Running Head: BACK BAY BATTERY SIMULATION 1

Strategic Innovation Simulation: Back Bay Battery

Name

Institutional Affiliation

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 BACK BAY BATTERY SIMULATION 2

Strategic Innovation Simulation: Back Bay Battery

Back Bay Battery is a good simulation as it helps to put in practice the strategizing skills

that are needed for business or any organization management. Research and development (R&D)

are required as it enables the business firm to remain competitive, as it can answer growing

customer needs. However, managers face a tough decision allocating these funds as they are

required to constantly be as per with competitions, ensure that research and development do not

raise the unit cost, and always listen what the customer want. The simulation equipped me with

all these skills as I had to make a tough decision whether to invest R&D on Nickel Hydride

Metal (NiMH) batteries or invest in promising innovative disruptor Ultracapacitor.

The news channel, customer desires, potential customers, and the Back Bay Battery

revenue details gave me the information I needed to make decisions. The power tools, two-way

radios, and power packs gave the Black Bay Battery Ltd the competitive advantage. However,

Lithium Ion batteries introduction into the market with many benefits over NIMH batteries took

computer batteries segment and other markets as well that generated revenue for the company.

The improvement in lithium-ion battery poses a risk as there is a possibility that it can encroach

the Black Bay Battery market niche. However, the Ultracapacitor with better performance in

most features such as recharge, the reliability over a long period as it is not affected by the

recharge cycles still stands a better position. Nevertheless, for Ultracapacitor to be more

appealing to customers, the energy density needs improvement, but it requires a lot of research

and development.

The Strategy

The 2012 news was promising as the overall sales of power Tools grew by 37% and 24.9

million units sold. I decided to maintain the price of NiMH at $10.00 and for Ultracapacitor at

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 BACK BAY BATTERY SIMULATION 3

$20.00 to cover R&D costs. I invested $2.0M in improving the energy density of NiMH to fulfill

customer needs and $1.0M to improve the processes, which could cut the unit costs. A $4.0M

investment was made for UC to improve the energy density as it was the only thing that was

missing. My investment paid out as the performance of both batteries improved and this made

the revenue to go up. I kept the price same for NiMH batteries for another two years, i.e., from

2014 to 2015, even though I found in the news that overall sales of Two Way Radios and Power

Packs have declined. However, in 2015 the mature competition requested a price reduction; this

necessitated me to reduce the Nickel Metal Hydride Batteries to $9 per unit to be competitive in

the market. But still, I found that my revenues dropped heavily, and my profit was slowing down

to a negative value. I found that the reason for this was a decrease in sales during this year. In

2016, the price was being reduced, and the managers requested more price reduction, and I

definitely knew that the revenues would be affected. I was flexible enough to drop my prices for

NiMH to $8.49 according to the news. Still, I found that my operating profit decreased to a

negative value, -22m, with a reduction in revenues. I thought this might be because of my

competitors who might have reduced the price of batteries more and my customers are moving

away from me. With this thought, I maintained my price at $7.5per unit of NiMH in 2018, but I

invested in process improvement to cut the unit cost. I reduced the price of UC to $17.8 in the

notion that the customers are moving towards more innovative technologies and because my

R&D has improved the desired UC features I thought this might improve the profit of my

organization. I invested heavily in process improvement to reduce the unit costs as the

competitors were pushing the prices of the products down.

In 2020, I maintained the low price of NiMH as I thought the technology was obsolete

and but the price will make the product more desirable and buy the products in huge numbers

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 BACK BAY BATTERY SIMULATION 4

due to decreased prices. The customers were willing to pay the price of $20.8 for Ultra capacitors

so I maintained the price. The investment was a success as I was able to raise the profits of

Ultra-capacitors from -25% in 2012 to 2% in 2020 and those of NiMH from 31% to 39%. My

investment on the process improvement helped to reduce the unit costs of both products.

I thought that my strategy for Ultracapacitors was working, but I was lagging some

essential aspects in NiMH batteries. When I analyzed the situation, I thought it might be because

of higher R&D investments in Ultracapacitors, which paid the price ultimately. I also found out

that it is better to invest in energy density, recharge cycles, and process improvement for

Ultracapacitors. I found that the market is highly fickle. There are times when the market

conditions were good, and I thought to increase the price of NiMH batteries. At times when the

market conditions were poor, I dropped the prices of NiMH batteries. Apart from it, the R&D

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 BACK BAY BATTERY SIMULATION 5

investments were not constant. Sometimes I had as much as $11 million to invest, and sometimes

I had as low as $5 million to invest. The challenging task was to cope up with the market

conditions and to invest pragmatically in the R&D.

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 BACK BAY BATTERY SIMULATION 6

Conclusion

The simulation helped me to understand how volatile the market is and does not always

support one's business strategies, goals, and will. This is more applies when a company wants to

introduce a new product or a service that requires much R &D investments and handle the

changing market needs. Black Bay Battery Ltd. simulation improved my skills on how to address

Research and development funds. An excellent timing and an efficient allocation of the fund are

required to ensure that the company remains competitive in the marketplace. Moreover, I was

able to understand the interconnection between the investment decision on new disruptive

technologies and its input to the health of business and profitability.

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