PV Technologies, Inc.

:
Were they asleep at the switch?

Group 2:
Akshay Talreja
Avinash Saini
Hemanth Kolishetty
Nawaz Iqbal
Sonal Jain
Versha Kaushik
PV Technologies
AT A GLANCE
• Solid balance sheet
% of Revenues (2010)
• Strong Profitability
8%
Industrial Automation • High Cash Flow
12%
34%
• Investments in R&D and Technology
Process Management

22% Network Power

24% Drive Technology

Industry leader in
Climate Technologies • PRODUCT INNOVATIVENESS
• QUALITY
• PERFORMANCE
• Founded in 1993 in San Francisco
• Specialist in RENEWABLE ENERGIES
• $30 billion in revenues (2010)
• 25 countries
Current situation
THE PRODUCT
Photovoltaic Inverters convert the direct
current output of a solar panel into alternative
current that is compatible with residential or
commercial use. Fundamental components
in a PV system.
No international standards of quality and
efficiency.
Growing market (+66% in 2009/2010),
supported by strong government incentives.
THE CUSTOMER
Solenergy Development LLC
• Major developer of energy generation
systems
• Among the biggest customers of PVT’s
solar energy business unit
• Strong relationship with senior
management team
The project :
• Construction of a PV solar energy power
plant in Barstow (California)
• Looking for a supplier of utility scale
central inverter
 The problem
PVT’s prices are significantly higher than competitors ones.
PVT’s better quality could explain the difference but Morgan was surprised
of the spread being so wide.
MORGAN’S Solenergy was committed to cut costs among the company.
EVALUATION
Inferior performance could be compensated developing an
enhanced maintenance schedule and a proactive quality control program.

Salvatori heard that Morgan’s evaluation was bad for PVT.

• Solenergy was about to conclude the selection process.
• The evaluation was mainly based on prices.

OUR BELIEF
PROBLEM: the evaluation had not been published
• Information only based on rumours.
• Hard to contact Morgan.
Is this situation just a "brush fire"
or
an important problem?

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Impact on the company

IMPACT Losing an important and powerful client can

ON certainly have an impact on the overall
IMAGE
reputation of the company.

4%
Inverters’ sales
account for only Photovoltaic
Inverters
IMPACT
4.1% of total ON
Other
revenues, the 96% PROFIT
economic loss is not
incredibly significant.

It’s a important problem, because if the rumors were to be believed, PVT were not only on
the verge of losing the contract with their key customer but more importantly, this would
damage their market reputation which could affect remaining 96% of their business in the
market segment.
Are PVTs products really more expensive?
COMPETITIVE ANALYSIS OF THE PRODUCTS
SOMA Energy BJ Solar PV Tech 1 PV Tech 2

Nominal AC output power 1.0 MW 1.0 MW 1.0 MW 1.25 MW

Efficiency rate 96.5 95.0 97.5 98.5

Expected life service 12.5 10.7 13.2 13.2

List price $170000 $160000 $180000 $187500

Effective Power Output 0.965 0.95 0.975 1.23125

Expected Lifetime Power 12.0625 10.165 12.87 16.2525

Output
List price/Exp. Lifetime 14093.26 15740.28 13860.01 11536.68
Power Output

PRICE is not the only element to take in consideration when evaluating a product
PVT is not competitive for Solenergy
Criteria are not aligned
Relevant criteria for
PVT:
• Efficiency;
• Reliability;
• Productivity
Relevant criteria for
Solenergy:
• Price
From PVT’s
perspective these are
elements that real
add value to the
customers into the
long run
Due to new cost
cutting strategy,
Solenergy has
developed different
priorities
Different alternatives

1. 2.
Offer to extend the original Offer a 99% UPTIME GUARANTEE
WARRANTY at internal cost from at no cost for the customer
10 to 20 years

3. 4.
Accellerate the introduction of the Initiate a DIALOGUE with Morgan
NEW INVERTER (1.25 MW with to find out the real output of the
98.5% efficiency) evaluation
Alternative 1: extending the warranty
to 20 years
S. Would contractually prepay the Extending the product warranty to 20 years while
warranty at the rate of 18% of the the industry standard is 5 years.
purchase price • Marketing and sales department: high
economic value for Solenergy;
• Finance, production and engineering
department think: competitive advantage
already in place (10 instead of 5 years).

PROs CONs

• Reliable: sign of • Relatively costly;

good quality;
• Warranty is not a
• Assure it will not key factor;
break;
• Warranty doesn’t
• Higher standard always mean
quality
Alternative 2: Uptime Guarantee
Uptime PROs
Guarantee
• The offer would be unmatchable by the
99%
competitors;
• It will increase even more the quality and
superiority of PV Technologies’ products;
• Signal of high reliability.
Economic impact

CONs
• Too costly, high impact on the profit;
• Other customers would ask for it;
• Short-term solution non sustainable in
the future, the market is more and more
focusing on low cost solutions.
 Alternative 3: Investment in a new
model
Profitability would be
Alternative 3: in line with the other PROs: No change in
Introduction of the options and it would pricing strategy, this is
new 1.25MW Model be the most efficient
and reliable inverter what the sector is
on the market looking for

BUT

Extremely risky
&
Expensive
Alternative 4: direct approach to
Morgan
One possibility is to approach Morgan directly in order to understand the situation and
underlining our skills.

PROs CONs

• More personal • We rely on not

approach: we public information;
demonstrate we are
ready to personalize our • Call for help could
product for them; make us appear as
desperate
• First step to build a long
term relationship
Which one do you think is the best
solution?

13
 The strategy

B2B marketing is all based on NETWORKING, If we do not manage to convince

it should not be considered begging. him about the superiority of the
Customer relationship management is product, we can adopt a strategy
fundamental to build a successful company. based on his needs to sell our
products.

Speak with
Morgan
Adopt an
ad hoc
strategy
Understand if the
evaluation is real
and what his real
needs are

If Morgan confirms that the evaluation is real, we should understand the roots of the problem
and figure out with him a solution, after proving him that our product is the best one.
What other product management
considerations should be addressed
when planning a new product or
service introduction or managing an
existing product or service in this
marketplace?

15
Product should be :
• Needed by the customer
• More economical and not just superior in performance
• Tested properly to avoid operational malfunction
• More flexible and responsive in serving the customer

This can be asserted by market analysis, statistical

processing, questionnaires or other forms of marketing
research and by developing relationship and by
establishing communication with the customer.

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• In this case, PVT should have analyzed the market well to understand how their
competitors are performing, what are current price for the 1 MW inverters in
the market before submitting the bid to Solenergy.

• In addition they should have focused on Solenergy’s needs and by proper

communication with Greg Morgan, Solenergy’s chief electrical engineer; they
should have figured out that the customer is on a budget cut.

• These considerations would have helped PVT to submit the bid keeping current
situations and needs in mind.

New Product

• Also, a new product and service should be managed not by solely focusing on
that particular product, but by analysis how it affects the company overall in
the market.

• If PVT wants to launch 1.25 MW inverter, they should analyze industrial

demand while taking cost as the major consideration to maintain their
leadership in this market. 17
What will PVT’s product team want to
say about the new products,
particularly the accelerated
introduction of the new central
inverter and the marketing initiative?
R&D? The finance people? The
engineers? The public relations
people? Sales? Customer service?

18
R&D people
• Have reservations regarding a premature introduction of the new
product in the market.
• They recognize that it may be an attractive offer to Morgan and
Solenergy, but are concerned that by collapsing the test phase for
the launch to be on time, the risks of potential operating malfunction are
greater.

Finance people
• They don’t think that it will impress Solenergy because some opinions
within the industry favor the coupling of smaller PV inverters rather than
building larger ones, supposedly reducing the costs in this way.
• Basically, they are against this option.

Engineers
• They are confident that this alternative could work, for the technical
advantages that it offers would enable PVT to beat the competition with
ease, without compromising their profits in this project.
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Public relations and marketing
• They are also in favor this alternative.
• They think that the new powerful inverter will address the market needs.
Being the first company to introduce an inverter with 1. 25MW, PVT
would reinforce their leadership status.

Sales force
• They are confident that the new inverter could be successfully sold by
utility users and the price was attractive.

20
How should PVT promote itself in First
Quarter 2012 and position the launch
of the new 1.25 MW central inverter
that’s been re-scheduled for
introduction in January?

21
• PVT will have a great opportunity to differentiate from its
competitor with the new 1. 25MW central inverter.

• It will be the first company to introduce this product to the market

and the advantages comparing to the 1. 00MW version are
obvious.

• There will be appreciated increase in the energy output, and thus

this should be the best way for PVT to make the consumers
perceive the new product as the most powerful (or prolific)
inverter in the market.

• To avoid cannibalization, the chosen price should be higher than

the current 1. 00MW inverter.

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What conclusions can be drawn
about the evolution and impending
changes in technology, pricing, and
buying criteria in this business?

23
• As the technology becomes more and more accessible and cheap, new low-
cost companies are threatening the whole equilibrium that exists on the
inverter business.

• Chinese companies, for example, are already offering products that, although
inferior in quality and reliability, have a much inferior target price.

• It is reasonable to think that with time, the gap in the quality level with reduce,
and as it happens the price will pose a bigger and bigger problem to the other
players.

• However, if a differentiation strategy is applied by the companies with better

technology and capable R&D department, the gap in technology and directly
related benefits will enable those companies to survive and maintain a healthy
portion of the market share

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What short term and long term
policies and processes should PVT
develop and implement to
effectively improve its marketing
programs?

25
 • PVT should review the current policy of testing equipment
performance and specifications against competitor’s offerings
SHORT
• Revaluate the needs of its business segment and key customers
TERM on a more frequent and regularly scheduled basis to mitigate the
risk of occurring similar problem in future

• Review of manufacturing costs to identify opportunities to price

the product more competitively

• PV Technologies should be actively involve in market place

analysis to know the customer’s varying need
LONG • Collaborate with customers to develop new products that best
need their requirements on both short term and long term
TERM basis
• Before quoting RFP, the evaluation criteria of customer should
be evaluated
• Keep a close eye on your competition and offer competitive
products at lower price. PVT can offer various price point to
cater the need of different segments.
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Thank you for your attention

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