STRATEGIC MANAGEMENT

Canadian Solar: Strategies for Growth

Executive Summary

The government incentive was responsible for changed positive outlook of the company. This new dimension of increased global expansion and growth of PV market, and increase in the development and demand of solar energy presented a managerial dilemma for the management of Canadian Solar.

The industry saw capacity growth, largest in its history, of around 5.6 gigawatts to around 14.73 gigawatts in 2008. According to industry analysts, the future of industry largely depended on two factors; government support and renewable energy schemes.

The internal condition of the firm is stable. However, there are certain financial constraints which the company needs to address. According the analysis, conducted through space matrix, the company needs to pursue competitive strategies in order to improve its current position. The company finally posted a profit after posting losses for the preceding years. This change was achieved mainly due to supportive initiatives by the government. The overall profitability of the company improved as indicated by profitability ratios. Return on assets and equity improved while return on investment declined.

The market has lower barriers for entry due to medium to low technological know-how and low capital requirement to manufacture a PV module. The 2008 market share figures for Canadian Solar are not very encouraging. The Company is vertically integrated and only related to production of solar energy products. The company should diversify its business in other green energy sectors.

Canadian Solar: Strategies for Growth

Introduction

The case revolves around one of the major PV cell producers in Canada, the Canadian Solar. Dr. Shawn Qu, the founder, Chairman and President of the company was seeking creative strategies as the company achieved a CAGR of 135 percent. The company was recovering as it only generated revenues of USD 9.7 million and USD 705 million in 2004 and 2008 respectively. One major reason of this strong growth is the supportive incentive programs by government in order to encourage the development of PV (Photovoltaic) technology. For many previous years, solar energy has been considered one the fastest growing technology in the world (Ivey 2010, pp.2).

However, the global economic disaster and the credit crunch along with change in the Spanish incentive program had resulted into the oversupply of PV during the first half of year 2009 (Gunther 2009, pp.2). The demand changed again during the summer. The forecasts were inaccurate which led to the issue of oversupply of solar modules. This fluctuation in demand led to change in the anticipation by market for Canadian Solar. According to analyst of Deutsche Bank, revenue of USD 395 will result into net losses of around USD 18 million (Deutsche Bank 2009, p.3). However, this forecast was revised after two months to USD 574 million and Profits equal to USD 50 million.

The government incentive was responsible for changed positive outlook of the company. Canadian Solar would directly gain from incentive program focused towards Canada and China. For Instance, in Ontario an incentive program to promote green energy (Feed-in Tariff (FIT) program) was released with requirements for domestic ...