Question

SolarNRG

When Julie Bell arrived at her office early in the morning, her assistant David was just getting back from Starbucks with fresh coffee. David knew that Julie would need a strong black coffee this morning, because the news was not particularly good.

Julie was the VP of marketing at SolarNRG, a solar panel firm in California established in 1998. The bad news was that the federal government was changing its energy policy, redirecting the focus on renewables back to fossil fuels such as coal. There were significant budget cuts for installing solar panels on government buildings and the tax incentives given to corporations for installing solar panels were being phased out. This was very troubling for SolarNRG, as their business enjoyed steady growth during the last decade on the back of strong demand from commercial establishments in addition to the contracts they won from several military bases in Southern California.

David was visibly confused, “they are trying to create jobs by shifting the incentives from the growing renewables industry that employs 250,000 to the declining coal industry that has one-fifth of that?” Julie did not even hear David’s rant, she knew that the demand from their primary markets were going to take a hit and she would have to find a new market soon.

A Brief History of the Solar Panels Industry

All the energy that we see on Earth ultimately comes from the bright star at the center of the solar system. The sun’s rays heat the atmosphere and provides nutrition to all living beings through photosynthesis. Coal and oil, which powered the industrial revolution and the exponential economic growth in the 20^th century, are basically fossilized remains of ancient gigantic forests from millions of years ago. So it makes sense to get energy directly from the sun, not only for environmental reasons but also for sustainability.

The ability of some materials to create an electrical charge from light exposure was first observed in 1839 by French physicist Edmond Becquerel. The first commercial design appeared in 1881, but it was quite inefficient and expensive. The designs iteratively improved throughout the 20^th century and the investment in solar energy started increasing considerably in the 1980’s when global warming started being discussed widely. This resulted in a considerable decrease of manufacturing costs and solar farms started appearing. In the new millennia China took leadership, producing more than 60% of global solar panel demand.

Many US based companies, that sell and install turnkey systems complete with high-capacity batteries, outsourced their parts to China and benefited from the economies of scale, reducing the cost of their offering. SolarNRG, on the other hand, succeeded in servicing their locally made parts when breakdowns occurred. Hence they provided services in combination with the product after purchase. This was their main appeal to their current clients like the military bases.

While sipping her coffee, Julie started reviewing her existing contracts. It would take some time to complete them, thus they were not in immediate crisis mode; but the demand from their current customers would likely dry up in the near future. She knew they had to break into the consumer market, where they had no experience. They would have to come up with a new product line for households, figure out which households to target and change their marketing message. “Figuring these out will require a lot of research, I am not even sure where to start :/” thought Julie.

1.Recall the personal value equation we discussed in class and describe the value of SolarNRG’s offering to their current clients according to this framework.

Answer 1

The personal value equation is given as below=

Value = Benefits received − [Price + Hassle]

If we look at the value that is being created by the company, it is primarily originated from the aftersales service that is being provided to the customers after they buy the solar panel form the company. While the rivals of the company get their panels being manufactured in China, they produced locally and thus they are able to address the breakdowns easily after the purchase.