Chat with us, powered by LiveChat Analyze the company using SWOT, PESTLE, Porter’s 5 Forces and VRIN. Craft a strategy for the company based on the strategi - School Writers

Analyze the company using SWOT, PESTLE, Porter’s 5 Forces and VRIN. Craft a strategy for the company based on the strategi

Analyze the company using SWOT, PESTLE, Porter's 5 Forces and VRIN.

Craft a strategy for the company based on the strategic issues. Research the company's business model, internal resources, external environment, competitive landscape, and prior growth strategies in order to come up with your own recommendations.  Based upon your analysis, develop a set of recommendations for the company to pursue. 

  • Introduction 
  • External Environment 
  • Internal Analysis
  • Competitive Landscape
  • Recommendation
  • Summary

2000 words paper.


This case was written by Professor GENG Xuesong and Lipika Bhattacharya at the Singapore Management University. The case was prepared solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Copyright © 2017, Singapore Management University Version: 2017-2-5

SMU Classification: Restricted


I keep a list on my desk; I have to keep reminding myself, that there are over 450 solar

companies that have failed, and gone bankrupt. There’re many stories of companies that

have made the wrong technology bet or invested in a technology before it’s time. You have

to pick the right technology, at the right time, and it’s a very serious decision because you

are, really are betting the company on those decisions.

– Steve O’Neil, Chief Executive Officer, REC Solar

On a sunny afternoon of May 2017, Steve O’Neil, CEO of REC Solar (REC), a leading company

in the solar industry, was attending a meeting in the company’s operational headquarters in

Singapore. His hand phone had been vibrating relentlessly and he finally took the call after the

meeting had just finished. He was informed that yet another solar company, Solar World, had

filed for bankruptcy. Just a few weeks earlier, two renowned solar companies, Suniva and Sun

Edison had filed for bankruptcy as well.

The solar industry was sailing on choppy seas again. The industry had been in constant turmoil

over the past several years due to fluctuating material prices, falling solar panel prices, industry

overcapacity, aggressive competition, and demand unpredictability. As O’Neil called it, the

industry was truly a “solar coaster”. More than a decade ago in 2005, the shortage of silicon

supply had forced many solar companies to close down or opt for consolidations. In 2008, solar

companies suffered badly from the aftermath of the global financial crisis. The industry gradually

picked up pace in 2013, gaining momentum from rapid customer adoption and new renewable

energy programmes. High profitability and growth motivated many companies to expand

capacity substantially. But in late 2016, the solar industry began riding the downslope of the

“solar coaster” again, as panel prices fell suddenly. 2017 looked a tough year financially for REC.

O’Neil and his top management team had to respond quickly to the market changes. Could REC

offer a price-cut on products to stay competitive? Could REC diversify their product scope and

geographic scope to minimise the market uncertainty? They also needed to examine whether their

long-term strategy was still viable for sustaining the competitive advantage in the ever-changing

market. Could REC focus on developing advantages in manufacturing, technology or service?

Could REC scale up the investment in new but uncertain technologies? In spite of the current

turbulence in the market, O’Neil firmly believed that the solar industry was on the cusp of

tremendous growth. The growth potential of the market was so huge that REC could potentially

double its market share, while still being selective in choosing their customers. Nevertheless, the

question of how REC’s current strategy could be changed weighed heavily on his mind.

Solar Market Solar technology dated back to the 1880s, and was based on the science of converting sunlight

into electricity using crystalline silicon, also known as the photovoltaic (PV) effect. High cost

and low conversion efficiency had prevented its commercial use until technological advances in

the late 1990s made solar power more affordable. Ever decreasing cost coupled with growing

energy demand, concerns about the dwindling sources of traditional energy and their

SMU-18-0XXX REC Solar: Strategising on a Solar Coaster


SMU Classification: Restricted

environmental impact, as well as various forms of governmental subsidies, finally led to an

exploding global demand for solar power energy after 2008.1

Solar energy had become the fastest growing renewable energy source by 2016. Globally, solar

panel installation had grown from less than 1 gigawatts (GW) in 1990 to over 23GW in 2009,

and then soared to 70GW in 2016. It was projected to grow to 250GW annually by 2040 at the average compound annual growth rate (CAGR) of 5 to 7%. Solar power was estimated to account

for around 15% of world electricity generation by 2040, up from about 1% in 2016.2

The cost of solar power had dropped from US$2/kWh (per kilowatt hour) in late 1970s to around

US¢ 7¢/kWh in 2016.3 As a comparison, the cost for hydropower was about US¢ 0.85¢/kWh,

US¢ 1.7¢/kWh for nuclear, US¢ 2.13¢/kWh for fossil fuel, and US¢ 3.4¢/kWh for natural gas.4

It was estimated that solar power cost would further decrease to around US¢ 4¢/kWh by 2040.5

The development of the solar industry had been primarily policy-driven.6 Germany had taken

the lead by providing generous subsidies to solar panel manufacturers in the early 2000s. Spain,

Italy and France had followed with similar measures. By 2010, Europe alone had accounted for

74% of the global demand for solar modules.7 However, after the 2008 global financial crisis,

these countries had dramatically curtailed their solar energy programme subsidies. Asia had

replaced Europe as a substantial solar market and reached 65% of the total global demand in


Japan had become an important market in mid-2000s with its ambitious plans of using solar

power for large scale electricity generation.8 In 2003, Japan introduced laws which made it

mandatory for electric companies to use a specified amount of electricity from renewable energy

sources such as solar and wind. In China, the government had identified solar industry as one of

their focus areas, and offered export credits and R&D support to boost solar products

manufacturing since 2000.9 China had taken the lead over Germany as the largest solar panel

manufacturer in the world in 2013 and became the most dominant solar player of the decade. The

market in the U.S. had also picked up substantially since 2010. With the government

incentivisation schemes, the demand for solar products in the US continued to grow exponentially

since 2013 with the state of California dominating the U.S. market demand.10

The newly installed solar capacity in 2016 globally was around 34GW in China, 7.7GW in the

U.S, and 7GW in EU.11 China, EU, and the U.S. were expected to dominate solar PV installation

volumes through 2020, but market growth was expected to be particularly higher in Asia.12 The

Japanese government continued to support the solar industry with the ambition of increasing its

1 Gil Knier, How do Photovoltaics work?, NASA, 6 August, 2008,

nasa/2002/solarcells, accessed May 2017.

2 Bloomberg New Energy Finance, New Energy Outlook 2016, story-unfold/, accessed May 2017.

3 Jeff Siegel, Chris Nelder “Investing in Renewable Energy: Making Money on Green Chip Stocks”, Jhon Wiley & Son’s., Inc,

2008, accessed May 2017. 4

5 Bloomberg, New Energy Outlook,, accessed May 2017.

6 World Energy Council, Solar,, accessed May 2017. 7 National Renewable Energy Department, U.S. Department of Energy, 2010 Solar Technologies Market Report,, accessed May 2017. 8 David Cyranoski, Japan goes for the sun, “”, April 29, 2009,, accessed May 2017.

9He Nuoshu, Can Brazil replicate China;s success in Solar?, “China Dialogue”, 20June, 2017,, accessed May 2017.

10 Daniel Wood, Watch 30 years of U.S. Solar Industry Growth, “”, US Department of Energy, January 30, 2015,, accessed May 2017. 11 Bloomberg New Energy Finance, New Energy Outlook 2016,, accessed May 2017. 12 Brian Publicover, APVIA sees steady Q1 growth in Asian PV, “PV Magazine”, May 26, 2017, https://www.pv-, accessed May 2017.

SMU-18-0XXX REC Solar: Strategising on a Solar Coaster


SMU Classification: Restricted

installed capacity multi-fold by 2020. 13 14 It was also forecasted that India would quickly

overtake Japan as the third largest market of solar panels (Refer to Exhibit 1 for Global Solar

demand monitor Q1 2017). Moreover, countries like Mexico, France and Australia were expected

to see strengthening demand over the next few years. 15

Solar Value Chain

The value chain in the solar industry ranged from raw material production (like silicon) to solar

panel production, to installation and service for end consumers (refer to Exhibit 2: Solar Value

Chain). The first stage was the production of solar grade silicon wherein metallurgical grade

silicon was converted into high purity polysilicon. The next stage was to cast the polysilicon into

ingots and wafers, which were the inputs for the production of solar cells. The array of solar cells

were then assembled into solar panels (also referred to as solar modules) encapsulated within a

protective glass. The final stage involved installing solar energy systems for residential,

commercial, or utility customers.

The cost in each of these stages continued to be driven down by technological enhancements.

Polysilicon costs had reduced from US$ 0.43/Wp in 2010 to US$ 0.18/Wp in 2015. 16

Historically, polysilicon constituted half of the price of a finished solar module until the 1980s.

However, after the fall in prices of polysilicon in the 90s and then drastically after 2008, this

component cost constituted only about 30% of the total module cost.17

The production cost for ingot/wafer and solar cells also dropped continuously as a result of

technology enhancement that reduced the silicon consumption. The average silicon consumption

for manufacturing solar cells was expected to drop from 4.8 grams per watt (g/W) in 2016 by 25%

to 3.6 g/W in 2020. 18 Assembling cells into solar panels was one of the simplest processing steps

with the labor cost minimised due to automation. But the assembly process consumed an

extensive list of commodity materials like glass, sealant and aluminum etc. 19 In the final

installation stage, the Balance of System (BOS) components, such as mounting structures,

cabling, electrical components (inverter, meters, surge protection etc.), labor and overhead costs,

represented more than half of the costs for the total solar system. Among them, the inverter costs

embodied the largest component of BOS, accounting for about 10% of the total cost of the PV


Besides raw materials, the cost of a solar panel was significantly influenced by technology and

scale.21 The solar cell efficiency (i.e., the percentage of solar radiation converted into electricity,

or the electrical power generated per unit surface area) was expected to play the largest role in

solar panel cost reduction. An efficiency increase of 1% could result in a reduction of up to 10%

13 Newsletter, “Japanfs”, The spread of Solar Power Generation in Japan, June 30, 2008,, accessed May 2017.

14 IEE Power and Energy Magazine, Ingram Publishing, First Solar, Feb 20 2013,, accessed May 2017. 15 Julia Pyper, Global Solar Market to hit 85 GW in 2017, “Green Tech Media”, April 11, 2017,, accessed

May 2017. 16 Polysilicon Spot price, Energy trend, Price quote,, accessed May 2017.

17 Eric Wesoff, Solar Power Year in Review, “Greentechmedia”, December 23, 2011,, accessed May 2017. 18 Irena, Solar PV Cost Analysis,

SOLAR_PV.pdf, accessed May 2017. 19 Greenrhinoenergy, Solar Industry, PV Modules,, accessed May 2017.

20 Balance of system (BOS) to module pricing ratio opens up from 50:50 in 2011 to 68:32 this year, “Greentechmedia”,

November 15, 2012, new-gtm-repo, accessed May 2017.

21 Irena, RE Technologies, Cost Analysis, Solar Photovoltaics, June 2012,, accessed May 2017.

SMU-18-0XXX REC Solar: Strategising on a Solar Coaster


SMU Classification: Restricted

of the total system ś cost per Wp.22 23 24 Moreover, economies of scale were crucial for the

industry as it required high fixed cost investment in equipment, overhead and managerial costs.

To remain competitive in the industry, at least 1 GW of scale was required. The learning curve

in the industry was phenomenal as well, because of required experience in installation,

maintenance, and process optimisation, and could reduce costs significantly. As a result, the

entire solar industry had struggled to stay on the steep learning curve. In 1976, solar panels sold

for US$72 a watt, which then fell to US$3/W in 2008, and then to US$0.5/W in 2016 and fell

another 30% in just six months.

Several hundred companies operated across the value chain in the global solar industry. Other

than polysilicon manufacturing which was dominated by a handful firms only, each part of the

value chain had anywhere from 50 to 75 companies making up to 90% of industry activity.25

Among all the manufacturing stages of the value chain, the solar cell manufacturing was the most

fragmented. The solar panel market was fragmented too, with no panel manufacturer having more

than 10 % of the market share. In the final installation stage, besides numerous small installers

(especially in the residential market), some integrated manufacturers provide designing,

financing and project management services at this downstream installation stage.

The customer of solar panels could be residential, commercial (e.g., on retail and industrial

buildings rooftops) and utility (e.g., power plants). The residential consumers were fragmented,

and most were one time buyers, making switching costs irrelevant, and the barrier to entry for

the installers was minimal.26 The commercial or utility market was much less fragmented. These

consumers had much larger power generation need, the solar panels they required were typically

much larger and more expensive than residential ones. However, the appearance factor of solar

panels in terms of color and look was not as important for commercial or utility buyers. The

installation design differed because commercial building typically had flat roofs, as opposed to

slanted roofs in most residential houses27. Though the demand for residential and commercial

solar panels was much lower than the demand from the utility sector (9%, 29% and 62%

respectively in 2016) all segments in the industry had continued to see substantial growth year

over year.2829 (Refer to Exhibit 3 for US Solar PV Installations).

REC: Company Background

REC was founded as a hand-washed wafer producing unit in Norway in 1996. Over the years the

company had grown to become a leading integrated solar panel manufacturing company, and the

largest European supplier of solar panels, producing more than 30 million solar panels as of end

2017.30 Its solar panels had generated 10 GWh of electricity for more than 12 million people

around the world. REC had established itself as a reputable, quality-focused solar panel

manufacturer over the past two decades and was well known for its product quality, advanced

technology, and exceptional customer service.

22 Wp stands for Watt peak which refers to the peak power value or the maximum output power achieved by a solar module under full solar radiation (under set Standard Test Conditions).

23 Solarmango, Watt Peak, Definition,, accessed May 2017.

24 Mercom Capital Group, Mercom Solar Intelligence Report, April 11, 2011,, accessed May 2017.

25 Finlay Colville, Consolidation in the Solar Industry, Think Again, “PV Tech”, Feb 15, 2017,

blog/45880, accessed May 2017. 26 Lucas Davis, A deeper look into the Fragmented Residential Solar market, Energy Institute at Haas, June 8, 2016,, accessed May 2017.

27 Alan Goodrich, Ted James, and Michael Woodhouse, Residential, Commercial, and Utility-Scale Photovoltaic (PV) System Prices in the United States: Current Drivers and Cost-Reduction Opportunities, p. 6-11,,

accessed May 2017.

28 Christian Roselund, The U.S. solar market nearly doubled in 2016 to 14.6 GW, “PV Magazine US”, February 15, 2017,, accessed May 2017.

29 Bloomberg New Energy Finance, New energy Outlook,, accessed May 2017.

30 REC, Company History,, accessed May 2017.

SMU-18-0XXX REC Solar: Strategising on a Solar Coaster


SMU Classification: Restricted

Moving to Singapore

The original market for REC was Europe. Until 2010, it had developed production capacities in

wafers, solar cells and solar panels in both Norway and Sweden. When the solar market shifted

gear with growing demand emanating from Asia and dwindling demand from Europe, REC

decided to expand its operations into Asia. The management team in the company was entrusted

with the task of finding an alternative headquarter that would facilitate coordinating its operations

and activities across the globe. Explaining the factors that influenced the choice, O’Neil said,

We looked at over two hundred locations around the world, before choosing Singapore. We

had a very detailed matrix with various criteria, including cost of labour, cost of utilities,

cost of materials, cost of logistics, and favourable climate for using chemicals. We chose

Singapore primarily because of the ready availability of human talent here, especially in the

semiconductor area, which is very similar to the chemical solar cell manufacturing process.

The location of the city as a major port, its logistics excellence, and proximity to materials

were important factors as well. Moreover, Singapore is a trade-friendly country, and the

government is very supportive. We work closely with Singapore Economic Development

Board (EDB). Singapore is also a good location for doing research, due to the availability

of human talent in our research study area.

The Singapore government had geared towards adopting an integrated approach towards

sustainable energy across power generation, transmission, distribution and consumption. For

example, it had initiated a collaborative program involving REC to provide new hybrid electricity

solutions comprising of solar energy and natural gas sources. With such government-backed

initiatives to go solar, Singapore served as a perfect backdrop as operations and manufacturing

headquarter for REC.31

The firm set up its new large scale integrated solar manufacturing facility in Singapore in 2010.

The new plant in Tuas was equipped with automated and integrated facilities to manufacture

wafers, cells, and panels in a state-of-the-art factory with multi-fold increase of its original

production capacity. REC favoured Singapore as a hub as the city had access to competent

research labs, which could help the company with research in latest technologies and product

innovation. REC had partnered with a leading solar institute, Solar Research Energy Institute of

Singapore (SERIS) (a research institute at National University of Singapore, NUS) to co-create

advanced products.

Change of Ownership

In 2015, REC joined forces with the Elkem Group, a Norwegian conglomerate,.32 The same year,

REC was rated as the most reliable, dependable and bankable solar company by New Energy in

the Altman-Z score.33 In a study of the major solar companies, REC had the lowest debt and

lowest debt/equity ratio (Refer to Exhibit 4 for REC debt/equity ratio).

Interestingly, many solar companies relied on huge amount of credit due to the long gestation

periods for investments involved in running a solar business. The downside of choosing products

of such companies is that these consumers may have to purchase third party warranties to cover

the risk that these solar companies are unable to fulfil their product warranty obligations, and

even then there was the risk of claims not being met due to caps and deductibles imposed under

the third party warranties.34

31 Ministry of Trade and Industry Singapore, Solar Nova Project, 2014/SolarNova.pdf, accessed May 2017.

32 REC, REC Factsheet,,

accessed May 2017. 33 The Altman Z-Score is a statistical tool used to measure the likelihood that a company will go bankrupt.

34 REC, Files, Documents, Fact Sheet, Altman Z Score, 2016,, accessed May, 2017.

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.

Do you need an answer to this or any other questions?