Introduction
The past couple of years has been particularly challenging for most industries globally. Due to the economic aftereffects of the pandemic, as well as the rapidly developing political tensions on an international scale, numerous organizations have been struggling to maintain their success. The manufacturing industry has been affected particularly strongly, with the recent need to transition to the active use of digital innovations representing another challenge (Rastogi et al., 2020). With the focus on research and the search for sustainable solutions, companies such as SolarEdge Technologies, Inc. will be able to overcome the crisis and regain their status of economic leaders.
Analysis
Company Description
SolarEdge is a company operating in the manufacturing industry and supplying smart energy technology to its customers worldwide. SolarEdge was founded in 2006 and quickly gained relevance in the manufacturing market due to its breakthrough invention of the DC optimized inverter (Rastogi et al., 2020). The company has been growing rapidly since its founding and introducing products such as EV chargers, grid services, PV of different scales, primarily the large ones, and other cutting-edge energy-related technologies for powering both organizations and individual homes (Rastogi et al., 2020). However, due to economic challenges observed recently within the manufacturing industry, the company has faced several problems that have led to a gradual drop in performance.
Internal Analysis: SWOT (SW)
Strengths
Though SolarEdge has entered the global market comparatively recently compared to other manufacturing organizations working in the energy production context, it has already developed multiple strengths. The strong and notably positive presence is one of the key strengths to point out when discussing SolarEdge and its advantages compared to other organizations. Indeed, the company has managed to amass quite a following since its founding, mainly due to the quality and innovative solutions that it has been incorporating into its products (Holm, 2021). Specifically, the photovoltaic (PV) batteries and solar inverters that SolarEdge has been representing as its brand items have allowed the company to stand out among other manufacturing organizations (Holm, 2021).
Similarly, the company’s current approach to managing its supply chain represents an outstanding example to follow. SolarEdge has established a powerful distribution network for delivering its products to end customers across the world, thus, making its products easily accessible. The current distribution network consists of warehouses located in all major cities in Europe, America, and Australia, thus, encompassing almost the entire globe (Holm, 2021). Moreover, the network represents a tightly-knit system with effective communication prioritized and maintained consistently (Rastogi et al., 2020). Due to the introduction of innovative communication technologies, the specified part of SolarEdge’s supply chain remains in a top-notch condition.
Furthermore, due to SolarEdge’s focus on creating a functioning and powerful supply chain, its choice of distributors has also been quite sensible, which has allowed the company to turn its current distributor system into a substantial strength. Specifically, SolarEdge’s suppliers have been selected strictly on the basis of their reliability, reputability, and quality of their raw materials. As a result, eh current supply network that SolarEdge has at its disposal is perfectly functional and amazingly effective.
Since SolarEdge’s supply chain has been proven to meet the top requirements and serve to the company’s benefit, it has also contributed to the quick emergence of another strength that SolarEdge can boast in the global market. Specifically, due to the focus on quality management, the company’s customer satisfaction rates have been soaring since the moment of its conception (Holm, 2021). Therefore, customer loyalty caused by impressive rates of customer satisfaction and the absence of expressively negative reviews can be seen as another strength of the organization.
Another factor that contributes to SolarEdge’s impressive performance rates and its ability to withstand the difficulties associated with the current global economic situation concerns its workforce. Due to the HRM strategy aimed at talent management and fostering the idea of continuous learning and improvement in staff members, SolarEdge has built a tea of experts who seek to meet the most rigid quality standards. Asa result, the company has gained a noticeable advantage.
In addition, one should focus on the financial aspects of the firm’s performance in order to give credit to the current cash flow rates and the effective tool for maintaining the cash flow running. Namely, SolarEdge has recently maximized its free cash flow to $0.096 billion, which represents a major achievement even for a firm of SolarEdge’s scale (“SolarEdge Technologies free cash flow 2014-2021 | SEDG,” 2022). The observed increase in cash flow can be seen as a direct effect of the company’s effective management of its supply chain and its commitment to proper quality assurance.
SolarEdge has also been known to have a particular skill for locating its target audience and catering to its needs to promote its products. As a result, the extent of customer loyalty has been mostly consistent for SolarEdge, and the levels of customer engagement have been satisfactory. Therefore, even with the presence of powerful and influential competitors, SolarEdge has a substantial chance to withstand the pressure of rivalry and continue providing the services and products that meet customers’ demands.
Finally, one must give SolarEdge credit for maintaining outstanding performance in the global market. Despite the pressure of the current circumstances, including economic challenges, political tensions, and related concerns, SolarEdge has been delivering high-quality products (Holm, 2021). Therefore, the described level of commitment to quality and meeting the needs of its customers has allowed SolarEdge to gain a massive advantage in the global economy compared to its rivals.
Weaknesses
However, even with the existing array of advantages, SolarEdge still has several weaknesses worth bringing up as the issues to be addressed within the shortest time possible. The marketing issue is one of the admittedly least developed areas of the company’s performance. Despite the strong presence that SolarEdge has built in the selected market, it has been consistently failing o create a marketing campaign that would attract new buyers. Partially, the observed issue can be attributed to SolarEdge’s having gained a large customer base at a fairly early stage of its development. Nevertheless, further efforts to improve the company’s PR framework must b made.
In addition, SolarEdge has been drastically lacking product and service diversification. Similarly to the previously mentioned issue, the low diversity of services and products can be seen as the effect of an early developed successful framework for product manufacturing, which has been meeting customer demands for quite a long. As a result, no factors necessitating the introduction of a more diverse range of products have been introduced into SolarEdge’s performance (Rastogi et al., 2020). However, with the rise in the company’s influence, the need to cater to the requirements of new customers has arisen, which suggests that the firm should introduce diverse products that would appeal to new audiences better.
Furthermore, linked to the specified issue, the fact that SolarEdge has been facing a reduced product demand indicates that the current issue regarding the low product diversity rates must be addressed as soon as possible. Indeed, the rates of PV systems usage and the purchase of the related products have dropped notably over the past couple of years (Holm, 2021). The observed trend can be linked to the fact that economic issues and the recent crisis have redefined the company’s decision to purchase PV systems and EVs, therefore influencing the extent of SolarEdge’s sales rates.
However, the observed issue can be explained by another factor, which represents a serious disadvantage for the company. Specifically, the fact that SolarEdge’s current forecasting tools could use numerous improvements should be mentioned as a core problem and a major weakness that the company is yet to address (Holm, 2021). The importance of the ability to predict changes in the market with sufficient precision is not to be underestimated since it leads to a major advantage in cost management and the allocation of financial resources in general (Holm, 2021). Therefore, in a setting where reducing expenses is critical for the effective allocation of resources, constructing an effective forecasting approach should be prioritized.
Consequently, the problem of failing to manage the challenges created by new entrants, as well as the existing rivals, in the target market can be seen as one of the main weaknesses of SolarEdge. Without an effective forecasting strategy, the company is doomed to failure in determining the further moves that its competitors are likely to make (Rastogi et al., 2020). Therefore, a comprehensive tool for evaluating the external market setting, as well as the internal specifics of the company’s environment, must be designed so that SolarEdge could thrive in the global market. The specified goal necessitates the enhancement of the firm’s research and development department since it suggests that innovative solutions that have not been discovered and deployed by other organizations yet must be sought.
Furthermore, the extent of SolarEdge’s ability to plan its financial resource management and make financial forecasts could also use significant improvements. Specifically, the organization’s current struggles with developing a proper forecasting tool also extend to its financial data management. The described issue represents an especially dangerous threat to SolarEdge’s performance in the future due to the need to predict changes within the global market with proper precision to avoid taking costs and facing risks.
Finally, inventory management concerns may hamper SolarEdge’s performance in the global market significantly. Namely, the problem of prolonged days in inventory management of SolarEdge implies that the firm is experiencing difficulties selling its inventory after its potential has been maximized. Failing to handle the outlined problem means increased expenses for inventory management at SolarEdge. Thus, to avoid taking further costs and reducing the degree of innovativeness that the company currently possesses, SolarEdge must revisit its approach to inventory management and especially the management of time in handling its inventory.
External Analysis: SWOT (OT)
Opportunities
Despite the presence of multiple challenges, SolarEdge still has numerous opportunities to pursue in the global manufacturing market, as well as the market for green energy. Specifically, SolarEdge should consider prioritizing research in its current business strategy. The focus on research and development as one of the core aspects of a firm’s performance will help SolarEdge remain ahead of the rest of organizations in the manufacturing and energy industries, therefore, maintaining leadership in the target area.
Moreover, as an organization that functions in the industry affected significantly by constraints caused by the pandemic, as well as economic and political challenges, SolarEdge must find a way to minimize its current costs. At the same time, it is crucial for the company to retain its quality a d adhere to the established industry standards, while also elevating them to create an additional competitive advantage. The specified outcome can be achieved by reducing the range of costs for a specific area that has been performing perfectly so far and directing the resources typically spent on its update to the realm of research and development. Product and service diversification, which currently represents one of the core weaknesses of SolarEdge, will benefit stupendously from the described change.
Additionally, with a due focus on the current customer trends and changes in consumer behavior, SolarEdge will be able to adjust to the demands of its new audiences. Studies have shown that there have been notable shifts in behaviors of target customers (Holm, 2021). Primarily, the increased focus on green energy, sustainable resource management, and enhanced waste management approaches have been spotted as the essential areas in which the company can explore its opportunities and implement innovative solutions in order to build a profound and unsurpassable competitive advantage.
Threats
At the same time, one must admit that SolarEdge is presently facing a range of threats in the target market. These threats are likely to hamper the company’s progress and prevent it from introducing the outlined solutions. Defined partially by the specifics of the industry, and to some extent by the larger economic, political, and financial factors, the threats in question need to be taken into account for SolarEdge to continue its development.
Specifically, the increased strengths of local competitors can be seen as a lesser yet still quite tangible threat since the developing improvements in the performance of retailers make them more visible to and desirable for rival companies. Therefore, SolarEdge will have to reinforce its relationships with local distributors so that its current advantage of having a strong retailer and distributor base could be kept intact. If SolarEdge does not introduce an immediate change to its policy for managing relationships with retailers, the latter may choose to work for another organization that provides greater benefits.
The failure to improve the existing customer relations also implies deleterious outcomes for SolarEdge’s performance since its customers’ loyalty presently serves as its major strength. Without the support of the existing customer base and being yet unable to attract wide audiences, SolarEdge will shrivel in the market that requires companies to acquire multiple customers and gain their loyalty promptly. Therefore, other companies gaining respect and trust of SolarEdge’s existing customer base is a massive threat that the company must avert at all costs. The described threat can be managed by expanding the range of services and products to meet diverse demands and ensure that customers can obtain all of the required products at SolarEdge without searching for another organization to seek complementary tools for the products purchased at SolarEdge. Therefore, the current threats associated with the company’s ability to retain its success and popularity are linked to its opportunity to expand the range of designed products and services. Specifically, tools for powering PV inverters, as well as expansion of the range of batteries that SolarEdge provides, will have to be considered the first items to include into the improved and diversified product range. With the specified threats in mind, SolarEdge will be able to overcome the emergent challenges and thrive in the global market despite the presence of numerous threats, including the arrival of new competitors.
Recommendations
Presently, it is strongly desirable that SolarEdge should focus on revisiting its competitive advantage. Specifically, to ensure that the company meets the standards set in the target market and compares to its competitors, the standards of sustainability must be included into its quality management and decision-making frameworks. Thus, SolarEdge will be able to make decisions and respond to emergent issues in a manner that allows for a sensible allocation of resources and a positive representation of the company in the social media. Given the increasing power of the latter, ensuring that SolarEdge’s PR does not contain any controversies is instrumental to its success.
Simultaneously, SolarEdge will have to improve its customer relations so that its target customer base could seek SolarEdge’s products and services as opposed to those of its competitors. For this purpose, the company must design a strategy for better control over its social media presence, which can be achieved by using strategies such as blogging (Holm, 2021). Furthermore, social media networks such as YouTube, Facebook, and Twitter. While the LinkedIn profile that SolarEdge currently has is useful for talent management, particularly hiring and developing connections with experts across the world, public exposure through other social media channels is desperately needed.
Increasing investment in the company’s research and development should also be considered an important aspect of the future strategy for the company to adopt. Since SolarEdge operates in the manufacturing industry, where delays are unacceptable, and defects must be identified and removed instantly, introducing innovative technologies and solutions is vital. In turn, the focus on improvements in the smart technology realm and the opportunity to utilize solar energy more effectively, will help SolarEdge create unparalleled products that will launch the organization to the top of the industry.
Finally, improved external analysis with the focus on forecasting and development of realistic prognoses concerning market and technology trends is strongly required. SolarEdge will have to design effective analytical tools, as well as tools for fast data collection, so that it could predict changes within the industry, as well as alterations in the demand and customers’ needs. Thus, SolarEdge will retain its power in the target market and ensure that its business strategy will help it deliver the products of the best quality, leveraging the most advanced engineering opportunities.
Conclusion
By exploring options concerning research and investment, SolarEdge will overcome the challenges that can currently be observed across the entire manufacturing industry. Moreover, with the proposed changes, SolarEdge will be able to construct a stronger identity in the manufacturing industry, while also developing a platform for further growth. The focus on research and development will pave the way to accepting the concept of incremental innovation, therefore, embracing the opportunities that it includes. As a result, SolarEdge will be able to respond to market changes rapidly and reframe its business approach correspondingly to match the emergent trends.
References
SolarEdge Technologies free cash flow 2014-2021 | SEDG. (2022). Macrotrends.com. Web.
Rastogi, R., Jaiswal, R., & Jaiswal, R. K. (2020). Renewable energy firm’s performance analysis using machine learning approach. Procedia Computer Science, 175, 500-507.
Holm, M. (2021). Solaredge technologies, inc. equity research-capabilities far beyond inverter technology (Doctoral dissertation).