Price elasticity of demand >1
Meaning it is elastic.
 Revenue = No of units sold x Price per installation

 Revenue can be increased by :

 Increasing quantity of solar units sold,

 Increasing the price of installation would make it inferior in comparison to

its competitors.
 Inference
 The company has to offer faster installation. As given in case, competitors complete installation in 1 day
while RSP’s installation time is 1.5 days.

 In a perfectly competitive market when demand of the product is elastic, the firm can increase its revenue
by decreasing the price which will increase the quantity demanded. RSP implemented this by reducing price
from A to B to C that increased its revenue.
 While moving from A to B, price reduced by 10%, quantity demanded increased by 40%, and revenue
increased by 26%.
 While moving from B to C, price reduced by 11.1 %, quantity demanded increased by 28.6% and revenue
increased by 14.3 %.
 So we can infer that, the greater the elasticity, the greater will be revenue generated.
Thank You