Solar Energy - Canadian Solar

Problem Statement

Solar energy is becoming increasingly popular within the years. Companies have been using this energy for automobiles, calculators, street lights, etc. Established in 8 different countries, keeping its bases in Canada and China, Canadian Solar has been generating strong financial returns. Canadian Solar believes its competitive advantage relies in their Western management and engineering and their low-cost Chinese production base and its strategy is to maintain comparable prices to its main Chinese competitors. However, with the global economic downturn in the recent years as well as changes in the government incentives in certain countries, the company has been struggling to stay on top in this competitive market, and needs to keep a competitive advantage against companies such as Sharp and Kyocera. This is a big problem to the company since it threatens their strategy and might put them out of competition. Which brings us to the question: What should Canadian Solar do to best compete in the increasingly “global” photovoltaic industry?

Analysis

External Analysis

General Environment

Most of the general aspects influence the PV industry relies on government incentive programs. Programs for green energy such as the FIT program, has a positive effect on the industry since it guarantees rates on certain projects. Other government laws such as the placement of a cap can have a negative effect on the industry. Therefore, since income levels vary for every country, this will affect the usage of PV technology. Moreover, society has a desire to “go green” and they highly value PV technology, although the implementation of PV technology can cause society financial harm such as in Spain, where the unanticipated installations caused taxpayers $26.4 billion.

Threat of new Entrants

Barriers to entry are considered low since the PV industry requires low capital and medium to low technological knowledge to make PV module. The low barriers to entry are also due to the large economies of scale in this industry. The major threat of the new entrants is the introduction of new solar modules since it will provide benefits that other existing companies cannot provide, leading to competitive advantage. Also, more new entrants were vertically integrated. The ones that held an inverted vertical integration weren’t considered an immediate threat, opposed to those who specialized in PV cell supplying and customers (i.e project developers). The government regulations also lower entry barriers since it promotes green energy with regulations such as FIT program.

Bargaining Power of Suppliers

the bargaining power of suppliers is relatively low since there aren’t many buyers for their products. Therefore, it is