Introduction
With the expanding threat of climate change due to the excessive release of emissions of carbon, many individuals are looking into solar options as more sustainable alternatives to replace traditional fossil fuels. Of all available options for clean energy, solar has been the most expensive, even though their increased availability has caused a decline in the process (Desilver, 2020). Thus, the scenario to be explored further is “Stagnant sunrise,” which describes the issue of an environmentally-aware customer being interested in switching to solar energy. However, with the lack of assistance from the government, the prices are too high, and the customer is disappointed with the need to stay with goal energy and its negative consequences. The customer is on the look for alternatives that may be cheaper, which means that the solar industry can lose a client while rivals get new ones.
Scenario
In this scenario, the foremost opportunity for companies specializing in solar energy is concerned with developing entry-level solar energy solutions that will be affordable and introduce more customers to the technologies (Gielen et al., 2019). Over time, it is expected that solar energy will become increasingly cost-competitive compared to fossil fuels, and its sustainability and low environmental impact can encourage high energy independence among customers (Johnston, 2021). In addition, the price disadvantages of solar energy are expected to be rendered negligible by advances in technology that increase efficiency and the capacity to store energy (Shaqzi, Sopian and Al-Hinai, 2020; Chowdhury et al., 2020).
Despite the opportunities, there are some threats associated with the scenario. Specifically, one of the main threats is that solar energy technology is expensive but is only generated when the sun is shining (Munnings, 2020). Therefore, even when customers purchase solar energy solutions but discover that the supply of energy may get interrupted when it is dark or overcast outside (Atasu, Duran and Van Wassenhove, 2021). Thus, clients risk energy shortages, which will not be interrupted if affordable storage solutions exist. However, during periods when solar energy is generated in excess, there should be affordable solutions available to store it to be used later (McBride, 2021). Thus, solar technology companies must ensure that besides low-cost solutions for collecting solar energy, there are also means of storing it.
The Company: SunPower
In the specific industry of solar energy solutions, SunPower is among the reputable organizations that specialize in the widespread adoption of renewable energy. Because customers are demanding better, more resilient, and affordable solar energy solutions, the company has embarked on a new chapter of its development to initiate downstream tech innovation. Specifically, the company works on on-storage technologies and energy management software. Despite the fact that the pandemic took a significant toll on the economy and the lives of the population, the interest in solar continues to grow. SunPower has been able to increase the interest of prospective buyers in its Residential and Light Commercial (RLC) business (SunPower, 2020). With an especially strong performance in the second half of 2020, the company increased the megawatts installed by 33% and 35% in the third and fourth quarters, respectively, ending the year with a total installed base of more than 350,000 homes (SunPower, 2020).
The future strategic direction of SunPower is to provide customers the opportunity to get solar energy solutions at reasonable prices and through affordable options of funding. To pursue the opportunity of providing affordable solar solutions to customers, SunPower has added more and lower-cost financing options in the mix of services of loans and leases. Such a solution has allowed the company to expand its final market of addressable customers while also extending margins. Therefore, customers have been continuously looking to own SunPower systems because there are several payment options available. The more clients get the solutions from the company, the more likely they are to add to the global system of sustainable energy that is accessible and affordable through new systems and solutions of payment.
SunPower aims to continue selling and installing its solar system through the network of more than seven hundred independent dealers across the US. It has expanded the SunPower Residential Installation program that enables companies with which the organization cooperates to sell its branded technologies while SunPower takes on the process of installing them. Such a structure has allowed for the development of entirely new channels to meet the increased demands of the quickly-expanding customer base and give homeowners more options when purchasing solar solutions.
Drawing from the four strategies of the Ansoff Matrix, SunPower focuses on product development as the fundamental direction of the firm (Tow, 2019). Besides offering innovative solar energy technologies that competitors provide, the company has also widened the selection of Along with the expansion of the customer base, SunPower has also launched SunVault storage that has enabled customers to charge using solar power, decrease the use of energy at peak times, as well as backup power to essential electric services. With the help SunVault, the company has offered customers an innovative and affordable solution with a wholly integrated storage of solar power. The unique value proposition of the solution lies in its capacity to store an enormous amount of power in two sleek boxes in contrast to competitors’ six boxes. This has increased technology deployment to customers in the fourth quarter of 2020 by seeing increased customer demands and attach rates for SunVault in 2021. Combined with the storage solution for commercial clients in the form of Helix, SunPower has helped its customers to manage their energy better and save money when developing a more resilient and powerful grid.
When it comes to business-level strategies, it can be suggested that SunPower focuses on implementing a hybrid strategy that combines differentiation and cost leadership. On the one hand, differentiation is a strategy for organizations that want to establish a broad customer base based on the uniqueness of the products and services being provided (Islami, Mustafa and Latkovikj, 2020). Because of this, SunPower uses differentiation to capitalize on the unique features of its business to win the marketplace. Even though the prices are higher due to the increased uniqueness of solar energy, the superior quality, the orientation on customers, design, and uniqueness explain the price tag (Office of Energy Efficiency & Renewable Energy, 2017). On the other hand, leadership in costs is important because solar energy solutions are expensive, and the company has to find ways to attract clients. Thu, SunPower works on reducing the immediate significant costs that customers face when switching to solar. Specifically, the company collaborates with its industry peers and trade groups; the company created and piloted SolarAPP, which is an online instant permitting application for local jurisdictions (SunPower, 2020). The tool allows streamlining the process of streamlining the permitting process, reducing timelines for implementation and soft costs, along with rates for cancellations.
By implementing a hybrid strategy, SunPower has managed to significantly improve the balance sheet and end the fiscal year 2020 in a solid financial position despite the challenges caused by the pandemic. According to its report, the organization “exceeded its GAAP net income and adjusted EBITDA guidance, expanded margins, strengthened the balance sheet and generated positive cash flow” (SunPower, 2020, p. 4). Besides, the hybrid strategy has enabled it to continue lowering the costs of capital while increasing the value that customers receive.
VRIN Analysis
The VRIN analysis framework represents a way to evaluate the value proposition of an organization in light of the competition that it faces in its respective market (Vargas-Hernández and Garcia, 2019). This suggests that as analysis is done, it becomes possible to develop competitive strategies that rely on the core strengths and resources of an organization to help it build a competitive advantage of market rivals (Barney and Hesterly, 2019). The resources that are valuable to SunPower include its socially responsible brand image, close relationship with suppliers, propensity for innovation and sustainability, as well as capital-raising abilities. Specifically, SunPower has established a defined corporate social responsibility function by promoting solar energy and its benefits to the environment (Maxeon Solar Technologies, 2020). It continuously engages in actions of social responsibility, which strengthens brand integrity and provides high-quality services and products (Mahmood and Bashir, 2020). This has been made possible by developing an effective distribution system that allows the company to meet the demand for the market supply (Tarver, 2020). Being highly innovative in its offerings, SunPower has worked continually on improving the options of financing for customers to encourage them to buy solar solutions (Best solar energy companies based on in-depth reviews, 2021). By doing so, it has raised capital internally to allow for the expansion and diversification of business.
Resources and competencies that are rare in SunPower are those that are developed and possessed only by several companies in the solar energy industry, thus helping the company build its competitive advantage (Cascade Team, 2021). The rare resources include international presence, the tendency to take risks, adaptability, and problem-solving skills. With the help of its global presence, SunPower has attained a higher financial strength and increased exposure and recognition. Through the emphasis on problem-solving and finding sustainable solutions to global energy challenges, the organization can reach higher competitiveness and attain both short- and long-term benefits. SunPower is a risk-taker who has shown a propensity toward challenging itself to facilitate growth and expansion (Management Association, Information Resources, 2018). Finally, adaptability is represented by the organization’s high exposure to a diverse global market and the need to adjust to its specific needs. Localization is a crucial strategic strength that helps gain penetration in various local markets.
When it comes to inimitable competencies and resources, they help add value to the competitive advantage of SunPower as well as ensure the company’s long-term sustainability. Such resources and competencies are usually expensive and are hard to imitate by the rivals that compete with the organization (Oregon State University, 2019). The inimitable resources include high-quality product offerings, diverse locations of physical retail spots, competitive pricing, and positive customer experiences. SunPower offers its customers high-quality products, which have been a source of brand appeal and recognition. The consistency in the quality of products enables repeated purchases as well as recommendations to friends and family to consider SunPower’s products (Kopp, 2021).
The fact that the company works with several retailers and also expands its own physical store coverage makes sun power solutions easily accessible and provides increased visibility to the brand. The strategic focus of SunPower, which is supported by its organizational culture, creates strategic leadership that is unique to the organization (Gander, 2017). With the help of competitive pricing, SunPower has been controlling its operational costs achieved through the expansion and the meeting of the demand for solar services (The Investopedia Team, 2020). In contrast to competitors, SunPower has offered its clients flexible options of payment for solar energy products and services and consistently worked on reducing the high immediate costs associated with switching to sustainable sources (Paulos, 2017). The cost-saving functions have allowed SunPower to maintain competitive pricing in the market, which is an inimitable source.
Finally, the non-substitutable resources are such that have been specifically developed for SunPower and thus cannot be used by industry rivals. Such resources do not have substitutes and thus cannot be used by any other company, allowing SunPower to exploit its opportunities and make effective use of resources for business growth. For SunPower, non-substitutable resources include its financial strength, technological advancement, investment in R&D, distribution channels, corporate leadership and vision, organizational culture, marketing strategy, and human resources. The company’s financial stability has provided a valuable source for the organization because it allows investing in the innovation of product offerings and maintaining consistent quality throughout different locations in which it operates (Cirera and Maloney, 2017). With the help of technological advancement, SunPower has carried its effectiveness and efficiency alongside the smooth management of international operations. Because the company is focused on innovation, it invests in employee training to ensure that workers align with the expectations of their jobs. The training refines people not only for their professional responsibilities but also for their personal development and growth (Half, 2017). Through investment in R&D, SunPower can stay on top of market trends and the demands of customers. Thus, the company has a significant strategic advantage by studying the industry on a regular basis to invest in the development of solutions that customers expect from the brand.
Based on the VRIN’s analysis findings, it can be concluded that the key strengths of SunPower are the high level of client satisfaction, a solid corporate social responsibility, a skilled workforce, investment in research and development, as well as good returns on capital expenditure. Being dedicated to promoting the use of solar power as an alternative to fossil fuels, SunPower has established itself as a reliable company that is attentive to consumer needs and works collaboratively with them. The weaknesses of SunPower, however, include the high costs of solar energy services, the challenges of product demand forecasting, new market entrants, and the consistent need to invest in more innovative technologies.
TOWS Analysis
Drawing from the strengths and weaknesses of SunPower, TOWS will allow making connections between the internal and external factors to gain a significant competitive advantage (Using the TOWS matrix, 2020). When it comes to the use of strengths to capitalize on opportunities, SunPower must continue discovering ways in which it can provide affordable products or services and offer payment options to reduce the burden of high costs associated with purchasing sun power solutions (International Monetary Fund, 2019). Through research and development, the company can study competitors’ offerings and develop the most affordable and reliable solutions that will be superior. It is essential to capitalize on the collaboration with customers and industry partners to develop an understanding of market needs and expectations that align with the latest trends.
When it comes to strengths to threats, it is important to examine how threats can be implemented to lower the impact or remove business threats, as well as determine how threats can be transformed into opportunities. The key threat is concerned with the high price of solar power solutions, and despite their desire to switch to sustainable options, customers are deterred by the high price tag (Nath, 2021). However, the fact that SunPower has already considered this challenge and developed ways in which customers can feel more comfortable purchasing sun energy solutions and paying in installments.
As to weaknesses to opportunities, the need to invest in research and development to provide innovative solutions and technologies creates consistent financial pressure on SunPower (Washington Metropolitan Area Transit Authority, 2020). However, despite the high costs of these measures, the company should consider investing in them because it provides an opportunity to discover ways to improve solar energy solutions and meet the market demand (Shaver, 2019). Even though this calls for high expenses, the findings of R&D and investment in innovation will allow for strengthening the long-term competitive advantage. Finally, weaknesses to threats are the area that should never be overlooked because weaknesses can develop or enhance the threats (Woodruff, 2019). Specifically, the high costs of producing sun power solutions imply that the company needs to find better alternatives and work with suppliers to reduce costs, which is often complicated to achieve and can disrupt smooth operations.
The Strategic Option
The most appropriate strategic option for SunPower is to become a solar power energy provider that sells the technology to the masses by offering payment flexibility and affordability while also preserving high quality (SunPower, 2021). It aligns with the organization’s corporate strategy and can provide attractive opportunities for long-term profitable growth. Using a hybrid business strategy, the company can continue project installation and strengthen consumer and commercial spending (SunPower, 2020). The Helix and Equinox product range that SunPower provides seamless technology solutions at lower costs, which can enhance the ability to expand the global footprint while spending less rapidly.
The two distinct target markets on which SunPower can focus include middle-class families and corporate clients operating plants, factories, or farms. Families that have their own properties are interested in sustainable power solutions but may be deterred by the high prices (Heggie, 2020). However, with the help of flexible financing options, such as cash and financed systems sales to end consumers, resellers, and third-party dealer networks, they can be attracted by the various options, including no money down cases (McKinsey & Company, 2020). For example, the residential lease program, which is developed in collaboration with third-party investors, will provide the target customers with SunPower technologies under lease agreements that also include warranty coverage and system maintenance (SunPower, 2019). Besides, lease customers can also have the option to purchase their leased systems of solar power upon the transfer to their homes (Glover and Allen, 2021). To appeal to the middle-class target market, SunPower will provide financing options to enhance its ability to provide individually-tailored solar solutions to a vast market of residential customers.
When it comes to corporate clients, SunPower will appeal to the target by developing solutions that can be installed in varied configurations to meet the needs of commercial customers because they may have diverse site requirements (SunPower, 2017). Through R&D, the company can study the market and identify solutions that will be the most appropriate to the needs and demands of its corporate customers (Ross, 2021). For instance, it is essential to offer several options for mounting solar panels. Specifically, if a customer has a large commercial rooftop, it is the best place to locate panels (Gagnon et al., 2016). On a farm, however, framed panels be a good option (David, 2021). Therefore, SunPower will consistently invest in innovation to be explicitly designed to meet the needs of corporate clients and ensure that technologies are resistant to wind and can be safely used and securely installed (Kurtz et al., 2020).
The segment of middle-class families is especially important for SunPower because of the possibility of promoting its products through word-of-mouth marketing (Matson, 2021). The segment is large, and the growth rate is significant as more customers who live in sunny areas consider choosing solar power energy. SunPower collaborates with various distribution channels, which makes its products and services widely available for purchasing (Fernando, 2021). The focus on this segment also aligns with the goals and strategy of the firm to create a community of like-minded consumers that use sustainable technologies and can improve their lives and the well-being of the planet (Spiliakos, 2018). The marketing expertise of SunPower allows using medial social marketing and consistent branding to promote the services and products offered by the company.
Conclusion
To conclude, the solar energy industry is challenging because the prices are significantly higher compared to alternatives. However, SunPower provides the opportunity to get solar energy solutions at reasonable prices and through affordable options of funding, which has allowed the company to expand its final market of addressable customers while also extending margins. Besides, through investment in R&D, SunPower can stay on top of market trends and the demands of customers. Thus, the company has a significant strategic advantage by studying the industry on a regular basis to invest in the development of solutions that customers expect from the brand.
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