Canadian Solar - Case Solution

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 in 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 it can maintain its status as the 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 economic recession of 2008 influenced the solar power demand and the overall industry (p.277).
• Shortages of silicon made the prices augment, and once the industry realized it was not a precious material, the prices of silicon dropped drastically (p.277 and p.287).

Political/legal |

• The government positively influenced solar PV module installations through incentive programs, renewable support schemes, subsidies, stimulus programs, or Feed-in Tariff Programs (at least 14 countries mentioned on p.289).
• The Spanish government has put a cap to control the growth in 2009 and 2010 (p.289).
• Japan wanted solar power installed in 70% of new homes (p.289)

Technological |

• Investments in thin-film technology1 claimed to have the highest efficiency of any solar PV cell in the world (p.281).
• Companies, including Canadian Solar, also compete based on technology (p.280).
• Investments in research and development and appropriate technologies are required to develop smaller yet more efficient poly- and monocrystalline PV cells.

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, a growing population, and consumer 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…