At the end of September 2009, the CEO from the Nasdaq-traded solar cell and module manufacturer, Canadian Solar, was at an inflection point in the formation of its international strategy. The company had experienced dynamic growth throughout the past 5 years, which was mostly caused by aggressive incentive schemes to install solar photovoltaic (PV) technology in Germany and Spain. However, both the credit crunch and some adjustments to government incentive programs caused a decline in the demand for solar PV technology, and predictions for 2009 were negative. Additionally, fierce competition was taking place in the industry. The company chose to focus on 10 major markets in the upcoming years where strong renewable policies were in place. Are changes to Canadian Solar's global strategy necessary?
Paul W. Beamish; Jordan Mitchell
Harvard Business Review (910M19-PDF-ENG)
April 05, 2010
Case questions answered:
- Problem statement – Canadian Solar Case Study
- External environment analysis
- Key success factors
- Internal organization analysis
- Value chain analysis
- Business-level strategy
- Corporate-level strategy
- Alternatives for Canadian Solar
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Case answers for Canadian Solar
Problem Statement – Canadian Solar Case Study
Canadian Solar has been successfully growing since its foundation in 2001. Its success was compromised during the 2008 downturn in the economy, which led to a net loss of $9.4 million for the company. The weakening demand and rapidly declining silicon prices have resulted in major inventory write-offs, high-interest rates on short-term loan facilities, and an increase in the allowance for doubtful accounts. Canadian Solar already had a few well-established international competitors in the solar photovoltaic (PV) industry; nonetheless, more competitors could easily enter the market thanks to a significant price drop of silicon.
The company’s stock price was trading at a large range from $3.00 to $19.91 during the last year; the last recorded stock price was $16.74 on September 25th, 2009, which might indicate that it is overvalued. It is looking for methods to foresee changes in the market as well as to adapt strategically to these changes so that they can maintain their status of top solar module producer in the world. Therefore, an analysis will be completed to determine the best methods to ensure that Canadian Solar remains competitive globally in the solar PV industry.
External Environment Analysis
The main micro-environmental factors that influence the PV solar industry are economic, political/legal, and technological (refer to Appendix 1).
The variety of favorable government assistance programs has led to a large growth in solar power projects worldwide. The industry life cycle is growth. There is no one among PV producers that grasps a market share larger than 10%2; hence, the industry is considerably fragmented. The demand for electricity will continue to increase, thanks to subsidized renewable-power incentive programs, growing population, and consumer’s income expansion. Consequently, a higher demand for electricity will result in a higher demand for solar power.
According to this Canadian Solar case (p.285), the PV industry’s size is small with an increasing trend thanks to a greater public interest in clean energy. Porter’s five forces analysis has to be conducted in order to…