(Case originally prepared by Prof. Frank Cespedes & Prof.

Diane Badame) (Harvard Business School)

PV Technologies, Inc.: Were They Asleep At The Switch?

A Presentation by Group-1 Section B Alliance School of Business

Company Background
PV Technologies was founded in 1993 in San Francisco, California Was a global specialist in renewable energy

Were among the industry leaders in five product groups: Industrial Automation, Process Management, Network Power, Drive Technology & Climate Technologies
In 2010, it served the electric power industry and large-scale solar project developers in more than 25 countries giving them revenue of $30 Billion By October 2011, global revenue from the PV Inverter division, a unit within the Industrial Automation Group had reached $1.24 billion (4.1% of the total revenue) It earned this market share & revenue growth primarily because of its R&D and reputation for product reliability and efficiency

Case Intro
People Involved: Nathan Rubenstein (PVTs Director of Sales and Marketing) Jim Salvatori (PVTs Salesperson) Greg Morgan (Solenergys Chief Electrical Engineer) Solenergy Development LLC (one of the largest customer of PVT) was a major developer of energy generation systems. Solenergy was brought by Jim Salvatori

Solenergy got an offer from City of Barstow, California, to construct a PV solar energy power plant and was seeking a supplier of utility scale central inverters.
Solenergy conducted periodic confidential evaluations of the select group of companies it invited to bid on its major projects which was directed by Greg Morgan

Case Intro
In late July, PVT received Request for Proposal (RFP) from Solenergy. The closing date for the response to RFP was October 31,2011 In late November, Salvatori came to know from his sources that PVT was trailing the other competitors- SOMA Energy & BJ Solar Salvatoris sources were vague; they believed the evaluation was based largely on price but werent certain this was the only factor Morgans updated evaluation would drive the purchase decision ultimately Rubenstein & Salvatori were concerned with this, as their companys reputation & position in the marketplace were at stake

Photovoltaic Solar Renewable Energy Market

Total installations in 2010 was 878MW and the revenue was $6 billion
Total installations in 2009 was 477MW and the revenue was $3.6 billion US market for solar PV was forecasted to expand at a 30.4%CAGR during the period of 2010-2015 reaching 1906MW by the end of the period.

Buying and selling PV inverters

PV engineers designed and manufactured a variety of PV inverters for application ranging from small residential to large scale commercial, industrial, and utility scale systems.

Segments of PV inverters market :

Residential
Commercial/industrial Utility companies IN 2010 utility companies comprised 27.6% of the market commercial 42.4% and residential 30.1%

Integrated Marketing Communications

Relation between Salesperson and Decision makers

Trade journals & Sales collateral materials to

Raise product awareness Information on new products Build image and reputation Catalogs Trade shows

PVT Website
Product features and benefits Inform target audience about current developments Demonstration through videos Provide point of initial contact

Factors affecting specifications of PV central inverters

IEC 62446 standard is established by IEC Central inverter-most failure-prone component

Entry of Chinese firms into US market

Commoditization of PV Inverters

Solenergys product evaluation Program

Financial condition & the Product OUTCOMES: Bid prices of PVT are much higher than its competitors

Focus on expense control

Morgans dilemma about cost of products and its performance & operating cost

PVTs Management concerns

Salvatoris discoveries about the evaluations Negative impact on PVT They came up with four alternative responses

How PVTs products are different?

SOMA Energy Nominal AC output power Efficiency rate Expected service life (years) List price Warranty (years) 1.0 MW 96.5 12.5 $170,000 5 BJ Solar 1.0 MW 95 10.7 $160,000 5 PV Tech(Old) 1.0 MW 97.5 13.2 $180,000 10 PV Tech (New) 1.25 MW 98.5 13.2 $187,500 10

ANALYSIS OF COMPARATIVE FEATURES AND PRICE

SOMA Energy Effective Power Output Expected Lifetime Power Output List price/Exp. Lifetime Power Output 0.965 12.0625 14093.26 BJ Solar 0.95 10.165 15740.28 PV Tech(Old) 0.975 12.87 13860.01 PV Tech (New) 1.23125 16.2525 11536.68

PRICE is not the only element to take in consideration.

Note:

Effective Power output = Nominal ac output power * efficiency rate Expected lifetime power output = effective power output * expected service life

10

Different alternatives

1. Offer to extend the product WARRANTY at internal cost from 10 to 20 years

2. Offer a 99% UPTIME GUARANTEE at no cost for the customer

3. Accellerate the introduction of NEW INVERTER (1.25 MW with 98.5% efficiency)

4. Initiate a DIALOGUE with Morgan to find out the real output of the evaluation

Alternative 1: Extending Warranty

Extending the product warranty from 10 years to 20 years while the industry standard is only 5 years PROs : Reliable Sign of good quality. High standard. CONs : Relatively costly. Warranty is not key factor.

Alternative 2: 99% uptime guarantee

PROs : The offer would be unmatchable by the competitors. Signal of high reliability. CONs : Too costly, high impact on the profit. Other customers would ask for it.

Alternative 3: Introducing a new model of 1.25 MW

The most efficient and reliable inverter on the market. PROs : No change in pricing strategy, this is what the sector is looking for. CONs : Extremely risky and Expensive.

Alternative 4: Direct approach to Morgan

PROs : More personal approach Personalize the product for them. CONs : We rely not on public information. Call for help could make us appear as desperate.

CONCLUSION