Hello , I have a major project ?

Major Project Report Template

Major Project Report Template

Your report, not including Appendixes and Tables, should be about 2,500 words (3,500 max). It must be organized by the eight bold headings below (Setting, Results, Demand in Orlando, Economics of Universal, Optimal Price, Fleet Size, Competitor and Lessons) and include the required Appendixes. Answer every question and provide every explanation requested below. You may include additional data and references if they help you answer the questions.

The document Major Project_step-by-step.docx provides detailed explanations and links to Panopto recordings and annotated spreadsheets that will help you address each of the sections below.

Setting

· Briefly describe your role as manager of Universal Orlando. What is your goal? What can you control?

Results

· What were your best cumulative profits? Report the number.

· Very brief summary of your strategy (save the details for sections below)

Demand in the Orlando Rental Car Market

· Market Demand tab—explain how it combines shifts in background demand with changes in quantity demanded in response to price changes. Explain how to disentangle the two.

· Background demand—explain data and calculations that show how it changed monthly from Nov-Sep. Report trend (if any) and seasonality (if any). Provide plausible explanation of what might cause the observed background demand.

Economics of Universal Car Rental Company

· Cost structure—what are Universal’s variable and fixed costs? How are inventory management costs both fixed and variable?

· Explain Universal’s supply curve.

· Price responsiveness of customers—measured by price elasticity of demand. How does knowing this help you as manager of Universal? Explain how to estimate price elasticity conceptually and with data from the simulation (i.e., explain how elasticities in the elasticity table were computed). Referring to the elasticity table, why do price elasticities increase (in absolute value) as rental price increases? Why is weekend demand more elastic (i.e. higher price elasticity in absolute value) than weekday demand?

· Elasticity and revenue--Explain how revenue changes with changes in price over the price ranges represented in the elasticity spreadsheet. What are the implications for Universal’s pricing decisions?

· Indirect price discrimination—define it. What is the usefulness of it to the seller (in this case Universal)? What are the benefits or costs to the customer of a seller using indirect price discrimination? What conditions must be met for indirect price discrimination to work in Universal’s case? Are they met? Show and explain the data that answer that question. How much do its profits increase as a result of Universal employing indirect price discrimination? Show your work.

Optimal Price Analysis and Decision

· Optimal price occurs where MR=MC Optimal price is the set of monthly prices (weekday and weekend) from Nov-Sep that maximize cumulative pre-tax profit for the eleven months (Nov-Sep). Optimal price occurs where MR = MC. Explain why this principle is true.

· Contribution Margin Analysis Use contribution margin calculations to determine where MR = MC for a sample month (e.g., November).

· Explain how contribution margin is calculated using simulation data—i.e., explain the definitions of the columns in the contribution margin spreadsheet provided in Study Materials and how you collect the data for the spreadsheet from the simulation.

· Explain the logic of doing a large interval search (i.e., $5 price intervals) followed by a small interval search (i.e., $1 price intervals).

· Explain why there is no need to test prices with elasticities less than 1.0 (in absolute value).

· Explain how you know that you have tested enough prices to be sure that the profit maximizing price is contained in your range of prices.

· Explain how contribution margin can increase with increasing price, even though revenues are decreasing.

· Does optimal price change from month to month?

· Repeat the contribution margin analysis for December to find optimal weekday and weekend prices for Dec.

· Explain the conditions under which the optimal price you calculated for Nov would be optimal for Dec-Sep. How would a decrease in background demand from Nov to Dec affect the price elasticity you face at the Nov optimal price? What is the implication for Dec’s optimal price? How would a change in the competitor’s price from Nov to Dec (i.e., price of a substitute) affect Universal’s price elasticity of demand in Dec at the Nov optimal price? What is the implication for Dec’s optimal price?

· Use your contribution margin analysis for Dec and data on changes in background demand and competitor’s price (Nov to Dec) to confirm the direction of change in optimal price (Nov to Dec) you explained theoretically, and to show the magnitude of the change in optimal price. Based on the magnitude of the change in optimal price from Nov to Dec and the data on background demand and competitor’s prices for the other months (Jan-Sep), would using Nov’s optimal price for all months be a reasonable initial approach as you test for optimal fleet size in Jan, Apr, and June? Discuss.

Fleet Size Analysis and Decision

· Capacity utilization When does the profit maximizing price leave unrented capacity? Why?

· Cost of unrented cars How much could Universal increase December profits if it didn’t have to pay inventory management costs for the unused capacity in December?

· Optimal fleet size If January was your only consideration, how would you choose the fleet size for January?

· Quarterly fleet size adjustment What are the issues caused by only adjusting fleet size quarterly?

· MR=MC analysis with fleet size. Explain how to determine optimal fleet size using the approach demonstrated in the “optimal fleet size spreadsheet” presented in the Major Project Step-by-Step Guidance. Conduct a similar analysis with the major project scenario. Report and discuss the results.

Competitor (Analysis & Evaluation of Competitor Strategy)

· For your best run, keep monthly track of the competitor’s prices, unit sales, market share, and profits. How do they compare with Universal’s results on each measure?

· Based on your observations of the competitor, what is his strategy? Why might a competitor implement such a strategy?

· How did the competitor’s strategy affect your strategy and results? Did the low prices of the competitor influence your optimal price (i.e., If he had charged higher prices, would your optimal price have increased)? If the competitor had charged higher prices (similar to yours), what affect would that have had on your unit sales and profits?

Lessons Learned

· Explain how the simulation accurately portrays the interaction of supply and demand.

· What did you learn about pricing strategy in a competitive market?

Appendixes

Spreadsheet showing your calculations of background market demand (seasonality).

 Wkday and Wkend elasticities scenario w constant demand.xlsx (copy of the spreadsheet provided in the Step-by-Step guidance; no need to recompute or modify in any way).

 Finding Optimal Price Using Contribution Margin.xlsx  (using this spreadsheet as a model, conduct your own analysis using the major project scenario and include the spreadsheet here).

 Measuring Effect of Indirect Price Discrimination.xlsx  (using this spreadsheet as a model, conduct your own analysis using the major project scenario and include the spreadsheet here).

Finding Optimal Fleet Size Using Contribution Margin.xlsx (using this spreadsheet as a model, conduct your own analysis using the major project scenario and include the spreadsheet here).