Year

2010

Political factors
Most European countries have robust FIT structures. German, Spanish and French Governments particularly supportive to solar power, although some recent changes have made some markets e.g. Spain less attractive.

2010
2010 2010

Limited number of suitable sites for solar generation close to transmission lines; requires infrastructure development, possibly requiring Government support
Government subsidies for solar power under pressure due to global economic crisis e.g. caps and reductions in Spain China approves Golden Sun policy to create IPPs in China, reimbursing 50% of capital spending on >500 MW installations, with 70% reimbursement for installations in regions without grid access

Year
2010 2010

Economic factors
Solar power costs $0.15-0.40 per kW/h; still too high to be competitive without subsidies Complex subsidy structure in US; some changes to ITC tax credit to extend the subsidy to utilities, and DOE offers loan guarantees of $6bn for production of solar plants in US. PPA s can be used to raise financing. Subsidy rates in Italy amongst best in Europe EUR 0.36-0.44/kWh, but recent changes to Spanish subsidies reduce attractiveness of Spanish solar market. Lower margins for systems (5-7%) compared with modules (55%) EU and US solar project financing environment still very challenging in wake of credit crunch, banking crisis and global recession; this is major industry constraint

2010 2010 2010

2010

Module supply predicted to outstrip demand; c-Si prices drop by 35-45% over 2008 prices. Supply of thin-film modules remains unaffected. Drop of c-Si wafer prices of 12% between Q4 2009 and Q1 2010; reduces LCOE price differential between CdTe and c-Si
First Solar CdTe module cost/watt of <$0.84, system cost/watt of $2.17, Capex/watt of <$0.80, and an energy payback time of 0.8 years First Solar share price c. $110 per share First Solar has single A rating on corporate debt and is the only net cash positive module producer; balance of $552m at end of Q1 2010

2010 2010 2010

Year
2010-12 2010

Socio-cultural factors
Demand for PV projected to increase by 27% Sustainability not yet an acceptance criteria for customers

Year
2010 2010

Technological factors
First Solar is effectively tied-in to CdTe technology; 18% theoretical maximum efficiency compared with >30% for c-Si First Solar CdTe module cost/watt of <$0.84, system cost/watt of $2.17, Capex/watt of <$0.80, and an energy payback time of 0.8 years; CdTe currently outperforms all other technologies

2010
2010 2010 2010

c-Si players account for 5x market compared with CdTe.

Limited number of suitable sites for solar generation close to transmission lines; requires infrastructure development CIGS achieves 19.9% conversion efficiency in tests (20% higher than best CdTe cell). Potentially disruptive technology but not at commercial scale yet First Solar continues its own internal R+D and scans environment for potential acquisitions for alternatives to CdTe. Also exploring grid scale storage technologies

Year
2010 2010 2010 2010

Environmental factors
Renewable energy industry is differentiated by image of clean and sustainable c-Si and CdTe have 50-100x better carbon footprints than coal/oil generation Life-cycle analysis used to evaluate environmental impact of solar modules CdTe exhibits best sustainability characteristics of PV technologies despite toxicity of CdTe

Year
2010 2010

Legal factors
11 US states had adopted RPS standards so that 20% of power would come from renewable sources by 2020. EU regulations in place to force solar companies to recycle modules appropriately

Culture Onion: Glasstech/Solar Cells Inc.

Adapted from Hofstede (2001)

Name change from Solar

Cells to First Solar upon acquisition by True North
Symbols Heroes

Search for technology suitable for large scale deployment Application of glass expertise to solar modules Belief that glass substrate could be used as basic building block for solar modules Aim to reduce cost of solar modules by avoiding expensive crystalline bulk silicon

Values

Rituals

Charles Fritts (inventor of first photovoltaic device) Harold McMaster the Glass Genius Infused company with his own money Offered to pay back investors when Glasstech failed

Painstakingly slow research to develop a commercially viable process for CdTe thin films

Culture Onion: First Solar

Adapted from Hofstede (2001)

Name change from Solar

Cells to First Solar upon acquisition by True North
Symbols

Mission statement: to create enduring value by enabling a world powered by clean, affordable solar electricity Sustainable development group Criteria based on cost/watt at module and system level, low capex/watt for manufacturing capacity, and fast payback time Growth metrics: 30% market share by 2015; RONA, share price

Heroes

Values

Rituals

Mike Ahearn (lawyer; long-time First Solar CEO, then Executive Chairman. Former partner at True North/JWMA John Walton (son of Wal-Mart founder Sam) is also founder of True North

Bonus of every associate linked to system cost/watt improvements at module level Incremental efficiency improvements CopySmart manufacturing philosophy Vertical integration

Craig S. Fleisher, Babette E. Bensoussan (2007) Business and Competitive Analysis: Effective Application of New and Classic Methods. London, FT Press.

Issue

Time
Long term horizon Medium term horizon Long term horizon Long term horizon Medium/long term horizon Short /medium term horizon Short /medium term horizon Short /medium term horizon Short term

Frequency
Infrequent Infrequent Infrequent Infrequent Infrequent

Effort
Significant Significant Significant Significant Moderate

Consequences Impact
Significant Significant Significant Significant Significant Significant Significant Significant Significant Significant

Strategic

Ownership structure Metric-based orientation Choice of technology Position in the value chain Relationship with government inc. CSR policies Changes within subsidy markets Project Finance Environment

Frequent Frequent Frequent Frequent

Moderate Moderate Moderate Moderate

Variable Variable Variable Variable

Variable Variable Variable Variable

Operational

Increased competition Changes in production capacity Specific metrics

Short term

Frequent

Significant

Variable

Variable

Rivalry
Low

PV industry 1999 vs 2010

Entry threat

Low Low

Substitute threat

HIGH

Low

Low

Buyer power

Supplier power

Pre-1999: inside-out

Post-1999: outside-in
Markets over resources: aiming to compete with the entire electricity generation market Driven by market opportunities (aim to shift towards transition and sustainable markets) Adaptation to changes in market forces Adaptation to environment (e.g. reacting to changes in government policies) but also adaptation of environment (influencing Government policy) Attaining advantageous position (e.g. 30% market share by 2015) External positioning, adaptation to environment and adaptation of environment Acquiring necessary resources e.g. Turner Renewable Energy to move into BOS production Bargaining power and mobility barriers (e.g. financial strength to acquire Turner, economies of scale)

Emphasis:

Resources over markets: Building on glass technology core competences, adapting to PV market Driven by strengths in competences (glass/CdTe) Resources, competences, value chain Adaptation of environment; shaping the solar industry

Orientation:
Starting point: Fit through:

Strategic focus:

Attaining distinctive resources (e.g. CdTe technology) Building resource base: 20MW annual capacity, and commercially viable thin film CdTe process External positioning

Strategic moves:
Tactical moves:

Competitive weapons:

Superior resources and imitation barriers (e.g. CdTe, Harold MacMaster tacit knowledge)

Choice of market(s): subsidised vs transition vs sustainable; also geographical choices Position in the value chain (aligning resources and markets)?
B
Puzzle: Find the best

Choice of technology (CdTe vs alternatives) Corporate control style/culture (financial vs strategic control vs strategic planning)

B
Dilemma: Make a Choice

A
Trade-off: Strike a balance

A
Paradox: Best of both worlds

Cost vs efficiency of modules and systems

Position in the value chain (aligning resources and markets)? Compliance vs control (attempting to shape regulatory environment, whilst reacting to environment through market and value chain choices)

Adapted from DeWit and Meyer, 2010

Adapted from DeWit and Meyer, 2010

External:
Competitive threats from other technologies due to price drop in c-Si Global economic crisis leads to international changes in subsidy policies and challenging finance environment

Context

Internal:
Owned by venture capitalists Requirement for shareholder value Eroding margins, declining share price Recent move of Mike Ahearn to Exec. Chairman role

First Solar 2010

Content
Operational targets for performance, market share Bonuses linked to cost/watt efficiency Efficiency roadmap for CdTe CopySmart process for designing manufacturing plant Move into plant design and production for utilities Increased role of Mike Ahearn and Lisa Krueger in Government lobbying

Process

Metrics driven: RONA, cost/watt, market share, efficiency targets Increased production capacity Vertical integration to take more control of value chain Continued focus on CdTe thin film technology Aim towards transition and sustainable markets Increased liaison with Government

External:
Utilities starting to build PV plants Growing solar energy industry Acknowledgment of climate change (Kyoto Protocol) leading to greater interest in solar energy

Context

Internal:
Harold McMaster is 83 McMaster has infused the company with his own cash True North offer to acquire the company in 1999

Solar Cells 1999

Process
Development of technology Focus on low cost Gradual increases in efficiency of CdTe Internal competences centred on CdTe technology

Content
Slow, painstaking research Gradual increase in capacity (20 MW by 1999) Focus on cell/module production

foundations laid in the past Others propose that organizations deal with uncertainty through the processes of revolutionary frame- breaking changes Greiner - Development Model(1972; Greiner and Cummings, Strategic Management Dynamics, 2009)

Company grows; several acquisitions, vertical integration, operating in US, Asia, Europe
Autonomy

Metric-based orientation; corporate centre imposes efficiency and performance targets

Control

Psychological Saturation

Red Tape

Bruce Sohn reflections on success; will they be able to maintain pace?

Leadership

Original founder McMaster sells to True North; rename company First Solar

CopySmart philosophy for manufacturing locations; life cycle analysis of modules

Organizational growth and development punctuated by a series of crises Decision-making in these crises does not conform to the processes of logic

Financial Crisis, Changes in subsidy policies, c-Si price crash

Targeted market share

Alter targets Value chain activities

Adapted from Senge, 1990 The Fifth Discipline and Argyris, 2006 Teaching Smart People how to Learn in Gallos, J.V. (ed) Organization Development: A Jossey Bass Reader p267-285

Decisions

Choices

Actions

Adapted from Senge, 1990 The Fifth Discipline and Argyris, 2006 Teaching Smart People how to Learn in Gallos, J.V. (ed) Organization Development: A Jossey Bass Reader p267-285

Events; CdTe technology Cost leadership

Shareholder value

Market share

The limits to growth archetype. Adapted from Senge, 1990 The Fifth Discipline

Intention vs Emergence
Direction vs. opportunism

Pre-1999
Opportunism: applying core competences in glass technology to PV Flexibility: Experimentation with different technologies Learning: learning from failures at Glasstech; painstaking research Entrepreneurship: sometimes exploring fruitless avenues e.g. amorphous silicon Support: focus on improving technology to the point where it is commercially viable

Post-1999
Direction: targeted growth and market share Commitment: CdTe technology improvement roadmap, CopySmart Programming: targeted CdTe efficiency improvements Optimisation: system cost/watt targeted improvements; CdTe roadmap Programming: CopySmart, metrics

Commitment vs. flexibility Programming vs. learning Optimisation vs. entrepreneurship Programming vs. support