Strategic Management in the Renewable Energies Sector

Using the example of a company which produces photovoltaic panels


Essay, 2007

15 Pages, Grade: A


Excerpt

Table of Content

List of tables and illustrations

1 Introduction
1.1 Strategic Management
1.2 Photovoltaic and the Renewable Energies Sector

2 The Process of Strategic Management
2.1 Purpose, Goals and Objectives
2.2 Analysing the External and Internal Environment
2.3 Schools of Thoughts
2.4 Strategic Analysis
2.5 Competitive Strategies
2.6 Forecasting the Future
2.7 Formulating the Strategies
2.8 Implementing the Strategies

3 Conclusion

References

List of tables and illustrations

Fig. 1: Hierarchy of goal-setting activities

Fig. 2: External influences on a PV producing company

Fig. 3: Porter’s Five Forces Model

Fig. 4: A view of the strategy process

1 Introduction

1.1 Strategic Management

There are various definition of strategic management in the literature because of the complexity and different approaches to deal with strategies. To give a brief idea what strategic management is all about the following definition is given. “Strategic management is a process, directed by top management, to determine the fundamental aims or goals of the organisation, and ensure a range of decisions which will allow for the achievement of those aims or goals in the long-term, whilst providing for adaptive responses in the short-term”. (Cole, 1997) Companies in the photovoltaic (PV) sector need to pass through the process of strategic management as well as their competitors. They will reach their aims and forecast or react on changes in the market to ensure the survival or development of the firm. This process will be presented in this work.

1.2 Photovoltaic and the Renewable Energies Sector

The need for strategies in this particular sector is getting demonstrative by the following statement:

“The enhanced importance of renewable energies is seen as one inevitable consequence of the acceptance Royal Commission on Environmental Pollution’s (RCEP’s) recommendation that the UK should attempted to reduce carbon dioxide (CO2) emissions by about 60% from current level by 2050. An estimated 30-40% of electricity demand will need to be derived from renewable resources in order to achieve this objective, a target which implies a massive increase in development in renewable energy schemes”. (Kellett, 2003)

The mentioned authors in this work have different ideas about aims and goals of this sector. Also the environment of PV producing companies is more or less discussed in academic papers and books in this field. The used schools of thought and various strategic analyses will be handled as well as the competitive advantages and future visions of companies in this sector.

2 The Process of Strategic Management

2.1 Purpose, Goals and Objectives

Companies set out their purpose, goals and objectives to achieve them by creating and implementing strategies. According to Cole (1997), the purpose or mission statement should define the key arguments of the company’s business and behaviour towards their external and internal environment. “[They]… are intended to provide a vision of why the organisation exists, where it intends to operate and how it intends to achieve its goals” (Cole 1997). For a company which produces PV panels these statements could include the ideas of Sheffield (1999). He reports that the demand of the increasing energy use must be meet by replacing fossil energies against renewable energies to save fossil resources and to minimise greenhouse-gas emissions.

In accordance with Cole (1997) the aims and goals are more focused on the success-criteria of the company’s operations. A realistic goal could be correspondent to Van Overstraeten et al (1996), “[…] to obtain a power generation system which is able to convert solar energy into electricity at a cost/kWh which is comparable with other generation or delivery schemes […]”. The objectives describe the intentions of specific units within the company. Sheffield (1999) thinks that the companies need to improve the efficiency of the energy production of the PV cells and arrays and lower the cost by developments to be competitive in the sector of energy production. The following hierarchy classifies these goal-setting activities under the terms of Cole (1997):

illustration not visible in this excerpt

Fig.: Hierarchy of goal-setting activities

2.2 Analysing the External and Internal Environment

After thinking about purpose, aims and objectives the PV producing company has to give thought to their external and internal environment before dealing with relevant strategies. According to Welford and Gouldson (1993); external and internal stakeholders influence the process of planning and changing the future of the company. Critical key issues of internal influences should be identified like organisational, cultural or financial factors. The mayor differences to companies from other sectors in the Construction industry become explicit by having a look at the external influences. Welford and Gouldson (1993) say that the government is a main factor because they “[…] are increasingly applying market instruments to achieve environmental objectives”. In Germany for example the government supports the construction of building integrated PV systems which are connected to the local energy grid. Agreeable to Weiss et al (2006), they engage the power companies to pay the costumer for the energy which they supply back to the grid. Another mayor external factor is the technology. Patel (1999) explains that the technology of PV cells and modules is still in a developing process and new improvements come up regularly. The competitors in the renewable energy sector are standing out as well, but this will be discussed in an eventual chapter. Other important external influences are shown in the following figure which is correspondent to Cole (1997):

illustration not visible in this excerpt

Fig.: External influences on a PV producing company

2.3 Schools of Thoughts

This chapter should explain which schools of thoughts could be relevant for a PV producing company to define their strategies. It will be discussed later which of them are temporarily in use by strategists of these companies. According to Clegg et al (2005), the Chandler School says that the strategy should react on changing in the environment that affects the structure of the company. See that the potentialities of integrating PV in everyday life are still not exhausted; this could be a way of focussing on a strategy to enter new markets, in keeping with FVS (2003). The Strategic Planning School argues that strategy would be rational planning which means that decisions are made by “[…] extrapolating from the past to plan the future”. (Clegg et al, 2005) Analysing the company in terms of strengths, weaknesses, opportunities and threats is ancillary to the Design School. Referring to that, strategies can be defined by audit the external and internal environment. Clegg et al (2005) reports that the Positioning School is about to station the company in a competitive environment. As discussed before, the competitive advantage is quite big in the energy sector. The Five Forces Model of Porter (1980) visualises that the rivalry among the competitors depends on different factors.

illustration not visible in this excerpt

Fig.: Porter’s Five Forces Model

If PV producing companies play around with future scenarios then this falls under the School of thought called Scenario Planning. Forecasting the future about, for example, what types of PV cells will be the most accepted or which kind of integration possibilities will be the most effective is a topic in an separate chapter. The mentioned Schools of Thoughts are just a selection of various opportunities and often combination should be used to consider all possibilities. But they are basic to think about strategies. They describe the different foundations to build up the processes of strategy.

2.4 Strategic Analysis

Strategic analysis takes up a central role of the strategy process. It is a dynamic way of handling information about the internal and external environment of the company to cause and react on changes. An example of this recurring process is shown in the following figure under the terms of Laurens (2004):

illustration not visible in this excerpt

Fig.: A view of the strategy process

Cole (1997) writes about the BPEST (Business, Political, Economic, Social and Technological) analysis which enables strategists to “[…] bring together a comprehensive review of the external environment […]”. As a result this analysis would spotlight positive and negative consequences of the company’s future. Another technique which could be used by PV producing companies is the SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, discussed by Cole (1997). It should identify problems before they occur and demonstrate strengths of the company which could be capable of development.

[...]

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Details

Title
Strategic Management in the Renewable Energies Sector
Subtitle
Using the example of a company which produces photovoltaic panels
College
Heriot-Watt University Edinburgh  (School of Build Environment)
Course
Business Management for the Build Environment Professionals
Grade
A
Author
Year
2007
Pages
15
Catalog Number
V77057
ISBN (eBook)
9783638804240
ISBN (Book)
9783656092612
File size
649 KB
Language
English
Tags
Management, Renewable, Energies, Sector, Business, Build, Environment, Professionals, Erneuerbare, Energien
Quote paper
Dipl.-Ing. (FH) Jan Seidel (Author), 2007, Strategic Management in the Renewable Energies Sector, Munich, GRIN Verlag, https://www.grin.com/document/77057

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