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PVT technologiesTRANSCRIPT
PV Technologies, Inc.:Were They Asleep At The Switch?
Hasan Mehfooz- 14648Floyd Fernandes- 14196Beatrice Louis – 14399Shairose Ukanji – 14127Daniyal Bin Wajahat - 14600
Industrial Marketing – Case StudyPresent to: Mr. Syed Asghar Raza
What Do All These Companies Have In Common??
They are the Top Five Fortune 500 Companies using Solar Power*With “green” being all the rage these days, many Fortune 500 companies are making the
switch to solar power by partnering with solar power companies and using solar energy to power their offices and retail establishments. A voluntary program called “The Green
Power Partnership” encourages organizations to go green and tracks their annual green power purchases.
Renewable Energy Market- Developmental Factors
•Shrinking supply sources (Oil, Natural Gas).
• Rising costs of traditional energy sources.
• Unstable oil market.
• Increasing environmental awareness
Currently the world’s total energy mix has 85% of energy being derived from oil, natural gas & coal. But……………
Renewable Energy Market- Developmental Factors
•All the afore mentioned reasons attributed to governments to create Public Policies in favour of green energies and has promptedmany governments to:
Offer Tax IncentivesOffer Subsidies
As a means of encouraging the development of renewable energy initiatives for new power
sources.
•Much of the growth in the Photovoltaic (PV) industry has been in European Countries, such as Germany, Spain, Italy and France.JapanIn the US, in the states of California, Arizona & New Jersey
The U.S “Green Market”
The US Federal Govt. envisions reducing fossil fuel dependence by
satisfying 80% of the country’s electricity demand from clean
energy sources by 2035.
The US Govt. incented PV growth with investment tax credit and
favorable legislation. This has lead to an,
Expected Growth of 30.4% CGAR from 2010-2015
Company Background- PV Technologies
• Founded in 1993 in San Francisco• Specialist in RENEWABLE ENERGIES• $30 billion in revenues (2010)• 25 countries
34%
24%
22%
12%
8%
% of Revenues (2010)
Industrial Automation
Process Management
Network Power
Drive Technology
Climate Technologies
AT A GLANCE
• They offer integrated solutions across multiple
market segments, including energy infrastructure.
• PV inverter division is a Unit within Industrial
Automation, has 38% of the market share in the US,
with $ 1.24 billion in sales.
Company Background- PV Technologies
PVT had:
Strong Balance SheetsStrong ProfitabilityHigh Cash Flow Investments in R&D
All this lead to
Industry leader in
• PRODUCT INNOVATIVENESS• QUALITY• PERFORMANCE
PV Technologies Communications
PV Technologies followed an Integrated Marketing Approach
Personal SellingPVT’s sales success was
driven largely by the nature and quality of the
relationship a salesperson developed and maintained with the decision maker of
the firm.
Company WebsitePVT’s website was used to:
1) Showcase product features & benefits.
2) Inform target audience about current developments.
3) Demonstrate through video streaming.
4) Provide initial point of contact.
Trade ShowsPVT took part in trade shows, like SOLAR POWER INTERNATIONAL- the largest and best attended
trade show.
Current Situation- The Product
A PV inverter is a critical component in a photovoltaic
systems i.e. they are Fundamental components in a
PV system. Photovoltaic Inverters
convert the direct current output of a solar panel into alternative current that is
compatible with residential or commercial use.
The PV Inverter market was composed of three segments: ResidentialCommercial/ IndustrialUtility Companies
The market share of each segment is:Utility companies 27.6%Commercial 42.4 %Residential 30.1%
The greatest growth was in the utility segment, while profit margin less in this segment their scale and visibility attracted the largest and strongest in the industry.
Current Situation- The PV Market
Current Situation- The Customer
Solenergy Development LLC• Major developer of energy generation
systems • Among the biggest customers of
PVT’s solar energy business unit• Strong relationship with senior
management team
The project :• Construction of a PV solar energy
power plant in Barstow (California)• Looking for a supplier of utility scale
central inverter
Case Introduction
Major People Involved in the case:
Nathan Rubenstein (PVT’s Director of Sales and Marketing)
Jim Salvatori (PVT’s Salesperson) Greg Morgan (Solenergy’s Chief Electrical Engineer)
Solenergy was brought by Jim Salvatori.
Solenergy got an offer from City of Barstow, California, to construct a PV solar energy power plant and was seeking a supplier of utility scale central inverters.
Solenergy conducted periodic confidential evaluations of the select group of companies it invited to bid on its major projects which was directed by Greg Morgan
In late July, PVT received Request for Proposal (RFP) from Solenergy. The closing date for the response to RFP was October 31,2011
In late November, Salvatori came to know from his sources that PVT was trailing the other competitors- SOMA Energy & BJ Solar
Salvatori’s sources were vague; they believed the evaluation was based largely on price but weren’t certain this was the only factor
Morgan’s updated evaluation would drive the purchase decision ultimately
Rubenstein & Salvatori were concerned with this, as their company’s reputation & position in the marketplace were at stake
Case Introduction
Factors Affecting Specifications of PV Central Inverters
The industry had not yet developed a set of standardized metrics to measure reliability and efficiency of PV inverters.
As a result of this manufacturers used performance measures that were not universally applied.
IEC 62446 standard is established by IEC , which defined minimum requirements for documenting.
Central inverter-most failure-prone component- the greatest challenge to was
inverter reliability, uptime and power conversion.
A recent consideration for manufacturers and developers was the entry of Chinese Firms into the US market. Their equipment was of inferior quality and performance, but the cost differential was significant. This signalled the approaching “commoditization” of PV inverters.
Solenergy’s Vendor/ Product Evaluation
Evaluations are conducted by Greg Morgan, chief electrical engineer at Solenergy and very respected among the industry.
Solenergy is used to
evaluating the companies
they invite to bid on their major
projects.
Solenergy often includes its
comments and opinions in
press releases. Morgan
judgements are highly influential
throughout the entire industry
PV Tech needs to get a
GOOD EVALUATIO
N of its projects in order to get the contract and to
confirm its leadership
The Problem !!!!!!
Morgan’s Evaluation
PVT’s prices are significantly higher than competitors ones. PVT’s better quality could explain the difference but Morgan was surprised of the spread being so wide.
Solenergy was committed to cut costs among the company.
Inferior performance could be compensated developing an enhanced maintenance schedule and a proactive quality control program
Salvatori Learnt
Salvatori heard that Morgan’s evaluation was bad for PVT.• Solenergy was about to conclude the selection process.• The evaluation was mainly based on prices.
PROBLEM: the evaluation had not been published• Information only based on rumours.• Hard to contact Morgan.
Key Pointers of the Case
PVT seems to have taken it’s market leader position as a given and almost taken the contract from solenergy for granted. It’s lack of knowledge about the new competitors from China who are offering cheaper solar products in PVT’ s dominant market is troubling.
Salvatori, especially in light of the huge ramifications of this contract, should have been a lot more proactive in maintaining contact with Morgan, the lead engineer in charge of evaluations.
Information should be solid. A major issue is that PVT really doesn’t know what is going on. There seems to be a huge lack of communication that is apparent when no concrete evidence is brought out to support the claim that PVT is doing poorly compared to it’s competitors.
Key Pointers of the Case
PVT should have taken it upon themselves to be more proactive in trying to understand what Solenergy is really looking for in its RFP. PVT has gone through all this time and energy in producing an RFP that might not even be close to what Solenergy is looking for. This is absolutely unacceptable given that Solenergy is currently their biggest customer.
PVT is a long established leader in the emerging market of solar energy. However, despite the quality of our products, there seems to be a lot of uncertainty in the face of new competition from China in the form of extremely cheap products that compete with our own. The lack of PVT’s response to this growing threat has manifested itself in the form of uncertainty in PVT’s ability to get a contract from its biggest customer.
PVT Management Concerns
Rubenstein the Marketing Director, got Salvatori’s discoveries known to the Executive Committee at PVT- which was met with disbelief, surprise, disappointment and deep concern.
They were concerned about the probable effect that Solenergy's implied endorsement of SOMA Energy and BJ Solar products would have on PVT.
Rubenstein and Salvatori came up with four alternative responses, that had to be presented to the Committee.
Different Alternatives
1.Offer to extend the product
WARRANTY at internal cost from 10 to 20 years
2.Offer a 99% UPTIME
GUARANTEE at no cost for the customer
3.Accelerate the introduction of the
NEW INVERTER (1.25 MW with 98.5% efficiency)
4.Initiate a DIALOGUE with
Morgan to find out the real output of the evaluation
Comparison
Alternative 1: Extending the warranty to 20 years
Extending the product warranty to 20 years while the industry standard is 5 years.
• Marketing and sales department: high economic value for Solenergy and would offset any product cost-related shortcoming.
• Finance, production and engineering department think: competitive advantage already in place (10 instead of 5 years).
Alternative 1: Extending the warranty to 20 years
Extending the product warranty from 10 years to 20 years while the industry standard is only 5 years
PROs : Reliable – Sign of good quality. High standard.
CONs : Relatively costly. Warranty is not key factor.
Alternative 2: Uptime Guarantee
PVT would offer its 99% uptime guarantee for each inverter-s in-service life at no cost.
Sales & Marketing, thinks this would reinforce the quality, durability and reliability .
Finance & Production thinks this approach would lead to lost warranty revenues and would negate most of the profit in the deal.
Alternative 2: Uptime Guarantee
PROs :
The offer would be unmatchable by the competitors. Signal of high reliability.
CONs :
Too costly, high impact on the profit. Other customers would ask for it.
Alternative 3: Investment in a new model
Alternative 3: Introduction of the new 2.5MW
Model
Profitability would be in line with the other options and it would be the most efficient and reliable inverter on the
market.
Marketing & Public Relations thinks the new technology is what the market wanted.
Finance & Production is concerned with malfunctions and weren't convinced the offer would impress Solenergy.
Alternative 3: Investment in a new model
The most efficient and reliable inverter on the market.
PROs :No change in pricing strategy, this is what the sector is looking for.
CONs :Extremely risky and Expensive.
Alternative 4: Direct approach to Morgan
Another solution that, Rubenstein and Salvatori suggested before any changes were made to product and market strategies, PVT should approach Morgan directly.
If Morgan confirmed, they could attempt to persuade him to share or even re-evaluate the criteria from which conclusions were drawn.
Finance & Production were sceptical about the existence of Morgan’s Report, as the conclusions were at odds with PVT’s recent evaluations of the same competitive products.
Alternative 4: Direct approach to Morgan
PROs :• More personal approach: we demonstrate we are ready to
personalize our product for them;
• First step to build a long term relationshipCONs :
• We rely on not public information;
• Call for help could make us appear as desperate
Which one do you think is the best solution?
Criteria are not aligned
Relevant criteria for PVT:
• Efficiency;• Reliability;• Productivity
From PVT’s perspective these are elements that real add value to the customers into the long run
Relevant criteria for Solenergy:
• Price
Due to new cost cutting strategy, Solenergy has developed different priorities
Speak with Morgan
Understand if the evaluation
is real and what his real
needs are
Adopt an ad hoc strategy
If Morgan confirms that the evaluation is real, PVT should understand the roots of the problem and figure out with him a solution, after proving him that PVT’s product is the best one.
If PVT do not manage to convince him about the superiority of the product, PVT can adopt a strategy based on his needs to sell their products.
The strategy