A Better Solar Company
Rachel Chamberland, Alex Diaz, Amanda Lui, Kevin Satre
Global Trends: World Energy Consumption
Coal
Gas
Hydroelectric
$44 billion Nuclear
Geothermal
Oil
Solar 0.1%
Source: Energy Information Administration
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Global Trends: Market Outlook
35000
30000
25000
Total World (MW)
20000
Policy-Driven
15000 Moderate
10000
5000
0
2010 2011 2012 2013 2014
Source: European Photovoltaic Industry Global Market Outlook
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Global Trends: Government Initiatives
Germany 2009:
Germany 2010: €100
€20 billion for
million for solar R&D
renewable
US 2009: 10 energy
million Solar Japan 2009: $21 billion for
Roofs Act residential solar power
US 2010: $6 billion
world’s largest France 2010: €1.35
solar plant billion clean energy S Korea2010: $36 billion
US 2009: $52.5 for clean energy
million for R&D
China: planned
$739 billion
North Africa 2009: $5
investment into
billion solar energy
renewable
energy
Recommendations
Acquisition: U.S. Brand Building: Italy
• Largest global energy • Expand presence
consumer • Differentiation
• Market expansion
opportunity
Analysis Recommendations Financials Timeline Conclusion
Agenda
Analysis
Recommendations
Financials
Timeline
Conclusion
Analysis Recommendations Financials Timeline Conclusion
SWOT Analysis
• Inverted Flexible Vertical Integration
• Warranty
Strengths • High Quality
• Western engineering & Chinese manufacturing
• Higher cost
Weaknesses • Lower market share
• Lack of Canada government subsidies
• Global trends
Opportunities • Expanding market
• Currency
Threats •
•
Possible lack of Financing
Possible lack of government subsidies
Analysis Recommendations Financials Timeline Conclusion
Competitive Advantage: Porter’s
Competitive Advantage
Low Cost Higher Cost
Cost Leadership
Broad
Strategy Differentiation
CHINESE
Target Market
COMPANIES:
PRICE WARS
Focus Strategy Focus Strategy
Narrow
(low cost) (differentiation)
Analysis Recommendations Financials Timeline Conclusion
Macro Factors Considered
Government Policies Entry Mode Method
Financing Currency
Liability of
Risks
Foreignness
Analysis Recommendations Financials Timeline Conclusion
Recommendations:
U.S. Acquisition
United States Market Outlook
7000
6000
5000
Market Size
4000
3000
2000
1000
0
2010 2011 2012 2013 2014
Source: European Photovoltaic Industry Global Market Outlook
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Analysis Recommendations Financials Timeline Conclusion
Acquisition: Project Developers
Analysis Recommendations Financials Timeline Conclusion
Recommendations:
Brand Building in Italy
Italy Market Outlook
2500
2000
1500
Market Size
1000
500
0
2010 2011 2012 2013 2014
Source: European Photovoltaic Industry Global Market Outlook
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Analysis Recommendations Financials Timeline Conclusion
Italy: Expand Presence
July 10: New office The Future is Bright Brand Advertising
High School Contest
• Addition of new sales • Promote recycling, • Trade shows
representation compost, energy • Advertisements
• After Sales Support saving
• $20,000 solar panels
prize
• Positive community
connection
Analysis Recommendations Financials Timeline Conclusion
Italy: Differentiation
After Sales Support
• Support center for customers in Italy
Superior Product
• Porter’s generic strategy
Analysis Recommendations Financials Timeline Conclusion
Financial Implications
Financials: Italy Costs
Your Future is Lombardy* $20,000
Bright Contest Sicily $20,000
Lazio $20,000
Compania $20,000
Veneta $20,000
Additional Advertising $20,000
Additional Sales Investment $1,000,000
Representation
Total $(1,120,000)
Analysis Recommendations Financials Timeline Conclusion
Financials: Italy ROI
Increase in Projected Revenue
4.5
4
Revenue Increase (millions)
3.5
3
2.5
2
1.5
1
0.5
0
Yr1 Yr2 Yr3 Yr4 Yr5
Analysis Recommendations Financials Timeline Conclusion
Financials: United States Costs
Average Acquisition Size
Acquisition Cost $85 million
Canadian Solar Ideal
Acquisition Cost $40-$45 million
Analysis Recommendations Financials Timeline Conclusion
Financials: United States ROI
25
Yearly Net Gains (in millions)
20
15
10
0
Yr1 Yr2 Yr3 Yr4 Yr5
Assumption:
Assumption: acquisition
acquisition of
of one
one company
company per
per year
year
Analysis Recommendations Financials Timeline Conclusion
Conclusion
Timeline: 2010-2015
2010 2011 2012 2013 2014 2015
Sales Force Acquire Harness
Expansion project project
developer pipeline
Your
Evaluate
Future
is Bright
Contest
Possible Harness Reduce
project
Acquire
project project expansion
development
developer pipeline efforts
acquisitions
Analysis Recommendations Financials Timeline Conclusion
Conclusion
I think that our fundamental belief
is that, for us, growth is a way of
life and we must grow at all times.
- Mukesh Ambani
Analysis Recommendations Financials Timeline Conclusion
Questions?
Many thanks to our Research Associate Pascale Chamberland!
Appendix
Appendix
• Global Trends: • Boston Consulting Group Analysis
• World Energy Consumption • Evolution of PV Market
• Market Outlook • The Market
• Government Initiatives • Entry Mode Selection
• Agenda • Risks
• Analysis • Currency: CAD/EUR, CAD/USD
• SWOT • Your Future is Bright Contest
• Porter’s generic strategies • U.S. Acquisition Opportunities
• Recommendations • Vocabulary
• Factors Considered • International Trade Shows
• U.S. Acquisition • Competition
• Market Outlook • Additional Financials
• Potential Project Developers • SWOT Analysis
• Italy Brand Building • Germany
• Market Outlook • China
• Expand Presence • Japan
• Differentiation • United States
• Financials: • Italy
• Italy: Costs, ROI • South Korea
• US: Costs, ROI • Czech Republic
• Timeline • France
• Spain
• Canada
Appendix: Current Market
Boston Consulting Group Analysis
Relative Market Share
High Low
United States
?
France
High
Market Growth Rate
Italy Czech Republic
South Korea
Japan
Germany
Canada
Low
China
Spain
Appendix: Future Market
Boston Consulting Group Analysis
Relative Market Share
High Low
?
France
High
Market Growth Rate
United States South Korea
Germany
Spain
Canada
Low
Czech Republic
China
Japan
Italy
Appendix: Evolution of PV Market
Appendix: The Market
Appendix: Entry Mode Selection
Strategic Goals &
Location-specific
Advantages
Equity Non-equity
Partially owned Wholly owned Contractual
Exports
subsidies subsidiaries agreements
Source: Peng, Michael. Global Business (2008).
Appendix: Risks
Liability of ●
Informal institutions in Italy
Foreignness
Currency ●
Strength of Euro
Financing ●
●
●
●
Interest Rates
Loosening credit for solar projects
Availability ●Global government stimulus efforts
●
Governmental ●
Possible reduction of FiT in Italy
Policy ●
US Government policy?
Appendix: Currency
CAD to Euro—5 years
Appendix: Currency
CAD to USD—5 years
Appendix: Your Future is Bright Contest
• Contest to promote environmental awareness in high schools
as well as brand recognition for Canadian Solar.
– Host in 5 most populous regions regions:
• Lombardy, Sicily, Lazio, Compania, Veneto
– Judge based on 1 month:
• Recycling
• Composting
• Energy Saving
Schools will fill out weekly progress profiles with details and pictures of the initiatives
they have taken.
Best school will be selected by managers in the Rome office and will win solar panel
installation worth $20,000 for their school
Appendix: U.S. Acquisition Opportunities
• Enerize Corporation- Florida
• Gold Coast Solar- California
• Emmy Energy- New York
• Home Energy New York – New York
• Clean Power Design- Missouri
• Green Wind and Solar- Oklahoma
Appendix: Vocabulary
• Net-Metering Scheme: Owners of renewable energy
sources collect retail credit for any excess energy they
produce.
• Grid Access: network connecting consumers and
suppliers
• Feed-in Tariff: Political policy to encourage use of
renewable energy:
– Subsidies for participating companies
– Grid access for renewable energy
– Net-metering
– Enacted in 63 jurisdictions as of 2009
Appendix: International Trade Shows
December 2010: CanSIA Solar Conference Ontario, Canada
(plans to attend)
May 2011: Solar Expo Verona, Italy
International Exhibition & Conference on Renewable Energy and
Distributed Generation
June 2011: Intersolar Europe Munich, Germany
Nov 2011: International Solar Energy Exhibition Milan, Italy
Appendix: Competition Trends
Solar World, Q-Cells
Suntech
First Solar Yingli Sharp
Differentiation
Trina Solar Sanyo
Sunpower
Appendix: Financials
U.S. ROI
• Judging by the total of 850 billion worth of acquired private companies, and a total
of 10,013 companies having been acquired (avg. of $85 million per company), we
judge that the companies we would acquire would be between $45-$60 million.
• In United States, with acquisitions we would capture another 2% of the market
share. In 2009 we had revenues of almost $37 million in the United States (with a
4% market share) and with an additional 2% of the market share we could increase
revenues by $55 million every year.
• In 2009, US spent $18.6 billion on renewable energy. Approximately 30% of that
was solar power (.3*18.6= $2.75 billion). Our approximated gain in market share of
2% gets us another $55 million in revenue each year from the United States alone.
• This increases our yearly revenue from United States to about $92 million dollars
(almost a 250% increase in revenue).
– Additional Note: United States is a rapidly expanding market for solar power.
• We could potentially break even after the first year, depending on the size of
acquisition.
Appendix: Financials
Italy Campaign Costs
• Advertising Campaign in Italy- $20,000 per regional winner (5 total regional winners)
– Five biggest regions – Lombardy*, Sicily, Lazio, Compania, Veneto.
• Additional $20,000 for getting the word out about competition.
• Judging by the total of $850 billion worth of acquired private companies, and a total
of 10,013 companies having been acquired, we judge that the companies we would
acquire would be between $70-$85 million.
*Lombardy will be the starting point. Assuming “Your Future is Bright” goes well, there
will be four more contests implemented over the course of a year.
-Return on Investment- Matching these “advertising expenses” against the revenues
they generate is nearly impossible and susceptible to poor estimates and “bad
accounting”
-However, it is possible that increasing our investment in the sales force in Italy will
double or even triple our market share if we act quickly.
• Additional $1,000,000 for more in the sales force in Rome, Italy.
Appendix: Market in Germany
●
Sales office located in Germany
Strengths
●
●
● Strong brand
●
● Top five customers are in Germany
Weaknesses ●
● Ability to differentiate from competition?
●
● FiT
Opportunities
●
● Largest PV market in world
●
● Availability of Financing
●
● Entrenchment of solar energy
Threats Expected cuts to solar PV tariffs
●
●
●
● Demand concentration issues
OLI Advantages ●
● Ownership: proven success in market
Appendix: Market in China
Production facilities
Strengths
●
●
●Strategic alliance with Guodian Power Development
●
Weaknesses ●Higher price
●
●Large burgeoning population
Opportunities ●
●Government subsidies
●Low interest loans
●
●
Government instability
Threats
●
●
●Demand concentration
●Collectivist society: government favoritism for local companies
●
●
●Location-specific: Vertical FDI, natural resources
OLI Advantages ●Internalization: IPR
●
Appendix: Market in Japan
Strong brand
Strengths
●
●
●
●
High-quality
●
Ability to differentiate and compete against
Weaknesses
●
quality of Japanese companies
●
●Aggressive climate policies
Opportunities ●Large residential market
●
Strong brand loyalty
Threats
●
●
●
●Competition
●High quality standards
●
●
●Location-specific: Reputation for quality
OLI Advantages ●Internalization: develop quality
●
Appendix: Market in United States
●
●Proximity to headquarters
Strengths ●
●Reduced liability of foreignness
●Western engineering with Chinese production
●
Weaknesses ●
Price war with Chinese manufacturers
●
●Large potential market, lags behind Europe
Opportunities ●
●Stimulus money
●CA: Million Solar Roofs Initative
●
Policies of political party in control
Threats
●
●
●
●
US entrenchment in oil industry
●
●Ownership: Differentiation
OLI Advantages ●Location-specific: horizontal FDI
●
Appendix: Market in Italy
Strengths Brand
●
●
●
● Quality
Weaknesses Higher price
●
●
●
● Competition: U.S.
●
● Subsidies of up to 80% of end user’s costs
Opportunities FiT (and no FiT cap)
●
●
●
● Net-metering
●
● Lack of energy sources & no import trade limitations
●
Government budget imbalance
Threats
●
●
● Slow reduction of FiT
●
● Eventual market saturation?
OLI Advantages ●
● Ownership: VRIO resources, Canadian Solar local offices
Appendix: Market in South Korea
Proximity to China: reduced transportation costs
Strengths
●
●
●Western engineering with Chinese manufacturing
●
●
Higher price
Weaknesses
●
●Competition
●
●
●High 2008 market growth
Opportunities ●FiT
●
●
Slowdown in 2009 solar market
Threats
●
●
●Strong currency
●FiT cap
●
●
● Ownership: Western engineering with Chinese
OLI Advantages manufacturing
Appendix: Market in Czech Republic
Western engineering with Chinese manufacturing
Strengths
●
●
●Reputation for Quality
●
●
Higher price
Weaknesses
●
●Liability of Foreignness
●
●
●Huge growth
Opportunities ●
●FiT: willing to invest more
●Simple administrative procedures
●
●
Speculation that growth will be unsustainable
Threats
●
●
●Taxpayers: negative PV image
●Cutting subsidies
●
●
● Ownership: Western engineering with Chinese
OLI Advantages manufacturing
Appendix: Market in France
Western company
Strengths
●
●
●Reputation for quality
●
●
Higher price
Weaknesses
●
●Liability of Foreignness
●
●
●Favorable government policies
Opportunities ●
●Further opportunity for growth
●FiT
●
Grid connectivity issues
Threats
●
●
●Slow administrative procedures
●
●
Ownership: Strong brand with high quality reputation
OLI Advantages
●
●Location-specific: Proximity to potentially large new market
●
Appendix: Market in Spain
●
Western company
Strengths
●
●
●Reputation for quality
●Proximity to Europe offices
●
●
Ability to differentiate?
Weaknesses
●
●Higher price
●
●
●2008 world leader in solar panels
Opportunities ●FiT
●
●
Heavy cuts to FiT (2009 market: 69MW)
Threats
●
●
●Economic slowdown
●Heavy competition
●
●
Ownership: Strong brand with high quality reputation
OLI Advantages
●
●Location-specific: Proximity to potentially large new market
●
Appendix: Market in Canada
●
Lowest liability of foreignness
Strengths
●
●
●Local company
●Low transportation costs
●
●
Higher price
Weaknesses
●
●Liability of Foreignness
●
Opportunities ●
Ontario FiT
Smaller market, population
Threats
●
●
●FiT: domestic content requirement
●
●
●Ownership: Western engineering, “home turf”
OLI Advantages ●Location-specific: Proximity to headquarters
●
Appendix: Main Sources
• US Energy Market World Data, 2th Edition, SBI, June 2010
• Canadian Solar Website & Financial Statements
• Renewable Energy Country Attractiveness Indices, Ernst & Young, August
2010
• Global Outlook for Photovoltaic Until 2014, EPIA, May 2010
