Vestas: Expanding the International Service Business in Norway

This report examines the business environment factors that Vestas, a leading wind turbine manufacturer, should consider for expanding its operations in Norway. It analyzes the PESTLE and Porter's Five Forces frameworks to understand the industry dynamics and Vestas' competitive position. The report also explores Vestas' strengths, weaknesses, opportunities, and threats through a SWOT analysis and utilizes the Ansoff Matrix and Porter's Generic Strategy to develop strategic recommendations for successful expansion in Norway.

BUSINESS ORGANISATIONS AND
ENVIRONMENT IN A GLOBAL CONTEXT

Table of Contents
1.0 INTRODUCTION........................................................................................................................................ 3
2.0 BACKGROUND OF VESTAS................................................................................................................... 4
2.1 WIND TURBINE INDUSTRY OF NORWAY.................................................................................. 5
2.2 MISSION, VISION AND OBJECTIVES OF THE VESTAS...........................................................5
3.0 INDUSTRY ANALYSIS.............................................................................................................................. 6
3.1 PESTEL ANALYSIS............................................................................................................................... 6
3.2 PORTER’S FIVE FORCE FRAMEWORK........................................................................................ 9
3.3 SWOT ANALYSIS................................................................................................................................ 12
3.4 ANSOFF MATRIX............................................................................................................................... 14
3.5 PORTER’S GENERIC STRATEGY.................................................................................................. 15
4.0 CONCLUSION........................................................................................................................................... 16
5.0 REFERENCES........................................................................................................................................... 17

1.0 INTRODUCTION
Every business organisation focuses on making significant growth and development.
The one of the major element which influences greatly to the business of a company is
its business environment. Business environment refers to all the internal and external
factors that influence the firm functions such as customers, employees, management
and business regulations (Andersen, 2017). This report is an attempt to investigate the
different business environment factors that should be considered by an organisation in
order to expand its business in a new market.
This report deals with the expansion of the business for the organisation named
“Vestas” with the support of strategic means. Vestas is a Denmark based company which
deals in manufacturing, installation, sales and servicing of wind turbines. It is largest
wind Turbine Company which operates in many nations of the world including India,
Italy, Germany, Denmark, United Kingdom, United States, Australia, Norway etc. In this
assignment, Norway is selected as the country for the expansion of Vestas (Carraher,
2018). Although Vestas is already operating in Norway, there are more growth
opportunities in Norway which are not still grabbed by the company. The overall aim of
this report is to consider the different factors to develop the effective strategies for the
successful business expansion and significant business growth in Norway.

2.0 BACKGROUND OF VESTAS
Vestas was founded in the year 1945 in Denmark. The firm has initially manufactured
the household appliance but in the year in 1979, it entered in wind turbine industry. In
the year 2013, it has become the largest wind turbine company in the world. Currently,
it is working in more than 50 countries with the workforce of 21,000 employees
(Blockeel, et al. 2016).
The annual report of 2017, Vestas monitors the performance of over 35,000 wind
turbines globally. The company has gained the trust of its suppliers and customers
which reflect positively on the business of the company. The company is taking is taking
advantage of being the oldest player in this industry and its strong technical foundation
in wind energy market (Andersen, 2017). The numerous strength of the company
makes it able to expand the business in suitable markets like Norway to enhance its
sales and profitability.

2.1 WIND TURBINE INDUSTRY OF NORWAY
Norway is a Scandinavian country encompassing glaciers, mountains and deep coastal
fjords. Norway is a leading company in electricity market liberalization. The renewal
sources contribute to 97.7% of the national electricity production in the country
(Andersen, 2017). The sources of electricity in Norway are hydropower’s which
contribute approximately 96% of the total electricity production of Norway. In 2016, no
wind power capacity was installed in the country; however, an announcement has been
made regarding the 17,000 MW of new capacity by the end of 2020 (Bull, et al. 2016). In
April 2017, the Swedish and Norwegian government develop the agreement on the
electricity certificate scheme’s future.
The agreement extended the cut-off for Norwegian projects by 1 year. Norway is
focusing on the promotion of the renewal sources of energy; therefore it can be
favourable for the business of the companies associated with the renewal sources of
energy (Yunna and Yisheng, 2014). The continuous effort of the Norwegian government
in promoting the use of renewal sources is favourable for the business of Vestas. The
government is investing in promoting the renewal sources of energy in the country
which can be seen as the great opportunity for the business of Vestas.
2.2 MISSION, VISION AND OBJECTIVES OF THE VESTAS
The vision of the Vestas is to provide the energy sources as the key solution to the
sustainable economic growth. The mission of the organisation is to plan new idea for
the enhancement of the business (Makos, 2015). The reliability with the culture of the
organization can undertake responsibility along with business success. The key
objectives of Vestas in improving their productivity can be well scheduled. This can help
in restructuring the organisation (Andersen, 2017).

3.0 INDUSTRY ANALYSIS
3.1 PESTEL ANALYSIS
There are different factors which possess a great impact on the business of Vestas. It is
crucial for the company to identify those factors and to analyse their impact on the
business of the company. There are many tools that can be adapted to determine the
impact of the various external factors on the business of the company (Housing Industry
Association, 2011). PESTLE analysis is a widest toll in the corporate world which helps
in analysing the impact of different macro factors, therefore PESTLE analysis of Vestas
can be done in order to assess the impact of various external factors.
POLITICAL FACTORS
The political environment of Norway can influence the business of Norway to a great
extent. One of the main objectives of Norway is to become the world leader in green
energy development. At present, one of the main priorities of the company is research
and development in oil and energy (Del Marmol and Feys, 2015). High level of direct
and indirect taxation, moderate policy and government, census oriented political
culture is the main factors which affect the business operations of the company.
ECONOMIC FACTORS
There are various economic factors such as inflation rate, interest rate and stability of
nation’s economy are the main factors that influence the business operation of the
company. The economy of Norway is favourable for the business of Vestas.
SOCIAL FACTORS
Nowadays, the interest of people is increasing towards the green energy sources. Even
the government is also encouraging people to adopt the green energy sources to fulfil
their needs of the electricity (Carraher, 2018). People are getting aware of the harmful
impact of the renewal sources. Therefore, it is necessary to validate the social
acceptance of the energy supply in the wider context.
In Norway, Europe levels of the support can be measured with the help of
Eurobarometer standards. This can help in gaining the balanced view of the energy

technologies to 3% while to wind energy is 21% and are opposed with the public
support of wind energy on the country level (Rothaermel, 2015). The incident of the oil
spill in the year 2010 has raised the environmental awareness among the people and
resistance with the people over installation and standard of living.
TECHNOLOGICAL FACTORS
The importance of Wind energy has grown the competition level in the market. For
Vestas, the only way to retain their leadership position is through technological
importance with the increased number of the employees. The research has strategically
managed development from 1.490 to 2.277 (Dawes, 2018). Thus, the development
facilities in Denmark allows the attractions of the employees towards the most
diversified market and increase effort to secure their development with the increase in
patents. The freexe sale of the Vesta product has helped in increasing their offshore
production. This can be higher than on shore with the more challenging seabed. This
can continue to be costly for products of the Vesta (Dawes, 2018).
LEGAL FACTORS
The regulatory approvals by the government can result in the facilities that are
approached with the taxation. The Danish law provided by the Denmark government
has not undertaken any obligation with the public update or revise the statement
through which future events and other measures of risks and implicated results can be
materially stated. The closure of the balance sheet of the Vestas and their cash position
has allowed them to buy-back programme of EUR 200m (Del Marmol and Feys, 2015).
This can present them a profitable growth with a firmly tracked leadership position in
transitioning market.
ENVIRONMENTAL FACTORS
The dependency rate of the Windmill moving and providing electricity associated with
the weather conditions. This can help in managing the business sustainability. The
demand for the Wind power in Denmark already accounts for the 26% of the total
electricity. Thus, it can cover the demand of the 30% of the total energy demand
(Makos, 2015).

Figure 1: PESTEL analysis
Source: Del Marmol and Feys, 2015

3.2 PORTER’S FIVE FORCE FRAMEWORK
The analysis of the competition in the industry can result in the visualising the factors
within Porter's Framework. The analysis of the industry can help in developing offshore
turbine in the development of the technology. The easier the companies the higher and
higher is the competition within the industry (Mathooko and Ogutu, 2015). The factors
that attract the barriers to entry in the business of the Vesta can be determined as
follows:
THREATS OF NEW ENTRANT
The wind turbine industry faces the package deal of the wind farms as relatively high
with the fixed costs. The financial crisis projects the more complex way to deal with the
business and tendency of gaining the supply and installation of the services with the
windmills and connecting the energy grid.
Figure 2: Threats from New Entrants
Source: Mathooko and Ogutu, 2015
The Vestas embraces their development measures by monitoring and maintaining the
contracts and setting up the products related business units on the scale of the seed
capital. The other barrier identified is the knowledge (Blockeel, et al. 2016). The existing
company have trough patents which paramount on the importance of remaining

competitive in the market through forefront on innovation. This can conglomerate with
the needs of necessary funds.
THREAT FROM SUBSTITUTES
With regards to the wind energy, the substitutes are present in the form of the energy
production. This can be high for the Vestas as the cost of the wind production is
traditional way and progress with the wind energy and gradual depletion can encounter
with natural gas production by producing less CO2 compared to other methods
(Mathooko and Ogutu, 2015). The low characteristic of the emission of the CO2 can
result in the other energies such as hydropower, tidal energy, and wave energy,
geothermal and other.
Figure 3: Threats from Substitutes
Source: Mathooko and Ogutu, 2015
BARGAINING POWER OF BUYERS
The role of the customer plays an important role in the installation of the cumulative
capacity in the business. The tendency of marking the business towards bigger
customers can result in a decrease of the overall customer importance. The customer
loyalty has been increased with at least 75 on the index of the world (Patterson Jr, and

Canter, 2017). This implies that there is a lot of competition globally and dominated
with the products.
BARGAINING POWER OF SUPPLIERS
There are two kinds of the suppliers in the wind industry they are raw and supplier of
the component. This has titled the opportunity of the business with bargaining the
market prices. This can virtually consist of the building a shift in the bigger projects and
large-scale production with the good capital funding. The financial crisis of the
organisation has resulted in a decrease of the suppliers and bankruptcy for the
business.
Figure 4: Bargaining power of suppliers
Source: Carraher, 2018
Many measures have been undertaken in order to mitigate the risk and dependency of
the value chain in the business (Yunna and Yisheng, 2014). This can affect the supply
bottlenecks and potential of the producing locally with the diversified risk.
COMPETITIVE RIVALRY WITHIN THE INDUSTRY
The product life cycle model can transfigure the adaptive measure of the fundamental
competitiveness regarding the lifecycle of the wind energy in the industry. This can help
in producing the effective product differentiation in the market. The wind industry is
relatively responsible for the long growth stages (Makos, 2015).

Figure 5: Drivers of degree of Rivalry
Source: Yunna and Yisheng, 2014
3.3 SWOT ANALYSIS
The strategic analysis of the Vestas can help in boosting their perceived importance in
the market. This can also provide an overview of the position in relation to its
surrounding. They are:
STRENGTHS WEAKNESS
 Global player and are in a good
position across the market
 The production level in the region
for the local market is transfigured
as local production
 Vestas has a strong brand image
 The focus on the cost of the energy
production adds value to their
services (Bull, et al. 2016)
 The importance to the R&D and
technology department result in the
strong position in the market along
 The high research and development
cost can add to financial imbalances
 Dependency on the suppliers
completely result in high wage level
in Denmark
 The low capital backing results in
low competition level
 The smaller the market share the
higher will be the growth market
which can result in a low profit
(Bull, et al. 2016)
 The subsidy schemes can present

with offshore segment
 The Dependency on Six Sigma
approach can provide quality
products
 The easy to work with policy can
support them with the long-term
experience
 The unique product portfolio
statement maintain them to remain
competitive
the use of the wind energy in
unnecessary ratio
OPPORTUNITIES THREATS
 The development of the technology
and rise in demand of the wind
energy can bring about an
opportunity for the business
 The environmental awareness in
the business and implication of CSR
policies result in offshore growth in
the market (Bull, et al. 2016)
 High growth rate opportunities in
other countries such as China
 The barriers to entry can be
mitigated with bigger customers
and bigger orders
 Rising prices of the traditional
energy sources such as Peak oil can
help in increasing the production
capacity
 The new competitor presence
 Falling of the prices within the
traditional source of energy
 The lack of the political aspect in
the discontinuation of the subsidy
schemes can result in the threat to
the organization
 The raw materials and suppliers
bottlenecks provided may face an
increase in price and deter
opportunity for the business (Bull,
et al. 2016)
 The Kyoto agreement can bind the
global target for the business

3.4 ANSOFF MATRIX
The competitive strategy for the emerging wind turbine industry can result in trade-offs
with direct drive technological concept in the business. The Vestas can seek to achieve
growth with the existing product in the current market segment i.e. Denmark. This can
help them in increasing the market share to the remarkable stage. Other than, the
Vestas can launch new products with targeted the precise number of the audience in the
existing market segment (Dawes, 2018). This can leverage the strength of the business
and is the easiest way to increase the market share.
Figure 6: Ansoff matrix
Source: Dawes, 2018
Vestas offers a large range of the turbines in the market. This can help them in covering
their product line with all the segments of the natural conditions. Despite the trends to
develop more powerful turbine can lead to the counting of the offshore turbine. The
core competencies can result in meeting the product line (Brenes, et al. 2014). It is
necessary to meet a range of the products in order to consolidate the desired market
share and increase in their portfolio of the organisation with the new product
development. This can also help in building a strong competitive advantage.

3.5 PORTER’S GENERIC STRATEGY
The porter’s generic strategy can help in developing the product engineering and
quality management in the Europe market. This can be predicted that the estimation
based on the European Commission’s objective to increase the final consumption of the
renewable source of energy to 20% by 2020 (Brenes, et al. 2014). This can add the
advantage to the business in order to include lower regulatory risk and lower risk of
access restriction along with the geographical vicinity.
Figure 7: Porter’s Generic strategy for Vestas
Source: Brenes, et al. 2014
The direct drive in the technology can provide more robust and reliable experience to
the wind turbine industry in Denmark. This can also provide a competitive advantage to
the firms. Further, it can add an innovative way to improve increase of direct drive wind
turbines reliability and resistance towards offensive competitive advantages and build
their focus on the onshore facilities (Bertozzi, et al. 2017). This focused differentiation
strategy can help in raising the demand for the wind turbine energy in the market.

4.0 CONCLUSION
The strategic analysis to the Vestas in relations to their surrounding can help in
maintaining their market position as a leader. The external analysis can provide an
special attention to the political aspect of the wind turbine industry. The general level of
support from the political commitment has deprived the conditions of the high
measures. Therefore, the implementation of the Kyoto protocol in Europe is still lacking.
Vestas shares listed on the Danish stock exchange were low because the Danish turbine
maker announced they will have delays in delivering projects profit and income.
This political setting and financial crisis have delayed the capacity of the business in the
emergent market. Therefore, in order to enhance the market condition, the Vestas
financial conditions must be minimised. It is also necessary to boost up the growth
prospects within Europe even after the benefit attained with the certain volume of the
development in market share.

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