Answer to Question #306792 in Marketing for Sanyo

Question

 

Now that you have looked at various factors in the business environment that have played a significant role in Pretty & Clean’s current condition, you need to think about your competitors and the role they play in your market. 

 

Using Porter’s five force model, discuss all five competitors, ranking them from ones that present the biggest threat in the market to ones that present the least threat to the organisation. 

Answer 1

Powerful Buyers: Companies developing and operating solar projects face powerful customers who can buy clean energy from many other sources at very low prices. From the largest utilities to the smallest individual homeowners, they all have plenty of options to choose from when looking for vendors of solar energy solutions.

Serious Threat of New Entrants: In the solar industry, competition is coming from companies of all sizes including aggressive, deep-pocketed players, large power corporations and even oil majors now jumping on the wagon. The technology and the economics of solar power is well-known by now, so there’s nothing preventing serious players from entering the space.

Solid Substitutes: The final product, solar energy, also faces serious and credible substitute products such as wind power and clean-fuels-based generation. Solar power is becoming so cheap that many utilities are trying to de-incentivize its installation to prevent the instability problems that a large proportion of intermittent energy resources could create in the power grid.

Power Vendors: Move one slot upstream in the solar value chain, and you’ll face the most aggressive market – in the manufacturing of the solar modules. Many of these companies, mostly from Asia, have been working in the red (at losses) for years hoping that it will get better at some point.

In the meantime, the panel manufacturing industry is inundated with excess capacity and sunk costs, imposing bitter exit costs. Incumbents prefer to stay in the fight, waiting and hoping that consolidation and bankruptcies will clear the space at some point.

Fierce Rivalry: Prices for solar panels have been consistently declining for the last 20 years with an accelerated decline over the last decade. Analysts predict that prices will continue to drop an additional 20 percent annually over the next 5 years.