Case Study First Solar Questions PDF

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Case Study First Solar Questions Provide an overview of what markets First Solar operates in including predicted growth and key purchasing consideration factors. What was First Solar’s competitive advantage prior to 2011? First Solar operates in the energy market, specifically the market of producin...

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Case Study First Solar Questions 1. Provide an overview of what markets First Solar operates in including predicted growth and key purchasing consideration factors. What was First Solar’s competitive advantage prior to 2011? First Solar operates in the energy market, specifically the market of producing solar power panels made of thin-film cadmium telluride technology that could harness photovoltaic solar power. The markets which First Solar operate are mainly in the United States and in Germany, with 74% of the company’s net sales in Germany alone in 2008 and other subsidy-rich countries in Europe which were the markets that had given First Solar’s competitive advantage prior to 2011. First Solar had 41% of the US market in 2011. There were three broad markets for solar power: residential homeowners with a predicted growth from 29% to 35% by 2020, commercial businesses with a predicted shrink from 40% to 25% by 2020, and utility market with a predicted growth from 31% to 40%. Key purchasing consideration factors include the low manufacturing cost per watt achieved by First Solar’s technology of $1.23/watt in 2007 in exhibit 7, the decreasing cost of the raw material silicon as compared to the gradually increasing cost of cadmium telluride in exhibit 2, and the vertical integration of buying system integrators in the United States from 2007. 2. Conduct an analysis using Porter’s 5 forces. List the relevant information from the case study under each force. Competitive rivalry Control over the US market from SunPower, which was the second largest PV manufacturer, with 38.5% control The remaining 20.5% control was divided amongst Solyndra, SunEdison, SunRun, Evergreen Solar and Spectrawatt, Inc Generally, has more competitive advantage over the competitors because of First Solar’s management of low debt and good balance sheet, whilst many competitors have had to file bankruptcies. Competition from China: including major players of Suntech, Yingli and Trina Solar. The Chinese government’s subsidy of the demand and supply of PV solar panels has seen $1.2 billion put into the program, with 1000% growth in installation of solar panels from 2009 to 2011, making China the world’s largest producer of solar panels. Bargaining power of suppliers As the cost of the supply for cadmium telluride increases, the cost of silicon decreases. By 2010, 80% of total silicon use was for the manufacturing of solar cells, this in turn decreases the supply of cadmium telluride in the general production of solar cells, putting First Solar at a disadvantage compared to the competitors who source silicon as the production materials.

Bargaining power of buyers Utilities purchased directly from PV manufacturers, and systems integrators and installers were also buyers directly contracted with First Solar. Early customers were system integrators, developers and operators, primarily located in subsidy-rich Europe. First Solar also diversified into non-subsidy reliant markets, including Africa, the Middle East and the Americas. There were three broad markets for solar power: residential homeowners with a predicted growth from 29% to 35% by 2020, commercial businesses with a predicted shrink from 40% to 20% by 2020, and utility market with a predicted growth from 31% to 40%. In the residential customers, the main focus was on the overall costs and benefits of the installed system, with the key criteria of levelized cost of electricity, installation and distribution costs, watts per unit area, and aesthetics. Commercial customers had larger scale projects that required greater wattage per panel, so the primary consideration for commercial business was the levelized cost of electricity, as well as watts per unit area, installation and distribution costs, and reliability of the technology. The utility market had large-scale projects, and was dependent on placement; the most important factor was watts per square meter, so as much power was generated as possible in small spaces. Risk of threat of new entrants The main threat was from the Chinese PV manufacturers, which were flooding the market with low-price crystalline-silicon solar panels due to the subsidies provided by the government. In 2012, Chinese producers were manufacturing nearly 60% of the world’s supply of PV panels. The large-scale entry of Chinese producers has led to a structural imbalance between supply and demand which will continue for the foreseeable future and will continue to put pressure on pricing. The Chinese government was primarily subsidising the building of new plants rather than ongoing operations Threats of substitute products The threat from the growing of silicon sourced PV solar panels has significantly disrupted the market share and profit of First Solar’s cadmium tellurium solar panels, mainly due to the decreasing price of silicon. In 2001, 20% of total silicon use was allocated towards solar cell production, this has increased to 80% by 2010. 3. What are the key challenges identifiable through the analysis? Do you believe the industry is attractive? The key challenges include the potential threats from the entrance of Chinese PV manufacturing companies into the United States and European markets, the potential for silicon to completely replace cadmium tellurium in being the semiconductor used because of the increasing difference in costs, and the declining European solar subsidies from the governments and unwillingness of banks to finance solar projects regardless of the balance sheet of First Solar. Therefore, the industry is very difficult to continue to operate in as the competition and threats are

projected to grow stronger, and First Solar is only expected to continue to operate in a loss, which may force them into bankruptcy. 4. Identify and explain a recommendation you would give Tymen deJong to guide First Solar in order to improve their business model moving forward? o This may include leaving certain markets o Reducing their product offering o Partnership o Government involvement....