PV Technologies, Inc.: Were they asleep at the switch?

Mayank Dubey
180103128

1. What are the value elements that customers consider in their purchase decision of
PV Inverters?
The various value elements are as follows:
Customers value inverter efficiency and reliability, manufactured cost and anticipated expenses and
maintenance were typically among the factors that most strongly influenced a developer’s choice of
inverter. They also value conditions, monitors and optimize the energy delivered by the PV array and
lastly performance of the inverter.

2. What is the crisis situation between PVT and Solenergy? Is there a need to act?
A confidential evaluation found that although PVT’s products are superior in terms of efficiency,
reliability, and productivity, the bid prices are significantly higher than that of competitors. Morgan
though has anticipated higher prices for PVT’s products due to better quality but has not expected it
to be this high as compared to competitors. Further, Solenergy has god relationship with PVT but
was committed to expense control, and upfront cost differential.

Yes, There is a need to act due to the following reasons:

1) Solenergy constitute more than half of PVT’s business
2) Morgan’s report has very high credibility among the industry thus, may hamper other projects
also

3. Four alternatives are under consideration to resolve the crisis. Evaluate these alternatives
and state pros and cons of each of the alternative. If PVT decides to go with alternative 4,
what could be the risk? Is there a way to mitigate that risk?

Alternative 1:
Offer to extend the original warranty at internal cost from 10 to 20 years. PVT would extend the
product warranty to 20 years. For this Solenergy would prepay the warranty premium annually at the
rate of 18% of the purchase price of each inverter.

Pros:
 Economic value of the alternative would clearly offset the any product cost-related
shortcomings
 Upfront cost
 reliability

Cons:
 This will expose company to additional and unknown expense and future complications and
potential impact on profitability when negotiating contracts with other firms
 Competitors provide 5 years warranty against PVT’s 10 year warranty therefore PVT already
have an upper-hand in terms of warranty
 If Solenergy gets extended 10 year warranty at internal cost, it may ask for same rate warranty in
the next project also and this decision may hamper the relationship PVT has with other existing
clients.

Alternative 2:
Offer a 99% uptime guarantee at no cost. In this the system owner would be compensated for any
portion of productive daylight hours when inverter is not fully functional at any cost to the
Solenergy.
Pros:
  Competitions will not match the offer as the product quality is not high enough
 Guarantee reinforced the quality, durability and reliability of PVT’s products and would
reinforce its leadership status
Cons:
 Central inverters have the drawback of complete power failure in case of any fault, there fore
in case of 100MW project the uptime cost would be very high
 This will negatively impact future negotiations with Solenergy and other customers
 Cost in lost warranty revenues would negate most of the profit in the deal
Alternative 3:
Accelerate the introduction of a new product, scheduled to release shortly, with higher capacity at
1.25MW and 98.5% efficiency.
Pros:
 Instead of 100 panels only 80 panels are required to be installed thus save a huge sum on
installation and wiring which may become a motivating factor for Solenergy
 Timing was suitable and simple rearrange of reliability testing queue can make this work
 This will reinforce PVT’s leadership position by being first to market
 Solenergy will have the opportunity of being to be first to employ latest technology and
robust management system
Cons:
 There can be some potential failures which they cannot identify due to compressed testing
timeframe
 Finance and Production executives argued that product innovation has reached the point
where a lower cost approach was feasible
Alternative 4:
Initiate a dialogue with Morgan to confirm the reported findings of the evaluation.
Pros:
 This will give PVT a plan to formulate a correct strategy to win the bid
 There is a scope of renegotiation in it
 Three year relationship can be leveraged
Cons:
 There is a little scepticism about the existence of Morgan’s report
 If PVT approaches Morgan it can be alleged as mal-practice

If PVT tries to go with option 4, it may affect the relationship with Solenegry as Morgan may
consider it as an un-ethical practice and may stop PVT from bidding. This step will also hamper the
image of PVT in the industry.
A way to mitigate that risk may be to have a meeting with Morgan directly discussing needs the
organization has and the various products and services PVT can offer, without pointing out anything
about the confidential assessment. Discussion will also make clear, the priorities Solenergy is having
for the tender.