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PV Technologies, Inc.

:
Were They Asleep At The
Switch?
Industrial
Marketing Case
Study
Present to: Mr. Syed
Asghar Raza

Hasan Mehfooz14648
Floyd Fernandes14196
Beatrice Louis
14399
Shairose Ukanji
14127
Daniyal Bin
Wajahat - 14600

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


Currently the worlds total energy mix has 85% of
energy being derived from oil, natural gas & coal.
But

Shrinking supply sources (Oil, Natural Gas).


Rising costs of traditional energy sources.
Unstable oil market.
Increasing environmental awareness

Renewable Energy MarketDevelopmental Factors


All the afore mentioned reasons attributed to governments to create
Public Policies in favour of green energies and has prompted
many governments to:
Offer Tax Incentives
Offer 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.
Japan
In 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
countrys 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 20102015

Company Background- PV
Technologies
Founded in 1993 in San Francisco
Specialist in RENEWABLE ENERGIES
$30 billion in revenues (2010)
25 countries

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,

AT A G L A N C E
% of Revenues (2010)
Industrial
Automation

8%
12%

34%

22%

Process
Management
Network Power

24%

Drive Technology
Climate
Technologies

with $ 1.24 billion in sales.

Company Background- PV Technologies


PVT had:
Strong Balance Sheets
Strong Profitability
High 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
Company
Approach

Website

Personal
Selling
PVTs 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.

Trade

PVTs 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.
Shows

PVT 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.

Current Situation- The PV Market


The PV Inverter market was composed of three segments:
Residential
Commercial/ Industrial
Utility 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 Customer


Solenergy Development LLC
Major developer of energy generation
systems
Among the biggest customers of
PVTs 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 (PVTs Director

of Sales and

Marketing)
Jim Salvatori (PVTs Salesperson)
Greg Morgan (Solenergys 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

Case Introduction
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
Salvatoris sources were vague; they believed the evaluation was
based largely on price but werent certain this was the only factor
Morgans updated evaluation would drive the purchase decision
ultimately
Rubenstein & Salvatori were concerned with this, as their
companys reputation & position in the marketplace were at stake

rs Affecting
Specifications
of PV Central Inv
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

reliability, uptime and


power conversion.
challenge to was inverter

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.

Solenergys Vendor/ Product Evaluation


Evaluations are conducted by Greg Morgan, chief electrical engineer at
Solenergy and very respected among the industry.

PV Tech needs to
get a
Solenergy is
used to
evaluating the
companies
they invite to bid
on their major
projects.

GOOD
E VA L U AT I O
N
of its projects in
order to get the
contract and to
confirm its
leadership

Solenergy often
includes its
comments and
opinions in
press releases.
Morgan
judgements
are highly
influential
throughout the
entire industry

The Problem !!!!!!

Morgans
Evaluatio
n

PVTs prices are significantly higher than competitors ones.


PVTs 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 heard that Morgans 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.

Salvatori
Learnt

Key Pointers of the Case


PVT seems to have taken its market leader position as a given
and almost taken the contract from solenergy for granted. Its 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
doesnt 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 its 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 PVTs response to this growing threat
has manifested itself in the form of uncertainty in PVTs
ability to get a contract from its biggest customer.

PVT Management Concerns

Rubenstein the Marketing Director, got Salvatoris 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

3.
Accelerate the introduction of the
NEW INVERTER (1.25 MW
with 98.5% efficiency)

2.
Offer a 99% UPTIME
GUARANTEE at no cost for the
customer

4.
Initiate a DIALOGUE with
Morgan to find out the real output
of the evaluation

Comparison

ernative 1: Extending the warranty to 20 ye

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 costrelated shortcoming.
Finance, production and engineering
department think: competitive
advantage already in place (10
instead of 5 years).

ernative 1: Extending the warranty to 20 ye

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 mode

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 Morgans
Report, as the conclusions were at odds with PVTs 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 relationship
CONs :
We rely on not public information;
Call for help could make us appear as desperate

Which one do you think is the best solutio

Criteria are not aligned


Relevant criteria
for PVT:
Efficiency;
Reliability;
Productivity

Relevant criteria
for Solenergy:
Price

From PVTs
perspective
these are
elements that
real add value to
the customers
into the long run

Due to new cost


cutting strategy,
Solenergy has
developed
different
priorities

Understand
if the
evaluation is
real and
what his real
needs are

Speak with
Morgan

Adopt an ad
hoc strategy

The 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 PVTs
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.