First Solar
Strategic Recommendations for
Growth During The Financial Slowdown
William Karpusiewicz
MBA801 – Strategic Management
Dr. Helen Rothberg
18 December 2009
TABLE OF CONTENTS
INTRODUCTION
3
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
TABLE OF CONTENTS
INTRODUCTION
 Executive summary
 Business Case
 Mission
 Vision
 Problem Statement
 Timeline
EXTERNAL ASSESSMENT
MACRO ENVIRONMENT
 Economic
 Political/Regulatory
 Demographic
 Socio-Cultural
 Technology
 Natural Environment
 Global
 The Red Thread of the Macro Environment
COMPETITIVE AND COMPETITOR ENVIRONMENT
 Industry Profile
 Economic Structure
 Industry Life Cycle
 Porter’s Five Forces
 Profit Pool Analysis
 Industry Attractiveness: Red Thread of the Industry Analysis
 Strategic Group Analysis
 Key Success Factors
 Porter’s Competitive Analysis
 The Red Thread for Competitive Analysis
INTERNAL ANALYSIS
 Leadership and Culture
 Organizational Structure
 Value Chain Analysis
 Resources, Capabilities and Core Competence
 Financial Analysis
 Red Thread of the Internal Audit
STRATEGIC RECOMMENDATIONS
 SWOT Analysis
 SWOT Strings
 General Strategic Orientation
 Grand Strategy Clusters: Attractiveness
 Grand Strategy Selection Matrix: Investment
 Strategic Recommendations
 Managerial Implications
 Competitor Implications
REFERENCES
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
INTRODUCTION
Executive Summary
This report details the solar energy industry, an industry that is poised for enormous
growth. As one of the sources of Renewable Energy, the solar initiative finds itself at a
disadvantage based in the perception that it is the most expensive in terms of cost per
watt of energy produced. Photovoltaics, based on silicon grade semiconductor materials,
absolutely meet this perception. But thin film photovoltaics, the Holy Grail of the Solar
Industry because they are not based on expensive silicon, have been slow to come to
market. That is, before First Solar. First Solar has put the solar energy industry on notice
that they are a low cost supplier of electricity and they have built in plenty of
manufacturing capacity to meet demand. The following report details the industry and
First Solar, the competition and the facts. An industry bent on growth, the global
recession of 2008 has set back the solar energy industry and transformed them from a
under supply market to an oversupply market. Normally, this would crush most
companies as the weight of unfulfilled orders would stop production lines and result in
heavily discounted products. But this has not been the case at First Solar. First Solar has
taken the necessary steps to build capacity but to also find an outlet for the capacity. The
net result is that they are the market leader and their stock today trades at nearly 9 times
greater than their competitors. But First Solar needs strategic direction…and to do this a
full SWOT analysis was conducted and the SWOT strings point to concentrated growth
strategies needed for the future. The recommendations for expanded manufacturing and
new markets are a direct result of this analysis that also includes managerial and
competitor implications. First Solar is poised for future greatness and needs a stable,
strategic game plan, especially in t he economic downturn, to achieve it.
Business Case
The business case for renewable energy is one of first a consciousness that renewable
energy has advantages for them. Many companies are starting to realize that energy from
renewable resources is increasingly available and cost-competitive. For instance, 20
percent of Starbucks Coffee stores in the United States use green power, and IBM
extracts over 100 million kWh per year from renewable energy. Companies are
discovering that there can be a strong business case for using renewable energy or “green
power,” and are seeking to obtain associated business benefitsi. Some of those benefits
are soft benefits. Renewable energy can strengthen a company’s relationships with its
various stakeholders like customers and local communities by signaling that it cares
about climate-related risks. This is one of the reasons why firms such as FedEx Kinko’s
and Staples use renewable energy in many of their storesii. But others use renewable
energy as a means to reduce overall costs, emissions and to hedge against the high price
of fossil fuels.
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
An important concept is the perception of cost and payback as most feel that renewable
energy is not cost competitive. It’s a question of Return on Investment:
With a combination of city, state, and local incentives, homes and businesses
in New York, New Jersey, Delaware, and Colorado can make all their money
back from a solar installation in three years.
The new hot market for solar electricity is Pennsylvania with incentives
covering 60% of the installation cost.
Solar hot water is now a one-year payback in Florida and southern Texas.iii
In 2008, the global solar market increased 50% and the US advanced to third position
globally. The market demand for solar power has grown an average of 30% per year for
the last five years. The US government has just changed the solar tax credit to a solar
grant, funded by the federal stimulus bill. Additionally, hundreds of states and
municipalities have launched their own incentives on top of this federal grant. New
Jersey, Pennsylvania and others are throwing fuel on the solar fire with generous
incentives that are driving adoption at faster rates per capita than California. Global
Solar Center has conducted a 50-state survey of solar incentives and adoption, which has
revealed surprising results. States that were solar laggards have now become solar
leaders. “With incentives on the federal, state and local level along with the support and
expertise offered by our members, like Global Solar Center, this is a great time to go
solar,” said Monique Hanis, spokesperson for the Solar Energy Industries Association
(SEIA) in Washington, D.C. iv
The business case for renewable energy sources is a well documented. Through the
Recovery Act, President Obama is investing more than $80 billion in clean energy. This
money is putting tens of thousands of Americans to work in developing new battery
technologies for hybrid vehicles, making our homes and businesses more energy
efficient, doubling our capacity to generate renewable electricity, and building a smart,
strong, and secure electricity delivery system.v In addition to being a cornerstone of US
Energy Policy, earlier this year, analyst Adam Morehead said, “We need to further
develop our ability to capture solar energy while avoiding unsustainable manufacturing
materials”vi This is the crux of the renewable energy conundrum. The key will be to be
able to not only make renewable energy affordable to manufacture and install but to be
able to use and recycle materials in the process of producing that energy. This will have
the most profound impact on reducing costs and impacting the environment.
Mission
To create enduring value by enabling a world powered by clean, affordable solar
electricityvii.
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William Karpusiewicz
MBA 801 Fall 2009
Vision
First Solar, Inc. (Nasdaq:FSLR) manufactures solar modules with an advanced thin film
semiconductor process that significantly lowers solar electricity costs. By enabling clean
renewable electricity at affordable prices, First Solar provides an economic alternative to
peak conventional electricity and the related fossil fuel dependence, greenhouse gas
emissions and peak time grid constraints.viii
Problem Statement
In a market that has gone from under supply to over supply, how can First Solar continue
to lower the cost of solar modules to gain a dominant position in the market and grow as
a company while the industry is in an oversupply situation?
Timelineix
1990 – Harold McMaster started Solar Cells Inc. experimenting with different ways to
put photovoltaic materials on glass. John Walton (of the Wal-Mart family) was an early
investor.
1999 – McMaster sells Solar Cells to an investment firm headed up by Walton. The firm
is reincarnated as First Solar.
2000- First Solar is moving ahead with thin film photovoltaics based on Cadium
Telluride (CdTe).
2002 – First Solar makes their first commercial product available from their Perrysburg
Ohio Mfg facility.
2005 – First Solar is up to 25MW of production capacity and has started construction on
their Ohio plant expansion.
2006 – Ohio Plant produces 75MW of capacity. Construction started on Oder, Germany
facility
2007 – Announce expansion into Malaysia of $150 Million USD in additional capacity
2008 – Malaysian expansion to 768 MW of capacity distributed over 4 plants
2009 – First Solar achieves over 1 Gigawatt of production capacity. Reduced
manufacturing costs of < $1 per watt are the lowest in the industry.
EXTERNAL ASSESSMENT
Macro Environment
Economic
The U.S. economy has started to recover from a recession that many economists believe
officially started in December of 2007.x This recession, which has had a major impact on
credit and the ability to get credit to finance projects, has significantly affected the
Renewable Energy sector. To remedy this, President Obama passed the Stimulus Bill in
early February 2009 that includes provisions that will jumpstart greatly the renewable
energy industry and particularly the solar energy segment.xi
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William Karpusiewicz
MBA 801 Fall 2009
The first sections of the bill extend the production tax credit (PTC) and offer the ability
for developers to take the investment tax credit (ITC) in lieu of the PTC. The industry
will also get what it has been advocating for since January — monetization of the tax
credits in the form of grants. Because of current market conditions, it is difficult for
many project developers to find financing due to the uncertain future tax positions of
potential investors in these projects. The bill would allow facilities to elect to claim the
investment tax credit in lieu of the production tax credit. This proposal is estimated to
cost US $285 million over 10 years. Current economic conditions have severely
undermined the effectiveness of both the PTC and ITC, so the bill would also allow
taxpayers to receive a grant from the Treasury Department in lieu of tax credits. This
grant will operate like the current-law investment tax credit. The Treasury Department
will issue a grant in an amount equal to thirty percent (30%) of the cost of the renewable
energy facility within sixty days of the facility being placed in service or, if later, within
sixty days of receiving an application for such grant. An applicant will qualify for a grant
if an application is received by September 30, 2011. The amount of money that will be
made available for this program is still unknown xii partly due to the difficulty in
estimating how many people or businesses will take advantage of it. If the program has
intrinsic value like the “Cash for Clunkers” program, then monies will be made available
and a second round of extended funds could even be afforded.
In addition to those measures, manufacturers in the wind, solar, storage, efficiency and
transmission spaces will be able to take advantage of a new 30% tax credit designed to
benefit manufacturers of advanced energy property. Caps on the tax credits for residential
solar hot water, geothermal heat and small wind systems will be removed under the new
bill as wellxiii.
For homeowners and businesses alike that may entertain the idea of using renewable
energy, most of the fundamental decision making is economic and rooted in affordability
and payback.
Political / Regulatory
The current stimulus bill (The American Recovery and Reinvestment Act of 2009), an
outgrowth of the economic difficulties during the former Bush administration among
them the skyrocketing cost of oil ($147.02 per barrel July 11, 2008xiv), makes provisions
for renewable energy. These Bush administration events set in motion demand for
alternative energy and became a rallying cry during the 2008 McCain Obama presidential
campaign.
Prior to this, there have only been a handful of energy legislative acts xv and most have
been reactionary to events or crisis of the time. In the 1920’s and 30’s, the acts were
related to the sale of electricity and hydro electrics. In 1946 and 1954, the Atomic
Energy Act paved the way for commercial nuclear power. It wasn’t until our mid 70’s
OPEC oil crisis that Energy Conservation and Policy act develop fuel economy standards
and the Strategic Oil Reserve. In 1977 the Department of Energy was formed and in
1978 is the first legislation in the National Energy Act, which makes provisions for an
electric market from alternate power producers. The 1980 Energy Security Act puts the
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
first face on Renewable Energy including Solar. Aside from the 1982 Nuclear Waste
Act, and the 1992 Energy Policy Act regarding alternative fuels for government vehicles,
nearly 25 years goes by to 2005 that Energy legislation appears again. This is partially
because states individually took on a more empowered role in the development of energy
and incentive policies, like California in 2007 with their Million Solar Roof Initiativexvi.
Today renewable energy incentives vary from state to state, with states like California,
New Jersey, Pennsylvania and Florida leading the way for introduction.
Demographics
Fossil fuels (coal, natural gas and petroleum), which account for most of the energy
consumed in the U.S., claim crude oil petroleum as the largest single source of energy. In
fact, the U.S. as a whole is the largest user of crude oil petroleum at 19.498 Million
barrels per dayxvii. The chart below details U.S. Consumption by Energy Source:
Renewable energy represents the smallest segment with Solar only 1%.
Socio/Culture
The U.S. people as a whole have experienced a number of times of economic crisis
brought on by oil embargos, political unrest or an act of God (Hurricane Katrina) that has
adversely impacted U.S. way of life either economically or in restriction of freedoms.
This has spurred on a conscious movement (along with the concepts and publicity of
global warming (from former VP and alarmist Al Gore who I always see driving a large
limousine to his Global Warming Presentations), greenhouse gases, the thinning ozone
layer, and the Kyoto Protocol (chlorofluorocarbon ban)) of becoming more “green”,
reducing one’s carbon footprint and contributing towards helping the environment. This
climate has spurred the development of hybrid gasoline/electric cars with improved fuel
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
economy that cost more to buy but have a willing clientele who pay for the upgrades.
The American people, who may not be fully cognizant of the ramifications of Renewable
Energy, are full engaged and are culturally adept at understanding that actions that they
take locally have a true impact globally.
Technology
The technology of Renewable Energy is based on using what the environment provides
and transforming it into a usable entity. Each and every form of Renewable Energy
proscribes to this philosophy, whether its natural steam well caverns for geothermal
energy in Iceland, the windy shores of Lake Michigan for Wind Power or the scorching
California sun for Solar Power. Key is that the power generation source does not alter
the environment…so the hydroelectric turbines at the bottom of Niagara Falls don’t turn
if the water level is low or the feeding river is frozen. This makes the technology of
delivered power susceptible to changes in the environment; this does not exist with fossil
fuels, which burn as long as they are present. It also makes Renewable Energy in total
somewhat less reliable. That being said there is still a significant role for Renewable
Energy because each percentage of alternative energy reduces the dependence on crude
oil and petroleumxviii.
The Solar Power Renewable Energy is based on two concepts: either the use of
photovoltaic materials which by their nature have the capability to transform sunlight
energy into electricity (flowing electrons) or the concentration of the sun’s rays to heat
water, make steam or drive a turbine. Solar concentration is normally relegated to either
a commercial supply plant or to home hot water heating systems. Photovoltaics are more
widespread in use and have the ability to provide direct electricity at the point of usage,
like at a house for any electric need. Photovoltaics, or PV for short, are an incredible
field of science in and by themselves.
Within the realm of Photovoltaics, the science is further divided into two different
material types, silicon and non-silicon. One of the best photovoltaic materials known to
man is silicon. An abundant material in nature, a purified grade needs to be used in order
to be an effective energy producer. Since this same purified grade is also used for
semiconductor computer chips, the best grades of material are reserved for
semiconductors and the lesser grades are used for photovoltaic. This makes solar power
tied to the material flow and general availability of purified silicon. The second material
type, non-silicon, is photovoltaic that are based on thin films of exotic metals, which in
certain combinations exhibit photovoltaic nature. Although the metals used are rare, the
overall cost factor compared to purified silicon is a fraction of the cost. Thin films
essentially represent the Holy Grail of Photovoltaics.
Natural Environment
Renewable energy represents the ingenuity of mankind to use his surroundings to the best
possible use without being destructive to those surroundings. Unlike strip mining coal or
cutting down forests of trees, solar, wind, geothermal, hydroelectric and biomass energy
sources do not tear down or cause any ill effects to the surroundings. Since these energy
production sources coexist with nature, they are fondly looked upon as sources of energy
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
that shine as samples of a humanity not pillaging the earth. Unfortunately, the aggregate
amount of energy produced today is small and until more renewable energy installations
are made (at albeit a somewhat higher cost than fossil fuelsxix) it will be considered to be
a minor contributor.
Global
Renewable Energy represents a global phenomenon similar to what was seen in the world
with the usage of cell phones. The western world, with a high degree of infrastructure,
transmission wires and fiber optic cables was the last to adopt cellular phone usage
because it had a high degree of infrastructure. The eastern and third world locales readily
accepted cell phones as it brought mass communication because of their lack of
infrastructure. Renewable Energy can be thought of similarly. A wind turbine in a desert
village can provide all the electricity they need to run lights, water pumps and all
household items. There is no need for a power generating station and high-tension
transmission lines. That commune in southern Africa can now have all the power they
need from just a few solar panels and minimal storage batteries. In these applications
Renewable Energy represents a major dislocation and an opportunity for the lesser global
communities to have a higher standard of living while providing no negatives to their
surrounding environment.
Here is further evidence just in the Solar Power venue. The world leader in installed PV
market share is Germany with 43% and Europe overall has 65% market share. The US
Market share is 18% and Japan and the rest of the world (including China, one of the
faster growing locales) is 16%.xx
The Red Thread of the Macro Environment
With the “green” sentiment running high and the infusion of capital from the latest
stimulus package, the opportunity for the expansion of the renewable energy market has
never been greater. Each one of the industries has important considerations, but the Solar
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Energy market has lagged behind and is ready to take off. The question will be can
manufacturers produce products low enough in cost that they can gain traction on their
own without incentives.
Competitive Environment
Industry Profile
The Photovoltaic or PV industry is one that has been experiencing significant growth.
Fueled by government incentives, the rising cost of energy during the Bush
Administration, and the growing concerns over global warming and greenhouse gas
impact on the climate, the PV industry in the United States experienced two consecutive
years of enormous growth from 2005 to 2007 that resulted in a 10X increase in the
industry since 1998xxi. In addition, the number of active PV manufacturers and/or
importers that ship PV cells and modules increased from 41 companies in 2006 to 46
companies in 2007. These new companies increased overall PV production to meet the
expected increase in demand internationally.xxii The following chartxxiii shows PV cell
and module shipments from 1998 to 2007:
Not including solar concentration products, PV cells and modules are divided into two
main categories by product type: (1) crystalline silicon, a type of photovoltaic
cell/module made from a wedge of single-crystal or polycrystalline silicon, based on
crystal-producing processes such as single-crystal, cast, and ribbon; and (2) thin-film,
photovoltaic cell/module made from layers of semiconductor material, such as
amorphous silicon (a-Si), cadmium telluride (CdTe), or copper indium gallium selenide
(CIGS)xxiv. The following chart shows shipments of the two different types of PV since
1998xxv. Note the growth in the thin film segment since 2004.
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
The explosive growth of PV led to silicon price destabilization and raw material
shortages. The result has been an opportunity for the thin-film market companies to
create new innovations to close the gap between thin-film PV and conventional
crystalline silicon PVxxvi.
Economic Structure
As stated before there are 46 companies producing photovoltaic cells and modules to the
industry. Of those, 10 companies hold 60% of the total market share with First Solar having
the largest single market share of 12.8%. The other significant players in the industry are
Suntech, Sharp Electronics, Q Cells, Yingli Green Energy, JA Solar, SunPower, Kyocera,
Motech Industries and Gintech Energyxxvii. Here is the top 10 by share:
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Supplier
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Besides First Solar which has about the twice the market share of the next competitor, the
other 9 nine firms have nearly the same share between 4 – 6%. Part of the reasoning is
that firms like Suntech who are dependent on silicon may be restricted to access unless
they vertically integrate. First Solar uses thin film technology that does not rely on
silicon.
From McKinsey’s report on the Economics of Solar Energyxxviii, solar power faces
challenges common from emerging industry sectors. An important aspect in this segment
is the ability to continue to drive down costs. By reducing manufacturing costs and
improving the product while maintaining a strong raw material supply a low cost supplier
will emerge.
Industry Life Cycle
All product life cycles are comprised of four main stages: introduction, growth, maturity
and decline. xxix The solar power industry life is clearly in its infancy. The Solar Energy
Industries Association (SEIA) provides evidence of the industry growth with
-- Overall 16% growth in capacity1,265 MW and MWTh added in 2008
-- Cumulative capacity now 9,183 MW and MW
-- Overall 9% increase in annual capacity additions81% growth in on-grid PV
installations
-- 50% growth in solar water heating installationsxxx
The SEIA also shows the cumulative growthxxxi over the past 8 years confirming the
notion that the solar energy industry is on a path of great growth.
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William Karpusiewicz
MBA 801 Fall 2009
But it’s McKinsey’s report on the Economics of Solar Powerxxxii that forecasts that solar
power, long derided as uneconomic, is gaining ground as technologies improve and cost
of traditional energy rises. They forecast that by 2020, global installed solar capacity
could be 20x to 40x today’s capacity. The McKinsey forecast, year by year:xxxiii
Porters Five Forces
The solar energy industry, which has already experienced substantial growth, is on the
precipice of unprecedented growth. With any industry in this phase, there will be a
scramble for companies to invest and make a play for leadership based on low cost,
technologically advanced products before consolidation occurs and the largest players
emerge. Initially fueled with government incentives, the success of the industry will be
truly gaged as incentives disappear and a competitive cost energy source takes hold.
The Threat of Entry – High: With the number of PV Manufacturers increasing from 41
to 46 between 2006 and 2007xxxiv, it is clear that the threat of entry is high in the industry.
Companies joining the industry would most probably shy away from silicon based PV as
the material is in short supply and the cost to vertically integrate is very high. But, thin
film PV carries a lower raw material cost and in some cases a significantly reduced
manufacturing cost a (see Nanosolar xxxvor First Solarxxxvi). In addition, companies that
are fundamental in semiconductor computer chip production, particularly advanced tool
vendors like Applied Materials, Veeco and Rigaku have made their way to the PV
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MBA 801 Fall 2009
manufacture table. These companies have the tooling and expertise to do everything
from manufacture in turnkey systems to Metrology (Quality Control Testing). With
forecast growth this number of entrants will only grow.
Bargaining Power of the Supplier – Moderately Low: The bargaining power of the
supplier with respect to the solar energy industry can be considered low. The general
products of the industry are solar cells and modules and although there are efficiency
differences between them the only real difference comes to supply and the final size of
the installation. By and large the solar components are more similar, even in appearance
than not and many times it’s a question of availability at the time a project is being done.
Suppliers who have generally low bargaining power are considered to be good for the
overall business/industry.
Bargaining Power of the Buyer – Moderately High: The bargaining power of the buyer
for the solar energy industry is moderately high. Although the buyers are buying a single
entity, solar panels or solar modules, they still have a wide choice of suppliers to choose
from. They can also choose to subcontract any portion of an installation, making their
power to demand to schedule much higher.
Solar energy companies commit to supplying projects that are fueled by capital money.
If at any time they cannot close a commit, projects can be bought or sold not unlike
trading done in the Engineering Project Management Field (CE Lummus, Foster
Wheeler, Bechtel, for example).
Threat of Substitutes – Moderately Low: The threat of substitutes to the solar industry is
moderately low based on the application. For example, roof mounted PV on a residential
home typically does not have a substitute as a wind power or geothermal option generally
doesn’t exist in a residential neighborhood. However, at the utility scale level a
commercial wind farm could definitely serve as a threat to a solar installation based on
the weather and airflow conditions.
Rivalry Among Participants – Moderately High: The rivalry among the participants in
the solar industry is moderately high given the fact that 9 of the top ten suppliers have
market share numbers within a whisker of each other between 4 and 6%.xxxvii This makes
for a very intense rivalry among the participants meaning that they will need to
differentiate themselves from their competitor in order to survive and win. In the solar
energy industry, that means driving down costs of solar cells and modules to win
projects. In a time when capital spending has significantly tightened and the industry in
and by itself is facing an oversupply situation because of less ongoing projects, those
companies with the lowest cost structures will be the survivors and winners.
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William Karpusiewicz
MBA 801 Fall 2009
Profit Pool Analysis
The profit pool analysis presented looks at the value chain of the infant solar energy
industry. Because the industry uses two different technologies, silicon and thin film
technology, the profit pool analysis cuts across a value chain that has to necessarily
encompass both competitive positions. To develop this analysis, the two articles by
Gadiesh and Gilbert are used as the cornerstone as they present the fundamental business
concept of “Profit Pools” through case study and strategy discussionxxxviii.xxxix
Assumptions
In order to develop a coherent Profit Pool Analysis, the value chain was reduced to four
components – the silicon raw material industry which encompasses the silicon raw
material, ingots and wafers used for the PV industry, the solar cell and module
production, the solar module installation and miscellaneous maintenance and service
costs. The year used was 2007, a year where all of the information could be retrieved. In
2007, the size of the Solar Energy Industry Profit Pool was $7.7 Billionxl. The silicon
raw material industry was based on 3 Gigawatts of silicon delivered to the PV industry in
2007 at a nominal rate of $4500 of silicon per kilowattxli. That year was a down year for
silicon with only 10% profit margins (normally upwards of 30%)xlii. PV cell and module
production was 4.2 Gigawatts at a nominal cost of $4 per wattxliii. Net profit for the
industry was based on First Solar’s year, which was typical at 30%xliv. The same margin
was assumed for the installations. In 2007, 2.826 Gigawatts was installed (note the
almost 1.4 gw inventory) at a rate of $1/Wattxlv. The balance of the profit picture went to
miscellaneous maintenance and service.
2007 Profit Pool Analysis for the Solar Energy Industry
70
% Profit Margin
60
50
40
30
20
10
0
Silicon Raw
Material
Solar Cell and
Module
Production
Solar Module
Installation
Maintenance and
Service
% of Total Industry Revenue
The chart shows that solar cell and module production comprised the largest single
portion of the profit pool at 65.5%. The silicon raw material had the second highest level
of profit at 17.5%. Remember that the thin-film PV companies do not use silicon and yet
silicon is positioned as an enormous profit portion of the industry. That is partially
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MBA 801 Fall 2009
because of the fact that silicon is in short supply and in the coming years the industry is
expected to meet the shortages with increased supply. The profit from solar module
installation is expected to decline in time as the experience base in installations goes up.
Longer-term maintenance and service, which represent a small portion of the profit
picture today, will increase as the installations age.
Red Thread for the Industry Analysis
The solar energy industry is in its early stages of growth with many players, a lot of
uncertainty and no set direction for mass introduction. The industry has been fueled by
government incentives, which help place many more units in the field. This in turn
drives down costs and increases the level of competition amongst the survivors. Coupled
with a global economic downturn, the industry with 50% of the installed costs needing to
be up frontxlvi is facing serious challenges as project financing dries up and an oversupply
of modules exists.
Strategic Group Analysis
The strategic group analysis drawn below is a product of the value chain analysis that
these companies provide. As expected, the group map does contain some of the top 10
PV suppliers but also includes lesser companies whose unique strategy allows them to
provide diversity in the industry. Pertinent to the solar energy industry, the strategic map
drawn shows the reliance on silicon based PV as the domain and the company’s degree of
value chain service that company can provide as the range.
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MBA 801 Fall 2009
Key Success Factor Analysis (KSF)
In this Key Success Factor Analysis, the top two solar energy PV companies and two
other companies in the top ten were analyzed against factors which are make or break in
the future success of the firm in this industry.
The most important KSF is the ability to provide flexible low cost solutions for energy
projects. Energy projects are funded by some form of financing, whether it’s a second
mortgage from a residential lender or venture capital funding power for a village, the
bottom line is going to be cost because 50% of the project costs are tied up in the actual
solar module materialsxlvii. In order to be able to attract customers, often time’s suppliers
need to be the lowest cost option. In this analysis, First Solar’s CdTe thin film modules
are hands down the lowest cost option as compared to Suntech, Yingli Green Energy and
JA Solar who use silicon based cells, which may be more efficient but also cost
significantly more.
The next important KSF is the ability to manage the project from inception to startup.
First Solar, Suntech, Yingli Green Energy and JA Solar all have similar capabilities.
Vertical integration in solar modules is important for the completion of projects.
Companies that are dependent on other suppliers for modules are subject to delays in
completing granted projects. Again First Solar, Suntech and JA Solar have similar
resources. Yingli Green is vertically integrated in silicon production and can sell what
they produce relying on no middleman.
Lastly, the ability to adapt to the infrastructure makes not only for a smooth project but
also for easy maintenance and service longer term. All solar companies are challenged
by new surroundings, so First Solar, Suntech, Yingli Green and JA Solar have similar
scores.
Scale: 1 is low, 5 is high
First Solar’s position is strong based on the fact that they have invested in low cost
vertically integrated solutions, have excellent project management experience and have
been involved with many projects. Their KSF score is what we would expect for a
market leader. Key for First Solar will be how can they sustain their growth and top
position in the face of daunting economic conditions for project financing.
Page | 17
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Porter Competitor Analysis
First Solar
Suntech
Yingli Green
Energy
JA Solar
Goals
 To create enduring
value by enabling a
world powered by
clean, affordable
solar electricityxlviii
 To be a world
leading solar
energy companyl
 To commit ourselves
to the great and
splendid solar energy
causeli
Assumptions
 PV based on CdTe
Thin Film
Technology
 To be the lowest
cost provider of PV
 CdTe will gain
world acceptance
 Committed to
delivering
alternative energy
choices through
lasting
partnershipsxlix
 PV based on silicon
 Traditional silicon
manufacture
techniques for solar
cells
 PV based on silicon
 Constantly
improving
efficiency to gain
market share
 PV based on silicon
Capabilities
 Low cost
manufacture
process
 Economies of scale
 Innovative R&D
program provides a
sound crystalline
technology road
map
 Technically
Advanced
 China Based
 Vertically
Integrated in
Silicon
 Uses less expensive
lower grade silicon
 Capable of
Diversifying
Strategies
 Expanded NonSilicon
Manufacturing
Capacity Fast
 Low Cost
Manufacturer
 Can aggressively
load project
schedule
 Grass Roots
Residential Plan
 Reduce Module
costs further
 Protect the
Environment
 Cutting costs always
takes priority
 Reducing material
use
 Develop third
generation thin film
technologylii
Satisfied
Position?
 Yes but wants to
wants to gain more
market share and
provide shareholder
value
 Larger Project
Work
 Expansion to India
 US Expansion
 Cd Toxicity
 Supply of
Tellurium
 Third world politics
 Expand Capacity
 Reduce Costs
 Improve efficiency
 Clear road map to
increase efficiencies
to 20%
 Improving
Encapsulation
Technologies
extending module
life
 Develop thin film
PV based on silicon
 No – wants to
become market
leader
 No – wants to be
world leader
 No – limited to
regional distribution
 M&A to grow
 Seek strategic
partnerships
 Silicon base
 China Focused
 Diversify into thin
films
 Seek strategic
partnerships
 China based
 Takeover Target
 Merger
 M&A
Likely
Moves?
Where
Vulnerable?
Action to
Invoke
Retaliation?
 Expand Capacity
 Diversify
Page | 18
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Red Thread for the Competitive Analysis
The competition sees the advantage of a non-silicon based entity for costs and capacity.
The question is whether or not they can deploy as quickly and catch up to First Solar who
has installed an enormous amount of capacity to anticipate growth. The net may be a
consolidation of some of the industry leaders to catch up to First Solar who have made all
of the right moves so far.
INTERNAL ASSESSMENT
Leadership and Cultureliii
First Solar’s Executive Leadership cuts across a vast experiential level that includes top
industry firms like Intel, Honeywell and GE and Top University’s like MIT. Three key
players are Michael Ahearn, Rob Gillette and Bruce Sohn.
Michael J. Ahearn serves as Executive Chairman of First Solar and served as CEO from
August 2000 to September 2009. Prior to First Solar, he was Partner and President of the
equity investment firm, JWMA (formerly True North Partners, L.L.C.), the majority
stockholder of First Solar. Prior to joining JWMA, Mr. Ahearn practiced law as a partner
in the firm of Gallagher & Kennedy.
Michael has served on the boards of Arizona Technology Enterprises, Arizona State
University Research Park, Homeward Bound, and the Arizona Science Museum and
currently serves on the board of the German Marshall Fund of the United States. He
received both a B.A. in Finance and a J.D. from Arizona State University.
Rob Gillette joined First Solar in October 2009 as Chief Executive Officer. Prior to
coming to First Solar, Mr. Gillette served as President and CEO of Honeywell Aerospace.
He joined Honeywell in 1996 and has served in a number of senior management
positions, including President and CEO of Honeywell Transportation Systems, President
of Honeywell Turbo Technologies, and he also served the Turbo business as Vice
President of Strategic Growth and Vice President/General Manager, Asia. Prior to joining
Honeywell, Mr. Gillette spent over 10 years at General Electric where he served in
numerous senior management positions. Mr. Gillette holds a B.S. in finance from Indiana
University.
Bruce Sohn joined First Solar in February 2007 as President. Mr. Sohn was formerly a
senior executive at Intel Corporation and has served on First Solar’s Board of Directors
since 2003. He was a technical and managerial consultant to the company prior to joining
the management team.
Mr. Sohn is responsible for technology development, manufacturing, expansion, quality,
EHS, supply chain, MIS and worldwide human resources. He heads operations for First
Solar’s module business; systems engineering, procurement and construction business;
and monitoring & maintenance business.
Page | 19
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
During his 24 years at Intel, Mr. Sohn played a leadership role in developing and
manufacturing leading-edge semiconductor technology. He designed an early generation
transistor and spearheaded initiatives in cycle time reduction and automated operations.
He served as an integral part of the start-up team at five Fabs, was program manager for
Intel's conversion to 300mm wafers and managed Intel's two largest Fabs.
Mr. Sohn is an engineering graduate of the Massachusetts Institute of Technology, is a
certified Jonah and has been a guest lecturer at several universities including MIT and
Stanford. He has published research in a variety of high technology topics including:
applying constraint theory to semiconductor process lines, high-volume factory design,
silicon surface defects, oxygen gettering, gate oxide quality, transistor design and
statistical design of experiments.
First Solar’s depth at the top is evident and what would be expected of a top market share
company.
Organizational Structure
First Solar Inc. is a C corporation. Originally operated as a Delaware limited liability
company from 1999 until 2006, First Solar, Inc. was then incorporated in Delaware on
February 22, 2006.liv In February 1999, Harold McMaster sold the company to True
North Partners, an investment arm of the Walton family, owners of Wal-Mart. John T.
Walton joined the Board of the new company, and Mike Ahearn of True North became
the CEO of the newly minted First Solarlv. As the company developed, its leadership
under Ahearn took shape and today’s current management team is shown below.
Page | 20
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Value Chain Analysis
The PV industry has an expansive value chain and a number of fervent competitors.
Below is a chart of some of the companies and what they deliver in the value chain:
In the PV Industry Value Chain, First Solar is part of the largest portion of the profit pool
as a solar cell and panel module supplier.lvi Specifically, their expertise lies in the
capability to be a low cost manufacturer, to build capacity and establish a healthy
pipeline of projects to direct the manufactured capacitylvii.
Page | 21
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Low Cost Manufacturer
First Solar has done an excellent job becoming a low cost manufacturer. To start, their
solar photovoltaic technology is based on a thin film technology that does not use
crystalline silicon (except for tempered glass). That means the cost structure of the cells
they produce is not subject to changes in the semiconductor industry or how quickly the
silicon industry can ramp up to meet PV demand. The thin film technology chosen,
Cadmium Tellurium (CdTe) is unique in that the tellurium is a waste stream from copper
processing. Their vertically integrated manufacturing process produces completed solar
modules in 2.5 hours.lviii Below are some of the key design features that set First Solar
apart form the competitionlix:
The result of these features and First Solar’s relentless drive to reduce costs was the
lowest cost to manufacture a solar module at 85 cents per watt achieved in 3Q 2009.lx
Page | 22
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Building Capacity
As other PV firms were deciding on how to build their business, First Solar aggressively
expanded their business searching out partnerships in areas of prime business (like Oder,
Germany) and seeking out places for low cost production (like Malaysia). The result has
been a value chain based on high volume, low cost that leads the industry. The chart
below summarizes First Solar’s expansion from small time operation in Perrysburg Ohio
to manufacturing juggernautlxi.
From PV-Tech.org, “First Solar’s annual nominal production capacity will double in
2009 to a planned 1.1GW as manufacturing plants, specifically in Malaysia ramp to full
production. Plants 3&4 in Malaysia are now ramping, with capital spending expected to
be between US$270 and US$300 million, which is targeted at plants 3 and 4, and
expansion at its existing plant in Perrysburg, Ohio. Each of the Malaysian plants or lines
has a nominal capacity of approximately 190MW. With over 1GW capacity, First Solar
can leverage the cost of materials and productivity improvements to a much greater
extent than in previous years, giving it the confidence that the cost per watt goals
internally set could well be exceeded.”lxii Key to their expansion is the fact that the
company has not only developed a process with its own machinery that can churn out
high volumes of cells but that they can replicate those factories to rapidly expand
capacitylxiii.
Project Pipeline
First Solar built in the capacity to manufacture a gigawatt of solar module capacity. But
they also developed a multigigawatt project pipeline to place those modules. Earlier this
year First Solar purchased OptiSolar outright including their solar project pipeline:lxiv



A 550 megawatt (MW) AC solar development project under a power purchase
agreement with PG&E
A project pipeline of additional 1,300MW AC which are in negotiation with
Western region utilities for solar development projects
Strategic land rights of approximately 136,000 acres (approximately 210 square
miles) with the potential to deploy up to 19 gigawatts (GW) AC of utility-scale
solar power projects
Page | 23
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Core Competence, Capabilities and Resources
Core Competence
First Solar’s core competence is in manufacturing and manufacturing optimization.
Through trade secret they have developed proprietary machines and processes to
manufacture a non-silicon crystal thin film solar module. They have developed acumen
to optimize the process. And they have developed core expertise to replicate the process.
This core competence is what sets them apart from their competition. The fact that they
can expand at will and produce the virtually identical product is the same core
competence that made McDonald’s great.
Capabilities (Taken from the most recent 10-K Filing)lxv
First Solar designs and manufactures solar modules using a proprietary thin film
semiconductor technology that has allowed them to reduce average solar module
manufacturing cost to among the lowest in the world. The solar modules are manufactured
on high throughput production lines and First Solar performs all of the manufacturing
steps in an automated, proprietary continuous process which eliminates the multiple supply
chain operators and expensive and time consuming batch processing steps used to produce
a crystalline silicon solar module. Solar Modules are produced in Perryburg, Ohio, Oder
Germany and Kulim Malaysia. Research and Development is primarily done at the
Perrysburg manufacturing facility. The objective of R&D is to lower the per watt price of
solar electricity from their modules by increasing the conversion efficiency of the modules
and optimizing the cost and other components in the PV system.
First Solar provides a complete solar power system solution including deployment of
modules and balance of system components procured from third parties. They also sell
solar power systems directly to system owners including components such as land for
building systems, engineering permits, construction management, maintenance and
monitoring.
Tangible Resourceslxvi
Protection of First Solar processes, methods and other technology, especially their
proprietary vapor transport deposition process and laser scribing process is critical to
their business. Failure to protect and monitor use of the proprietary intellectual property
could result in loss of valuable technologies and competitive advantage. In the U.S., First
Solar holds 23 patents that expire between 2009 and 2026 and have 37 patents pending.
Internationally, First Solar holds 17 patents and has 70 patents pending.
Intangible Resources
First Solar relies on patents, trademarks, trade secrets, copyrights and other contractual
restrictions to protect their intellectual property. First Solar also relies on unpatented
proprietary manufacturing expertise, ongoing innovation and other trade secrets to
develop their competitive advantage. Failure to protect these secrets would adversely
affect First Solar’s market position.
Page | 24
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Financial Analysis
The solar energy industry is made up of some brand new, venture capital staked entities
like First Solar, Nanosolar and Miasole and other well established corporations like BP,
Sharp and Kyocera. As a matter of competitive comparison, I looked at the financials of
First Solar compared to some other firms in the top ten that were used in the previous
comparisons…Suntech, Yingli Green Energy and JA Solar. The chart below from data
gathered at Wikinvest shows the size of the companies by market capitalization and other
ratios looking at valuation, profit, business strength and investment returns.lxvii
First Solar dwarfs the other companies in size at 5 times largest its nearest competitor,
Suntech. It also has a significantly higher net profit, stronger fundamentals and much
better returns on equity and assets. By making some basic moves on increasing capacity
even in the midst of the economic downturn First Solar has positioned themselves for
success. An acquisition in 2008 for Turner Renewables gave them some much needed
project expertise and the 2009 OptiSolar acquisition provided them with a deep pipeline
of projects for their increased capacity to fill to. So in addition to the necessary
marketing and sales required to sell projects, they have a built in project install plan
which keeps them busy during the financially challenging times which in turn increases
their experience base…a necessary requirement to sell subsequent future projects.
First Solar, a company who has seemingly made all the right moves, is not bulletproof.
The technology of thin film semiconductors still tethers them to exotic materials like
Tellurium that can be in short supplies at time. Also, the late John Walton’s estate is a
major stockholder at 40% ownership and has voting rights over board members and
approving/disapproving mergers and acquisitions. This could hamper future growth or
provide a stumbling block to any future diversification or vertical integration that First
Solar may want to take on.
Red Thread for Internal Audit
First Solar is primed to be market leader. The leadership instilled when they were formed
has provided superb guidance. They have concentrated on the largest part of the profit
pool and have technologically untethered themselves from silicon-based photovoltaics.
Page | 25
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
The results have been strong exploitation of the core competence in manufacturing
resulting in over a gigawatt of manufacturing capacity, excellent project acquisitions to
create a strong pipeline of work and great financial success. But can they sustain
it…what does the competition have that can impact them and what other threats lurk that
can jeopardize First Solar and their brightly shining standing.
STRATEGIC RECOMMENDATIONS
First Solar SWOT Analysis
Strengths
S1 Strong Manufacturing Competence – can easily
replicate facilities quickly
S2 Best Solar Economics – Lowest Cost per Watt
S3 Strong Leadership
S4 Over a Gigawatt of Manufacturing Capacity
S5 Market Leader
S6 Strong Business Financials
S7 Excellent Project Pipeline
S8 Strong Raw Material Supply Contracts
Opportunities
O1 Solar demand in unbounded
O2 US is the next great battlefield and First Solar is
US based
O3 Stimulus money available to rejuvenate industry
O4 Strong Financials for M&A
O5 Market Leader clout for getting new projects
O6 Diversify First Solar as a project owner
O7 Further Manufacturing Expansion
Weakness
W1 Tellurium Supply tied to Copper Industry
W2 Short time incorporated (just 10 years)
W3 Much Manufacturing protected only by Trade
Secret
W4 Toxicity of Cadmium
W5 Low conversion efficiency of CdTe modules
Threats
T1 Removal of Gov’t Subsidies
T2 Global economic recession
T3 Concerns over Foreign Currency
T4 Loss of Trade Secret Advantages
T5 Merger & Acquisition
T6 Environmental Pressure
SWOT Strings
Strengths / Opportunities
Weakness / Opportunities
S1, S2, S4, S6, S8 / O1, O3, O7: CG, I
Utilize the company’s Manufacturing core strengths
to expand into emerging markets (US, India)
S3, S5, S6/ O1, O3, O4, O5: CG, SA, JV
Find acquisition targets that bolster core business and
allow further manufacturing expansion
W2, W5/ O1, O2, O3: CG, I
Need to convince US market that CdTe solar is a
perfect fit-Born in the USA
W3 / O5, O6, O7: CG, I. VI
By further reducing costs they can make it difficult
for the competition to win projects
Strengths / Threats
Weakness / Threats
S2, S5, S6, S7 / T2: CG
In the down economy create work by buying
competitors projects/project lists
S1, S2, S6 / T1, T2 : CG, I, VI
Reduce costs further to make projects stand on their
own without subsidy
W1, W4, W5 / T6: I, VI
Develop PR around the recyclable nature of exotic
chemicals to improve environment and make superior
product
W2, W3 / T4: HI
Provide incentives to employees to guard trade
secrets (stock ownership)
Page | 26
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
General Strategic Orientation – Strength /Opportunity
First Solar is clearly in a position of strength in the solar energy industry. Solar panels
and modules in and by themselves are not new and novel. There are many ways to make
them and they all work to provide electricity. But First Solar’s are less expensive,
making the investment return particularly in a down economy the critical difference
between project on and project off. They are less expensive because they use materials
that are inherently less expensive to start with…the cadmium and tellurium they used are
from recycled mining and smelting processes unlike silicon which are crystals that need
to be grown. They are less expensive because the vapor deposition coating process that
they employ (proprietary trade secret) allows them to coat a sheet of glass to make a solar
panel in a very short period of time whereas in silicon panel production the vapor
deposition processes (sputtering) uses vacuum, is high cost to use, has low yields and
takes a long time to make. Less expensive materials and process adds up to a winning
combination to drastically reduce costs. That combination allowed them to build
capacity fast and even though the 2008 solar energy market was challenged going from
an undersupply position to an oversupply position (partly because credit woes strapped
projects), First Solar continued to succeed because they had an outlet for their production
as a consequence of the strength to manufacture and deliver. The chart below shows First
Solar’s position graphically:
Grand Strategy Clusters – Attractiveness – Improving position/rapid growth
The McKinsey Report referenced earlier showed the explosive growth that the solar
energy industry is on the verge of. All of the major players are ramping up and adding
capacity to their manufacturing capability. The competition will be fierce as companies
vie for projects and deliver systems. The real battleground will be the U.S. as not only
are there miles and miles of open rooftops ready to accept solar panels, but there is little
or no maintenance and unlike a wind turbine that is always turning there is no mechanical
mechanism to wear out. With the cost of solar systems dropping and intense competition
creating a true market economy for this industry, large corporations will get larger and be
Page | 27
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
better positioned for investment. First Solar is uniquely positioned based on their
manufacturing prowess and low cost systems. This will appeal greatly to project mangers
looking to bring solar power in a timely and cost effective manner.
Grand Strategy Selection – Investment – Strength/Internal & External
First Solar has been very successful at both internal and external development. Even
though their history is short, they had excellent guidance from John Walton (of the WalMart fame) who instilled an entrepreneurial sense in the new company. They did due
diligence in the internal development of their processes to achieve the lowest
manufacturing costs in the industry. Couple this with the company’s choice of
technology and the result has been the market leader position. Externally, they have had
no problem seeking the pieces required to round out their expertise. In 2008, Turner
Renewables provided them with necessary project utility experience that they did not
possess. In 2009, OptiSolar came with a project pipeline that provided them an outlet for
the foreseeable future for the capacity that they have built. With over $11 Billion in
Market Capitalization, First Solar has the deep pockets to acquire more companies and is
positioned to do so. The chart below shows where First Solar is positioned graphically:
Page | 28
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Recommended Strategy
First Solar has defined themselves as the low cost leader in solar energy by exploiting
their technological prowess and leveraging cost to get projects and implement their
technology. Fundamentally, by choosing non-silicon based thin film semiconductor they
immediately removed themselves from the high cost and limited supply of photovoltaic
grade silicon. Not to say that the industry will not respond and provide this silicon, its
just that the many year time penalty is lost time in building business.
My recommendation is for them to continue what they have started and to further expand
and grow. This is based on their very strong financials, a manufacturing process that can
be easily replicated and a cost proposition that is making competitors cringe. The growth
that I am proposing is on a number of different levels.
First, on manufacturing First Solar needs to continue to build inexpensive capacity to
have more modules available for growth. In starting production in Malaysia, they took
advantage of a superb situation and were able to quickly build capacity. They should
now look for another inexpensive place to expand. My choice would be India where the
solar energy market will be amazing but to date has been mostly left behind. By building
capacity in the country of sale they will be building in Goodwill and further reducing
their costs. I have no illusions that solar energy projects in India will have to come at
reduced costs because of India’s economic standing. However, rural plant generation
could provide millions of dollars of revenue so First Solar should not only build a facility
to manufacture solar module capacity in India, they should also fund some grass roots
projects which will herald them as not only savvy business folks but humanitarian ones as
well. This is the hallmark of all great corporations.
Next, First Solar needs to win in the United States. The U.S. with 18% market share lags
behind Germany with 43% and Europe overall with 65% market share.lxviii Think about
all of the big box stores with flat roofs, the shopping malls with flat roofs, the parking
lots that bake in the sun…all of these are First Solar opportunities to convert that lost
energy into electricity. On the roof of a building they are basically unseen. They have no
mechanical or moving parts. They are a maintenance supervisors dream. In order to
penetrate this space, the cost has to be rock bottom. Importing modules from Malaysia
and India to supplement Ohio production could keep costs down.
Lastly, First Solar needs to make acquisitions with their hard earned cash and those
acquisitions have to have future return. First Solar should look closely at companies like
Yingli Green Energy or JA Solar in China. That would give them a strong local
presence, access to local projects and an ability to grow in the next electricity Mecca of
the world – China. Boots on the ground expansion into China needs to be done through
merger & acquisition. First Solar will need the Chinese expertise to navigate the local
government and issues in order to succeed.
The recommended strategy is daring but a natural conclusion based on the comprehensive
study, the SWOT analysis and the development of the SWOT strings.
Page | 29
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Managerial Implications
The baton has been passed from Mike Ahearn to Rob Gillette who will need to make his
mark in this company. He is a veteran of Honeywell, a place where progressive thinking
was a way of life. In one of his first moves, he has brought in TK Kallenbach as
Executive Vice President of Marketing and Product Management. Mr. Kallenbach was
most recently of Honeywell.
But like Sam Palmisano who took over from Lou Gerstner, Rob Gillette will need to
decide direction and develop his stamp. My recommendation to build in India should be
credibly researched by First Solar who will find that handsome government incentives
(refer to IBM Offshore) would be made available to them and would provide real
incentive to build.
Look for First Solar to build a close strategic alliance with someone capable of weighing
M&A in China closely, perhaps a Morgan Stanley or Price Waterhouse. Either way First
Solar will need others expertise and guidance from the Walton estate to ensure that they
are in good hands.
Lastly, look for the company to start to provide stock dividends (something they don’t do
now) to avoid paying taxes on the future windfall from the above recommendations.
Competitor Implications
First Solar has put the competition on notice that they are not waiting for the silicon
market to catch up to them. They are clearly positioned for growth and expansion and a
global recession slows them but does not stop them.
Look for the competition to merge to become bigger in order to do battle with First Solar.
This will be the only viable way to be competitive with First Solar.
Page | 30
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
References
i
"Business Powered by the Sun." Allianz Knowledge Partnersite. 2009. Allianz, Web. 1
Dec 2009.
<http://knowledge.allianz.com/en/globalissues/energy_co2/renewable_energy/business_c
ase_green_power.html>.
ii
Ibid.
iii
"Solar Spreading to Surprising Locations." GlobalSolarCenter. 2009.
GlobalSolarCenter, Web. 1 Dec 2009. <http://www.globalsolarcenter.com/about/solarspreading-to-surprising-locations/>.
iv
Ibid.
v
"The Recovery Act
and Clean Energy." The White House. October 28, 2009.
Whitehouse.gov, Web. 1 Dec 2009.
<http://www.whitehouse.gov/blog/2009/10/28/recovery-act-and-clean-energy>.
Morehead, Adam. "A Business Case for Renewable Energy." Net Impact Austin. 20 Jan
2009. Net Impact Austin, Web. 1 Dec 2009.
<http://www.netimpactaustin.org/blog/business-case-renewable-energy>.
vi
vii
"Overview." First
Solar. 2009. First Solar Inc., Web. 15 Dec 2009.
<http://www.firstsolar.com/en/corporate.php>.
viii
"Investor Press Release." First Solar. 24 Jan 2008. First Solar Inc., Web. 1 Dec 2009.
<http://investor.firstsolar.com/phoenix.zhtml?c=201491&p=irolnewsArticle&ID=1202877&highlight=>.
ix
"First Solar." Wikipedia The Free Encyclopeadia. 10 Dec 2009. Wikipedia Foundation
Inc., Web. 15 Dec 2009. <http://en.wikipedia.org/wiki/First_Solar>.
x
Leonhardt, David. "Unites States Economy." NY Times. 13 Aug 2009. NY Times Inc.,
Web. 15 Dec 2009.
<http://topics.nytimes.com/top/reference/timestopics/subjects/u/united_states_economy/i
ndex.html>.
xi
" Update: President Obama Signs Stimulus Package into Law."
RenewableEnergyWorld.Com. 13 Feb 2009. RenewableEnergyWorld.Com, Web. 15 Dec
2009. <http://www.renewableenergyworld.com/rea/news/article/2009/02/update-housepasses-final-version-of-stimulus-package>.
xii
Ibid.
xiii
Ibid.
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
xiv
"2003 to 2008 world oil market chronology." Wikipedia The Free Encyclopaedia. 3
Dec 2009. Wikipedia Foundation, Web. 15 Dec 2009.
<http://en.wikipedia.org/wiki/2003_to_2008_world_oil_market_chronology>.
xv
"List of United States Energy Acts." Wikipedia The Free Encyclopaedia. 22 May 2009.
Wikipedia Foundation, Web. 15 Dec 2009.
<http://en.wikipedia.org/wiki/List_of_United_States_Energy_Acts>.
xvi
"Fact Sheet Making Solar Power Mainstream." Environment California. 2007.
EnvironmentCalifornia.org, Web. 15 Dec 2009.
<http://www.environmentcalifornia.org/energy/million-solar-roofs/fact-sheet2>.
xvii
"U.S. Energy Facts Explained." U.S. Energy Information Administration Independent
Statistics and Analysis. 2009. US Government Department of Energy, Web. 15 Dec 2009.
<http://tonto.eia.doe.gov/energyexplained/index.cfm?page=us_energy_home>.
xviii
"Renewable Energy Explained." U.S. Energy Information Administration
Independent Statistics and Analysis. 16 Jul 2009. US Government Department of Energy,
Web. 15 Dec 2009.
<http://tonto.eia.doe.gov/energyexplained/index.cfm?page=renewable_home>.
xix
Ibid.
xx
"Welcome to
the World of Solar Energy." Solarbuzz. 9 Dec 2009. Solarbuzz, LLC,
Web. 15 Dec 2009. <http://www.solarbuzz.com/>.
xxi
"Solar PV Report." U.S. Energy Information Administration Independent Statistics and
Analysis. . 2009. US Government Department of Energy, Web. 15 Dec 2009.
<http://www.eia.doe.gov/cneaf/solar.renewables/page/solarreport/solarpv.html>.
xxii
Ibid.
xxiii
"Energy Information Administration (EIA), Form EIA-63B, "Annual Photovoltaic
Module/Cell Manufacturers Survey."." U.S. Energy Information Administration
Independent Statistics and Analysis. . 2009. US Government Department of Energy,
Web. 15 Dec 2009. <http://www.eia.doe.gov/>.
xxiv
"Solar PV Report." U.S. Energy Information Administration Independent Statistics
and Analysis. . 2009. US Government Department of Energy, Web. 15 Dec 2009.
<http://www.eia.doe.gov/cneaf/solar.renewables/page/solarreport/solarpv.html>.
xxv
"Energy Information Administration (EIA), Form EIA-63B, "Annual Photovoltaic
Module/Cell Manufacturers Survey."." U.S. Energy Information Administration
Page | 32
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Independent Statistics and Analysis. . 2009. US Government Department of Energy,
Web. 15 Dec 2009. <http://www.eia.doe.gov/>.
xxvi
"Solar PV Report." U.S. Energy Information Administration Independent Statistics
and Analysis. . 2009. US Government Department of Energy, Web. 15 Dec 2009.
<http://www.eia.doe.gov/cneaf/solar.renewables/page/solarreport/solarpv.html>.
xxvii
"Top-10 solar cell suppliers in 2009: iSuppli." Pradeep's Point!. 6 Sept 2009.
WorldPress.com, Web. 15 Dec 2009.
<http://pradeepchakraborty.wordpress.com/2009/09/06/top-10-solar-cell-suppliers-in2009-isuppli/>.
xxviii
Lorenz et al., . "The Economics of Solar Power." The McKinsey Quarterly. June
2008. McKinsey Inc., Web. 15 Dec 2009.
<http://www.mckinsey.com/clientservice/ccsi/pdf/economics_of_solar.pdf>.
xxix
"Industry Life Cycle." Encyclopedia of Small Business. Ed. Kevin Hillstrom and
Laurie Collier Hillstrom. Gale Cengage, 2002. eNotes.com. 2006. 28 Sep, 2009
http://www.enotes.com/small-business-encyclopedia/industry-life-cycle
xxx
"US Solar Industry Year in Review 2008." SEIA.org. 2009. SEIA, Web. 15 Dec 2009.
<http://www.seia.org/galleries/pdf/2008_Year_in_Review_Slides.pdf>.
xxxi
Ibid.
xxxii
Lorenz et al., . "The Economics of Solar Power." The McKinsey Quarterly. June
2008. McKinsey Inc., Web. 15 Dec 2009.
<http://www.mckinsey.com/clientservice/ccsi/pdf/economics_of_solar.pdf>.
xxxiii
Ibid.
xxxiv
"Solar PV Report." U.S. Energy Information Administration Independent Statistics
and Analysis. . 2009. US Government Department of Energy, Web. 15 Dec 2009.
<http://www.eia.doe.gov/cneaf/solar.renewables/page/solarreport/solarpv.html>.
xxxv
"Nanosolar: technology for profitable solar." www.Nanosolar.com. 2009. Nanosolar
Inc., Web. 15 Dec 2009. <http://www.nanosolar.com/>.
xxxvi
"Home Page." First Solar. 2009. First Solar Inc., Web. 15 Dec 2009.
<http://www.firstsolar.com>.
xxxvii
"Top-10 solar cell suppliers in 2009: iSuppli." Pradeep's Point!. 6 Sept 2009.
WorldPress.com, Web. 15 Dec 2009.
<http://pradeepchakraborty.wordpress.com/2009/09/06/top-10-solar-cell-suppliers-in2009-isuppli/>.
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
xxxviii
Gadiesh, Orit, and James L. Gilbert. "Profit Pools: A Fresh Look at Strategy."
Harvard Business Review. May/June (1998): Print.
Gadiesh, Orit, and James L. Gilbert. "How to Map Your Industry’s Profit Pool."
Harvard Business Review. May/June (1998): Print.
xxxix
xl
Skinner , Liz. "Sun will shine on solar-energy investing, report says." Investment News.
18 June 2007. Crain Communications Inc, Web. 16 Dec 2009.
<http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20070618/FREE/7061400
7&ht=solar>.
xli
"Solar Power." Wikinvest. 2009. Wikinvest, Web. 16 Dec 2009.
<http://www.wikinvest.com/industry/Solar_Power#Silicon_Supply>.
xlii
"Silicon price hike squeezes solar-product profit margins." Silicon price hike squeezes
solar-product profit margins. 18 Dec 2007. China.Org.CN, Web. 16 Dec 2009.
<http://www.china.org.cn/english/business/236109.htm>.
xliii
"Worldwide Solar Panel Production Doubles in 2008." CalFinder. 2009. CalFinder
Contractors, Web. 16 Dec 2009. <http://solar.calfinder.com/blog/news/worldwide-solarpanel-production-doubles-in-2008/>.
xliv
"First Solar (FSLR)." Wikinvest. 2009. Wikinvest, Web. 16 Dec 2009.
<http://www.wikinvest.com/stock/First_Solar_(FSLR)/Data?ref=topnav>.
xlv
Osborne, Mark. "German market to top 3.2GW says Solarbuzz: Global growth of 5%
in ‘09." PV-tech.org. 9 Dec 2009. PV-tech.org, Web. 16 Dec 2009. <http://www.pvtech.org/news/_a/german_market_to_top_3.2gw_says_solarbuzz_global_growth_of_5_in
_09/>.
xlvi
"Solar Power." Wikinvest. 2009. Wikinvest, Web. 16 Dec 2009.
<http://www.wikinvest.com/industry/Solar_Power#Silicon_Supply>.
xlvii
Ibid.
xlviii
"Overview." First Solar. 2009. First Solar Inc., Web. 15 Dec 2009.
<http://www.firstsolar.com/en/corporate.php>.
xlix
"About Suntech." Suntech Power. 2009. Suntech Power, Web. 16 Dec 2009.
<http://www.suntechpower.com/index.php?option=com_content&view=article&id=48&Itemid=58⟨ =en>.
l
"Overview." Yingli Solar. 2009. Yingli Green Energy, Web. 16 Dec 2009.
<http://ir.yinglisolar.com/phoenix.zhtml?c=213018&p=irol-IRHome>.
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First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
li
"Overview." JA Solar. 2009. JA Solar Holdings Inc., Web. 16 Dec 2009.
<http://www.jasolar.com/corporate_overview.php>.
lii
"Products and Services - Technology." JA Solar. 2009. JA Solar Holdings Inc., Web.
16 Dec 2009. <http://www.jasolar.com/products_technology.php>.
liii
"Corporate Leadership." First Solar. 2009. First Solar Inc., Web. 16 Dec 2009.
<http://www.firstsolar.com/en/leadership.php>.
liv
"Frequently Asked Questions." First Solar. 2009. First Solar Inc., Web. 16 Dec 2009.
<http://investor.firstsolar.com/phoenix.zhtml?c=201491&p=irol-faq>.
lv
"First Solar." Wikipedia The Free Encyclopeadia. 10 Dec 2009. Wikipedia Foundation
Inc., Web. 15 Dec 2009. <http://en.wikipedia.org/wiki/First_Solar>.
lvi
"Solar Power." Wikinvest. 2009. Wikinvest, Web. 16 Dec 2009.
<http://www.wikinvest.com/industry/Solar_Power#Silicon_Supply>.
lvii
"First Solar, Inc. Strategic Analysis Profile." Research and Markets. Aug 2009.
Research and Markets, Web. 16 Dec 2009.
<http://www.researchandmarkets.com/reportinfo.asp?report_id=649326>.
lviii
"Fast Facts." First Solar. October 2009. First Solar Inc., Web. 16 Dec 2009.
<http://www.firstsolar.com/Downloads/pdf/FastFacts_PHX_NA.pdf>.
lix
"Product Design." First Solar. 2009. First Solar Inc., Web. 16 Dec 2009.
<http://www.firstsolar.com/en/product_design.php>.
lx
"Fast Facts." First Solar. October 2009. First Solar Inc., Web. 16 Dec 2009.
<http://www.firstsolar.com/Downloads/pdf/FastFacts_PHX_NA.pdf>.
lxi
Osborne, Mark. "First Solar first to US$1 per watt manufacturing cost." PV-tech.org.
25 Feb 2009. PV-tech.org, Web. 16 Dec 2009. <http://www.pvtech.org/news/_a/first_solar_first_to_us1_per_watt_manufacturing_cost/>.
lxii
Ibid.
lxiii
Kanelios, Michael. "Why does First Solar stand alone?." CNET News. 20 Nov 2007.
CBS Interactive Inc., Web. 16 Dec 2009. <http://news.cnet.com/8301-11128_3-982120954.html>.
Page | 35
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
lxiv
"News Release: First Solar Agrees to Acquire Multi Gigawatt Utility Scale
Photovoltaic Pipeline." First Solar. 2 Mar 2009. First Solar Inc., Web. 16 Dec 2009.
<http://investor.firstsolar.com/phoenix.zhtml?c=201491&p=irolnewsArticle&ID=1261676>.
lxv
"SEC Filing - Form 10-Q." First Solar. 30 Oct 2009. First Solar Inc., Web. 16 Dec
2009. <http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MTkzOTZ8Q2hpbGRJRD0tMXxUeXBlPT
M=&t=1>
lxvi
"SEC Filing - Form 10-K." First Solar. 25 Feb 2009. First Solar Inc., Web. 16 Dec
2009. <http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MTkzN3xDaGlsZElEPS0xfFR5cGU9Mw=
=&t=1>.
lxvii
"Solar Power." Wikinvest. 2009. Wikinvest, Web. 16 Dec 2009.
<http://www.wikinvest.com/industry/Solar_Power#Silicon_Supply>.
lxviii
"Welcome to
the World of Solar Energy." Solarbuzz. 9 Dec 2009. Solarbuzz, LLC,
Web. 15 Dec 2009. <http://www.solarbuzz.com/>.
Page | 36
First Solar Strategic Plan
William Karpusiewicz
MBA 801 Fall 2009
Memorandum
To:
Dr. Helen Rothberg
Professor
From:
William Karpusiewicz
Date:
December 16, 2009
Individual Strategic Plan – First Solar Strategic Recommendations for
Growth During The Financial Slowdown
_______________________________________________________________________
Subject:
Attached please find the Individual Strategic Plan – First Solar Strategic
Recommendations for Growth During The Financial Slowdown. This assignment is due
on December 18, 2009 as the final written assignment for www.turnitin.com in MBA
801N-700, Strategic Management, which meets online.
The work and writing presented in this assignment has been solely written by the author
herein named above and does specifically cite reference works as endnotes appropriately.
Attachment Above
Page | 37