Strategic Management - Canadian Solar

Strategic Management - Canadian Solar

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).

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). 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). 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 content. Canadian Solar uses Chinese land for significant production even though it is a Canadian Firm. The company has seven facilities for the sole production of Solar PV components. Almost 90 percent of its sales in 2008 were generated from Europe, even though the company operated mostly in Canada and China. The company was seeking significant changes within its management as the company planned to move into new destinations (for sales offices) including Germany, Spain, Italy, Japan and South Korea.

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. There has been many examples of companies, who expanded into different cultures and failed due lack of ability on managers part to understand and manage according to the culture of the Country (Ivey, 2010).

The financial crises of 2008 and its economic destruction continued in the year 2009, and the whole industry was in recession. The case requires a strategic solution, which a hedge fund entity wishes to implement in Canadian Solar so that the firm could attain double digit growth. The hedge Fund deems itself as engaged investor. The fund buys stakes in those companies where it thinks a strategic fix would enhance company performance and improve returns.

The Fund is seeking to maximize its investment as it uses its return to for ...