Finance and marketing research project, PESTEL,SWOT ,Key Competitors and Customers
1. FINANCE AND
MARKETING
RESEARCH PROJECT
- Rotary Engineering
UK Limited
GROUP 8
Adelusi, Ibitoye
Akugizibwe, Alex
Mohammed, Shujath
Obi, Christopher
Salem Aly, Marwan
2. CONTENTS
Introduction
Current market status
Strategic Analysis of current market
• PESTEL
• SWOT
• Key Competitors and Customers
Customers Pros and Cons
Segmentation, Targeting and Positioning
Future market Status
Financial Analysis
Conclusion and Recommendations
References
3. INTRODUCTION
Rotary Engineering UK Ltd formed in 2003 in Sheffield following a management
buy-out is an engineering company whose core business expertise includes
electromagnets, workshop equipment, and commercial renewable installations. The
renewable energy side of the business involves the installation of wind turbines and
solar photovoltaic panels on a commercial scale under the trading name of Rotary
Renewables™. Following new investment in 2010 the company moved to new
premises and increased its capacity for expansion. One of the challenges facing the
UK solar industry in general and Rotary Engineering in particular, is how to maintain
a strong market in the face of declining subsidies. This presentation is therefore
meant to:
Provide a representation of what the current UK solar market looks like;
identifying key competitors and primary customers,
Specify future potential market demand and how the market is developing.
Demonstrate the financial viability of the investment.
5. STRATEGIC ANALYSIS OF CURRENT
MARKET - PESTEL
POLITICAL
Government analysis suggests the 2020 target requires around 108 terawatt hours per year (TWh/y) of
large-scale renewable electricity generation in 2020, with the remainder (126 TWh/y) coming from small-
scale renewable electricity, renewable heat and transport.
World energy markets are becoming more volatile due to the threat of geopolitical instability.
Greater CO2 emissions are leading governments to encourage more sustainable forms of energy.
As part of the EU-wide action to increase the use of renewables energy, the UK has committed to
generating 15% of its energy from renewable sources by 2020.
ECONOMIC
A country's Economy is underpinned by its energy supply (IEA, 2004).
Alternative energy sources as a percentage of total energy supply are increasing and are expected to
continue to do so, tripling from 2 per cent in 2002 towards 6 per cent in 2030 (IEA, 2004).
Energy markets will see demand increase by almost 60 %, with fossil fuels meeting most of this, and
nuclear and renewable energy markets having limited relative contribution (IEA, 2004).
6. STRATEGIC ANALYSIS OF CURRENT
MARKET - PESTEL
SOCIAL/CULTURAL
The Kyoto Agreement, signed in 1992, has led to carbon funds (World Bank, 2004) and
emission trading (EU, 2004) in Europe and around the world, which is becoming a legal
requirement.
People's worldview is starting to change to a concern over the sustainability of the future,
although this is not expected to change dramatically to justify widespread changes to energy
use for some time.
TECHNOLOGY
The International Energy Agency states that alternative energy markets will be underpinned
by technological breakthroughs.
Research shows technology is the key to competitiveness in the alternative energy industry;
whilst alternative energy technologies (AETs) are underpinned by 48 critical success factors
across technological, commercial, socio-political and organisational categories
Photovoltaics have the highest proven technical potential of all renewable energy sources in
the field of electricity generation from renewable energies in Europe.
7. STRATEGIC ANALYSIS OF CURRENT
MARKET - PESTEL
ENVIRONMENTAL
The UK's insolation is a fraction of that in subtropical locales such as Spain and North
Africa. The insolation in the south of the country however is comparable with that of
much of Germany.
The effect of global warming, makes the investment in solar PV technology
seem interesting as there is currently a big push to reduce environmental
impact.
LEGAL
All installers need to have some form of certification - Microgeneration
Certification Scheme (MCS) before undertaking the job
In some cases planning permission may need to be obtained to place solar
generating plants on the roof tops of certain buildings or in open spaces so
this could limit the customer base.
8. STRATEGIC ANALYSIS OF CURRENT
MARKET - SWOT
STRENGTH
Continuous incremental change with in the UK solar
market at 15% approx.
Reduction in energy import increase trade and help in
improving unemployment
More chances of solar development due to forced EU
emission policy and trading system by 2027
Multi-channel renewable source which increases the
selection based on cost
WEAKNESS
Less diversified geographical presence of company.
Poor experience(5 year) in renewable sector as company
entered in 2007.
No specific specialization as they provide multi variety of
renewable sources.
Lack of maintenance services.
Provide only installations.
OPPORTUNITIES
Highly chance of solar business with in the UK due to EU
POLICYS
Expects £ 6.5 bn of carbon revenue till 2027 which majorly
effects the solar sector in terms of renewable energy()
As projected 9.1 m household will be in fuel poverty by 2016
which gives high chance to solar business.
High chances of residential business as 23% of total UK CO2
emission is house hold based.
THREATS
Highly saturated renewable market in terms of solar specialist.
EU tariff policy may doesn’t allow company to expand in other
parts of the world.
High chance of increased manufacturing cost which might affect
the installation cost.
New sources like oil shell and oil sands reduces the solar energy
demand.
Threat of market due to DO IT YOURSELF technological
influence.
http://www.youtube.com/watch?v=Do5z7accysw
10. STRATEGIC ANALYSIS - KEY COMPETITORS
and CUSTOMERS
CUSTOMERS
• Residential Homes
Schools
Care Homes
Hospitals
Supermarket Stores
Landlords
Farmers
Churches
Shopping centres
KEY COMPETITORS
Over 111 manufacturers and installers
in the UK deals with Renewable
energy.
Over 62 manufacturers and installers
deals with PV installation.
Big Competitors:
Solar Century
Tesco,
BP Solar,
Sollatek UK
Local Competitors:
Yorkshire Renewable Energy Ltd
YORKSHIRE SOLAR
Energy Jump
Homeco Energy
ALTERNATIVES
Wind Energy
Solar Vehicles
Hydropower
Solar thermals
11. CUSTOMER VIEW – PRODUCT EVALUATION
CONS
Expensive
Intermittent
Require Space
Energy Storage is Expensive
Associated with Pollution
PROS
Renewable
Sustainable
Reduces Electricity Costs Governmental
Financial Support (FIT)
Low Maintenance
Environmental friendly
Availability and Market Presence
Silent
12. MARKETING APPROACH - SEGMENTATION,
TARGETING AND POSITIONING
According to (PWC,2010), the five year growth rate from 2007 to 2011 was
approximately 70% per year! The growth rate from 2009 to 2010 was a
whopping 172%. The growth rate for 2011 was a more modest 40%, but still
great for an entire industry. The reason for the slowdown to 10% in 2012 is the
reduction of incentives in several European countries. After 2012, the long
term growth estimates range from 20% to 30%.
Most of the PV solar installed in the world at the end of 2011 came from:
residential rooftops,
from commercial buildings like hotels or malls, and
from utility plants connected to the grid. The utility market has just recently
been taking off. It is the market segment that has been the most influential
in the growth rate over the last few years.
Solar makes a big difference during the time of day when electricity is needed
most for instance in hot areas when air conditioners are running almost
constantly. This is when solar can add significant contributions to the grid at
less cost than other sources.
The pressure to go "green", is also driving the usage of this technology.
13. MARKETING APPROACH - SEMENTATION,
TARGETING AND POSITIONING (cont'd)
(McKinsey, 2012) suggests annual installations of solar PV could increase 50-fold by 2020 compared with
2005, achieving installation rates that could rival those of gas, wind, and hydro and that might outpace
nuclear with most of the growth largely from demand in five customer segments over the next 20 years.
Four of these segments are likely to grow significantly by 2020; the fifth is likely to grow significantly from
2020 to 2030.
1. Off-grid areas. Solar power is ideal in places without access to an electric grid. Applications include
delivering power to agricultural irrigation systems, telecommunications towers.
2. Isolated grids: Demand in this segment is already 25 to 30 GW. The current barrier to deployment is
the limited availability of low-cost financing.
3. Residential and commercial retail customers in sunny areas where power prices rise steeply
at times of peak demand.
4. Residential and commercial retail customers in areas with moderate sun conditions but high
retail electricity prices.
5. New, large-scale power plants
Across these five segments, distributed rooftop generation is likely to be the dominant source of solar
demand in the OECD countries (of which the UK is one).
14. MARKETING APPROACH - SEMENTATION,
TARGETING AND POSITIONING (cont'd)
Develop targeted customer offerings. Large commercial customers are likely to prefer
suppliers that can install and operate solar systems across a global network of sites.
Minimize customer-acquisition and installation costs: Companies may be able to reduce
acquisition costs by striking partnerships with companies in other sectors: for example, home
builders, security companies, broadband providers, or retail power providers. They can
reduce installation costs by optimizing logistics, predesigning systems, training employees to
improve their capabilities, and clearly defining standards.
Secure low-cost financing: Many companies are partnering with other organizations to
gain access to low-cost financing for instance SolarCity secured funding from Google to
finance residential solar projects, enabling Google to receive tax benefits in exchange for
owning electricity-producing solar assets.
15. FUTURE MARKET TREND UK
• It is the UK Government’s intention that the vast majority
of installations are in the Domestic (0-4kW) market.
In DECC’s forecast, domestic installations account for
almost 98% of total installations in 2020.
Installations of 4kW-10kW (Small) account for
the majority of the remainder.
The sheer number of domestic installations to
be completed means that the greatest amount of
effort will have to be devoted to this sector.
However, there is likely to be a significant increase of
large installations.
This will support both smaller installers and
larger design / wholesale companies seeking to
dedicate themselves solely to larger projects
(admittedly some of which will be large collections of
smaller installations e.g. new housing estates).
16. FINANCIAL ANALYSIS - OPTION 1
A £20,000 marketing investment
capital each year for the 50 kW PV
Panel. For the following 4 year
period, the investment will cost
£38,141. Assuming a mark up of
10% and the unit sales per year,
the payback period will be less
than three years.
The Discounted cash flow at the
end of the fourth year will equal
£63,364
Year
Marketing
Capital Material Cost
Labour
Cost Overhead Unit Cost # of Units Total Unit Cost
1 20,000 45,900 8,000 11,475 65,375 2 130,750
2 47,277 8,240 11,819 67,336 3 202,008
3 20,000 48,695 8,487 12,174 69,356 4 277,424
4 50,156 8,742 12,539 71,437 4 285,748
895,930
Year
Marketing
Capital
Unit Selling Price,
Markup 10%
# of
Units
Total
Revenue
Total
Cost Profit
Discount
Factor
Profit
Present
Value
Discounted
Cash Flow
1 38,141 71,913 2 143,826 130,750 13,076 1 13,076 -25,065
2 74,070 3 222,210 202,008 20,202 0.952 19,240 -5,825
3 76,292 4 305,168 277,424 27,744 0.907 25,165 19,340
4 78,581 4 314,324 285,748 28,576 0.864 24,685 44,025
38,141 89,598 82,166 63,364
Payback Period < 3 years
17. FINANCIAL ANALYSIS - OPTION 2
A £10,000 marketing
investment capital per
year for the 50 kW PV
Panel. For the following 4
year period, the
investment will cost
£37,232. Assuming a mark
up of 10% and the unit
sales per year, the
payback period will be less
than three years.
The Discounted cash flow
at the end of the fourth
year will equal £65,182.
Year
Marketing
Capital Material Cost
Labour
Cost Overhead Unit Cost # of Units Total Unit Cost
1 10,000 45,900 8,000 11,475 65,375 2 130,750
2 10,000 47,277 8,240 11,819 67,336 3 202,008
3 10,000 48,695 8,487 12,174 69,356 4 277,424
4 10,000 50,156 8,742 12,539 71,437 4 285,748
895,930
Year
Marketing
Capital
Unit Selling Price,
Markup 10%
# of
Units
Total
Revenue Total Cost Profit
Discount
Factor
Profit Present
Value
Discounted
Cash Flow
1 37,232 71,913 2 143,826 130,750 13,076 1 13,076 -24,156
2 74,070 3 222,210 202,008 20,202 0.952380952 19,240 -4,916
3 76,292 4 305,168 277,424 27,744 0.907029478 25,165 20,249
4 78,581 4 314,324 285,748 28,576 0.863837599 24,685 44,934
37,232 89,598 82,166 65,182
Payback Period < 3 years
18. CONCLUSION AND RECOMMENDATION
CONCLUSION
Good market in solar business for
next predictable 5-7 years based
on the future carbon markets.
More profitable margin.
Pricing policy should be changed
RECOMMENDATIONS
Rotary should expand their
business internationally as a
global company.
Company should concentrate
more on wind and other energy
sectors in European market for
larger business scope.
Company should develop DIY
solar panels with renowned
quality and less profit margins.
19. REFERENCES
REF - Department of Energy and Climate Change (2012). Feed-in Tariffs (FITS). [online]. Last
accessed 17 December 2012 at:
http://www.decc.gov.uk/en/content/cms/meeting_energy/Renewable_ener/feedin_tariff/
feedin_tariff.aspx
REF - Feed-in Tariffs (2012). Eligibility and Tariff Levels. [online]. Last
accessed 17 December 2012 at: http://www.fitariffs.co.uk/eligible/
http://www.iea.org/
http://www.mckinsey.com/
http://www.epia.org/
http://www.pwc.co.uk/