Action plan for PV Technologies – when they asleep at the switch

Problems / Issues faced by the PV Technologies:
As per the information from Sales Manager Mr.Salvatori, PVT might lose the contract against SOMA energy and BJ Solar from the bidding, which is one of the high visibility project conducted by Solenergy Development LLC who won to construct a PV solar energy Power Plant. Mr. Greg Morgan – Chief Engineer conducted the evaluation of the bidders and the assumed outcome is that PVT will be out of the running potential supplier because of the price compared to other bidder though the quality of the product is incomparable.

If PVT loses this contract then its reputation and position in the Market Place are at stake as the announcement might through a press conference.

Action Plan for PVT:
1. Competitor analysis – We should never underestimate the competitor and should analyse competitor before we bid or approach for any kind of order. They should know what are their offerings, price structure, services offered, value offered and geographic location.

2. Increase Marketing Efforts: The major disadvantage of PVTs lacking in reaching or communicating their product line and service to the clients/customer. They should start PR activities to improve their reach and increase their client relationship as well as customer base. In today’s market they should not rely on only the quality, Sales people contacts and services offered to the customer, rather advertisement / PR activities should drive the customer to approach PVT . There should be a proper line of communication credible source of information and proper way of communication (Internal and external) is needed.

3. Line of Communication: They should also not rely on the information by the sales people which made them react even when the source of information was unethical. Losing a customer like Solar Energy will put their reputation in trouble in the industry. Plan of action to win the current bidding

Since the management is concerned about the decision taken by Solenergy, they should have a casual talk with Morgan and know the exact situation of the bidding. Recommendation for PVT would be to offer its new product, accelerate the introduction of their new 1.25MW model which is 98.5% efficiency. Introducing this new product, might be appealing for Solenergy in all means like efficiency, reliability, service and most importantly price of the inverter which is much lesser than the competitor. Choosing other options like extending warranty to 20 years or offering 99% uptime guarantee at no cost will lead to a lot of disadvantages to PVT to sustain in the market and for future orders as well. Disadvantage by offering Option1:

•  Solenergy will have to pay a high price upfront.
•  Though the quality of the PVT inverter is reliable still PVT will have to increase manpower for the purpose of maintenance.
•  This option will lead to additional expenses and more complications in the future.

 •  Offering this option dilute the market (by increasing the service offered will increase the expectation from customer for every order) and will affect future orders too.

Disadvantage by offering Option 2:

• Unexpected cost from the failure of the product ( due to Climate condition / economic factor / Power source ) can put PVT into huge loss.
• Increasing manpower only for the purpose of maintenance.
• Margin in this offering is also very low for PVT. Orders should not be taken for the sake of reputation.
• Market will get diluted

Overall the competitors can also offer these options (Option 1 and Option 2 – Annexure 1 and 2), as they want to enter the market. Since it will reach a broader segment of people, it will be a value addition for the competitor to offer the same (alternatives), enter the market and acquire a new client. The competitor’s revenue can also increase for the year.

By offering a new product (Option 3) they can regain top standard and reputation, and possibly close the deal with them. However, they need to think of a way in which the acceleration of this product will not hurt them financially and can still be delivered to Solenergy on time and possibly reduce the manufacturing cost. Solenergy too can claim that they were the first ones to employ the latest technology and the most robust management system.

The advantage by offering Option 3 will be that competitor cannot offer a new highly efficient product in such a short span of time. Since PVT is known for its Research and development and product innovation, this would be the ideal option for winning this bid.

Drivers for Renewable energy: Key factors for the competitor to offer a best possible solution.

Market for alternative source of energy is in a growing stage. Rising energy cost, unstable oil market, environmental awareness, tax incentives are the main drivers towards the growth of renewable energy.

Market value for 2010 was $6 billion more than 100% growth from the previous year and the market for solar PV forecasted to increase by 30.4% CAGR for the period of 2010-15. It’s a vision of a federal government to depend on the renewable energy to produce 80% of the electricity by the year 2035.

Around the world, 85% of electricity is being derived from oil, gas and coal and less than 1% are from solar energy, so there is great potential in the market for growth. PVT is a pioneer in renewable energy supply to more than 25 countries with their quality and effective product.

The below calculation are done as per the calculation in the PVT option like the following :

 Total cost of Sale : 60% of the total Project Value
Warranty Expenses & Premium : 18% of the Total Value
Maintenance Contract Income : 8.9% of the Total Value
Gross Expenses – Guarantee : 38.7% of the Total value
Maintenance Contract Expenses : 8% of the Total value
Sales Commission : .4% of the Total Value

Annexure :1
Considering if SOMA uses the alternative
Current
Alternative1

Total Project value
Warranty Premium
Maintenance Contract Income
Total Revenue
Total cost of Sales
Warranty Expenses
Gross Expenses – Gurantee
Maintenance Contract Expenses
Sales Commission
Project cost of sales
Project Gross Profit

17000000

10200000

68000
10268000
6732000

17000000
3060000
20060000
10200000
3060000

68000
13328000
6732000

Alternative2
17000000
1513000
18513000
10200000
6592385
1369444
68000
18229829
283171

Annexure 2:
Considering if the BJ Solar uses the alternative
Current
Alternative1
Total Project value
Warranty Premium
Maintenance Contract Income
Total Revenue
Total cost of Sales
Warranty Expenses
Gross Expenses – Gurantee
Maintenance Contract Expenses
Sales Commission
Project cost of sales
Project Gross Profit

16000000

9600000

64000
9664000
6336000

16000000
2880000
18880000
9600000
2880000

64000
12544000
6336000

Alternative2
16000000
1424000
17424000
9600000
6204597
1288889
64000
17157486
266514