Case Study: SolarWorld-U.S.A.
LONG HOANG
BPS 4305_503: Strategic Management
Professor Zhiang Lin
Personal Case Study
SolarWorld-USA
SolarWorld was founded in 1975 under the name of Solar Technology International, but the firm did not largely emerge until 1998. SolarWorld was able to penetrate the solar energy market in Germany, which was heavily supported by local government. As a result, the organization developed a fully vertical infrastructure, integrating every aspects of solar production.
Based on the same foundation, SolarWorld opened another full-scale facility in Hillsboro, Oregon in 2008. Just like in Germany, the organization’s operation was endorsed by the US government with enormous capital grants, tax-incentives, low-interest loans and several other favored regulations. However, after three years, SolarWorld had already struggled financially as solar products became more commoditized. The industry had become extremely competitive when new players started to join the market, especially the Chinese. Within 2010 only, Chinese government had invested over $30 billions to their top five solar producers. Funded with such enormous sum, they were able to cut the solar module’s cost by 50 percent. As a consequence, SolarWorld-USA suffered a large deduction in net revenue as they became the victim of price erosion under the Chinese’s rivalry. In addition, the Chinese’s market shares have reportedly been growing more and more. Furthermore, renewable energy is a very niche market. It makes up only 8% of the total energy industry. SolarWorld’s practice, active solar technology, occupies just 1% of the total renewable energy due to its high cost and capital investment. This leaves a big hole for threat of substitutes such as coal, nuclear or natural gas energy, which are mostly the primary choice before renewable energy. Even though SolarWorld has been facing a variety of problems, it still has many advantages, mostly on its home playground, the USA. The organization has
BPS 4305_503: Strategic Management
Professor Zhiang Lin
Personal Case Study
SolarWorld-USA
SolarWorld was founded in 1975 under the name of Solar Technology International, but the firm did not largely emerge until 1998. SolarWorld was able to penetrate the solar energy market in Germany, which was heavily supported by local government. As a result, the organization developed a fully vertical infrastructure, integrating every aspects of solar production.
Based on the same foundation, SolarWorld opened another full-scale facility in Hillsboro, Oregon in 2008. Just like in Germany, the organization’s operation was endorsed by the US government with enormous capital grants, tax-incentives, low-interest loans and several other favored regulations. However, after three years, SolarWorld had already struggled financially as solar products became more commoditized. The industry had become extremely competitive when new players started to join the market, especially the Chinese. Within 2010 only, Chinese government had invested over $30 billions to their top five solar producers. Funded with such enormous sum, they were able to cut the solar module’s cost by 50 percent. As a consequence, SolarWorld-USA suffered a large deduction in net revenue as they became the victim of price erosion under the Chinese’s rivalry. In addition, the Chinese’s market shares have reportedly been growing more and more. Furthermore, renewable energy is a very niche market. It makes up only 8% of the total energy industry. SolarWorld’s practice, active solar technology, occupies just 1% of the total renewable energy due to its high cost and capital investment. This leaves a big hole for threat of substitutes such as coal, nuclear or natural gas energy, which are mostly the primary choice before renewable energy. Even though SolarWorld has been facing a variety of problems, it still has many advantages, mostly on its home playground, the USA. The organization has