Vestas case study

Résumé du document

Scope: Vestas is producing wind turbines, so we can say it is operating in the global wind turbine industry. This is the industry which is analyzed in part 2 of the project.

There are four big players in this industry, Vestas being the market leader. For the competitor analysis we decided it is not the best choice to analyze GE (second in market share) because they also have other activities than wind turbines. Enercon was next in line, and would have been the best choice, however due to lack of data we had to analyze the fourth competitor: Gamesa. As the task is only to recommend a benchmarking process, no actual comparison to a given competitor is done.

Models and theories:
Question 1: A brief analysis of the industry – Porter's 5 forces model is used with the 6th force added.
Question 2: Jobber's CA framework was chosen because it is well-structured and can provide a detailed analysis. For reflecting on Gamesa's business plan Hutt and Speh's 3-bridges business model is considered suitable.

Extraits

[...] Product form competitors (Technically similar) 2. Product substitutes (Technically dissimilar) 3. Generic competitors (solve/eliminate same needs) 4. [...]

[...] Demand being larger than supply - http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C-F2A7B446C1D7 page 15 [7]http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C- F2A7B446C1D7 page 15 [8]http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C- F2A7B446C1D7 page 15 [9]http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C- F2A7B446C1D7 page 16 The rotor, nacelle, machinery, and tower foundation - http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C-F2A7B446C1D7 page 16 [11]http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C- F2A7B446C1D7 page 16 [12]http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C- F2A7B446C1D7 page 16 [13]http://360.datamonitor.com/Product?pid=5A0064AF-4869-4940-A18C- F2A7B446C1D7 page 18 [14]Gamesa Corporacion Tecnologica SA SWOT Analysis “Company profile” [15]Gamesa Corporacion Tecnologica SA company profile [16]Wind Farm Development and Sale: Gamesa Energía (Wind Farms) Gamesa Corporation Business plan 2013-2015 [18]Benchmarking A summary of various articles, Erik C. Krogager [19]http://www.vestas.com/en/about-vestas/strategy.aspx Global wind turbines Industry profile, Datamonitor Turbines and services Vestas' CEO Sustainability statement John P. Moriarty En route to a theory of benchmarking Benchmarking A summary of various articles, Erik C. Krogager Figure 2David Jobber ”Principles and Practice of Marketing”, McGraw-Hill Figure Identify competitors 1. [...]

[...] Following this framework, the first step is to identify the closest competitor. For that reason the focus of our research will be Gamesa Corporation Tecnologica AS, one of the leaders within wind turbine industry with market share equal to The strengths and weaknesses of Gamesa seem to be as follows: Strengths: Global production platform and strong portfolio Solid market position Strong geographic presence Weaknesses: Lack of scale Declining financial performance They have set up a number of objectives for the near future. [...]

[...] Gamesa's Business plan for the period 2013-2015: The plan clearly shows that they will emphasis on “Customer Benefits Bridge” as well as “Company Boundaries Bridge” Customer benefits- aiming for higher customer satisfaction and value creation (stronger relationships Company boundaries- establishing strong and long-term partnerships with suppliers and other businesses Lean organization, eliminating overlaps, reducing corporate units, and facilitating quick decision making (reactions). Focuses on basic business processes (BBP)[17] Benchmarking The analysis so far shows that the global wind turbine industry, although at slower speed, is expected to grow in the future. This leading to ever- growing competition on the market is the main reason why Vestas needs to implement appropriate benchmarking process. [...]

[...] Question Jobber's[3] CA framework was chosen because it is well- structured and can provide a detailed analysis. For reflecting on Gamesa's business plan Hutt&Speh's 3-bridges business model is considered suitable. Industry Analysis Due to the sheer amount of players on the market (142)[4]and the differentiation created by patents, the market in which Vestas operates is a Monopolistic Competition Porter's 5 forces Buyer Power Because there are many suppliers the buyers have many alternatives to switch, meaning high bargaining power Globally the number of buyers is large, each country having at least one national supplier and with a tendency for adding more[5], this means low bargaining power[6] The market growth started to decrease in speed[7], although still growing; it increases competition within the industry increasing the buyers' bargaining power Although the turbines themselves are differentiated by patent issues, the end product is more or less the same, making switching easier high power The switching costs are higher due to different technologies and long term contracts lower power[8] Supplier power Some components of the turbines like the cooling systems are only produced by a few suppliers high bargaining power[9] (oligopoly less players) Most of the cost of the turbines are made up by 4 components[10], so even though there are plenty suppliers for these parts, they know they have the upper hand + quality matters - high power (supplier quality & size) The degree of differentiation not being so high, the switching costs are not so high low power[11] The suppliers tend to integrate forward, manufacturing whole turbines, this also increases their power[12] Substitutes The reduced environmental impact of wind turbines reduces the threat of fossil fuel plants Compared to fossil fuel plants the efficiency of wind farms is much lower, and much cheaper[13] Also, due to the high set-up costs the switching costs for buyers are lower, therefore increasing the threat of substitutes New entrants: The market has high requirements aimed at engineering, manufacturing and construction expertise due to the complexity of the final product and activity low threat this is further decreased by patents and licenses Considering the significant initial manufacturing costs it is obvious that the entrants have to be in possession of an enormous capital low threat The industry has been rapidly growing over the past few years therefore it is very attractive, but, well established companies such as Vestas can look at them as a medium threat Rivalry: Few market leader companies hold the majority of global market share they have a determinative role within the industry lower rivalry Due to high switching and fixed costs for buyers, the degree of rivalry among these “players” is lower The very recent deceleration in the speed of the market growth, contradicts overall statistics of the past years increased rivalry Networks Partnerships with competitors are reduced because the market is so global, thus making alliances harder due to direct competition harsher conditions The relationships with the buyers and suppliers are tighter due to long term contracts and quality needs better conditions All in all we can say that industry conditions are at a moderate level. [...]