MBA 542: Managerial Finance: Comprehensive Vestas Wind Systems Report

This comprehensive report analyzes Vestas Wind Systems, a leading player in the renewable energy sector. The report is structured into three parts: Part 1 provides a detailed background of the company, including its business model, industry, revenue streams, and lifecycle analysis. A PEST analysis is conducted to assess the political, economic, social, and technological factors influencing Vestas' operations, particularly in its key markets. Part 2 focuses on financial analysis, including the calculation and interpretation of key financial ratios, comparing Vestas to its competitors and the industry as a whole. This section includes an Excel sheet for ratio calculations and analysis. Part 3 explores managerial actions from the perspective of a CFO, aiming to enhance the company's value through strategic recommendations. The analysis incorporates information from Vestas' annual reports and other relevant sources, providing a thorough examination of the company's financial health and strategic positioning within the dynamic renewable energy market. The report also delves into the company’s sustainability efforts and its commitment to the energy transition.

MBA 542: Managerial Finance
Company Report
STUDENT NAME: .
Please note:
1. Please submit (1) this report, and (2) Excel file for ratio calculation through Moodle.
2. Your answers should be typed below each question (12 Times New Roman, black fond color).
Please do not change the format of the document. Content of your answers and references should
follow APA style with single space.
3. Make sure you read each question and its specific requirement carefully to meet all requirements.
4. Your submission will be checked using TurnItIn where originality will be checked against other
students’ submission and anything that’s available on the Internet.
5. Please note that whenever the questions mention “your company”, it refers to the company you
choose to analyze.
6. Basic Definitions and Formulas not required
Your Report consists of three parts:
Part 1: Background (Analyze company data, environment, social
aspect, economical, and its competitors, etc.)
Part 2: Financial Analysis including your spreadsheet ratios
(Ratios in an excel sheet and then use them in the document and
analyze it with competitors and then industry on a whole)
Part 3: Managerial Actions (Analyze as a CFO to increase the
value of the company)
Part 1: Background of your company (10 points each)
1. Company
1.1 Brief business description:
 What does your company do? Which industry/industries?
 What is the company’s business model?
 What are the main activities through which your company generates revenue?
 You should get the company’s most recent annual report and provide a pie chart on percentage of
revenue coming from various business units/products, and a similar pie chart on various
geographic areas where revenue is generated.
Note: you should be able to find all the information above on the company’s most recent annual report.
Type your answers starting from here:
The company which is considered for this assessment is Vestas Wind system on the basis of
which the analysis would be conducted. The company is a Denmark-based energy company which is
considered is engaged in the operations of manufacturing and distributing wind turbines which are used
for generation of power. The company was founded in 1945 and has its operations in several countries
such as Denmark, United States, Germany, Australia and several other countries. As per the recent
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estimates, the company is considered to be the largest wind turbine company in the world. The company
operates in two areas which is project and service (www.vestas.com, 2019). The company belongs to
power industry and basically engaged in wind-based power generation. The company is a growing
company and the company has reported revenues of (Euro) EUR10,134 million for the fiscal year ended
December 2018 which is an increase of 1.8% over FY2017.
The business model of Vestas Wind System aims at sustainable growth of the energy sector and
utilize the renewable sources for the purpose of generation of energy. In addition to this, the business
aims to provide efficient source of energy for the future generation. The business model of Vestas Wind
system of providing cheap renewable energy sources so that in the energy sector, sustainable
development can be promoted. The management of Vestas Wind System is dedicated in generation of
energy with the use of renewable sources of energy and therefore, it has become the largest company in
providing wind energy.
The business of Vestas Wind System provides wind energy solutions to the country in which the
business is operating. The business of Vestas Wind System effectively classifies the operations of the
business into two main business segments which are power solutions and services. The services
segments mainly comprise of sale of service contracts, spare parts and related services. The company
provides wide range of services to across equipment manufacturer platforms. The company is able to
generate revenue of E 1,522 million in 2017 which shows a significant increase in the revenue of the
business which is almost around 16.3%. On the other hand, the power solution segment mainly involves
sale of wind power plants, wind turbines and other related services. The company has been able to
record a revenue of E8,431 million which is significant, however, there has been a decline in the
percentage of sales which is achieved by the business (www.vestas.com, 2019). These activities help the
business to generate maximum revenue from operations of the business. In addition to this, the business
has also introduced certain products which are quite popular in the market and some of the products
which is offered by the business includes SiteHunt, SiteDesign, electrical pre-design, powerplant
controller and PowerPlus. The business would be focusing on enhancing the revenue of the business by
focusing on innovation and development of the business. Some of the services which is offered by the
business are installation and operations. Offshore wind project planning, service and maintenance and
several other services. On the basis of different operational segments of a business, the management is
able to generate appropriate revenue from operations.
The annual report of the business for the year 2018 shows that the management relies more on
power solution option for the purpose of generation of revenue while a minor portion is generated from
the services which is provided by a business (www.vestas.com, 2019). The business mainly earns
revenue from two main segments which are business power solutions and services which is provided by
the business. An effective representation of the revenue which is generated by the business from the
segments in the form of percentage is shown below:
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Power Solutions
85%
Service
15%
Vesta Wind Systems
The above chart effectively shows the percentage of revenue which is generated by a business
from operational process of the business. The management of the company is able to generate 85% of
the revenue from power solution services and only 15% of the total revenue is generated by a business
from the services which is provided by the business. The vestas wind systems have an effective
operational system which allows the business to effectively generate revenue from operations of a
business. The revenue earned by the business also contributes to enhancing the profits of the business.
43%
44%
14%
Region Wise Revenue Generation
Europe, Middle East, and
Africa
Americas
Asia Pacific
The above chart effectively shows region wise revenue generation for the business for Vestas Wind
System. The above figure shows that the maximum revenue is generated from America which amounts
to almost 45% of the total revenue which is generated by the business. In addition to this, the business
has also generated 42% revenue from Europe and Middle East nations. This shows that the overall
revenue which is generated by the business is mostly from America and Europe and Middle East
nations. The analysis also shows that the business is effectively operating and developing in the
countries which are shown in the chart above.
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1.2 Life-cycle analysis: where is your company and its product in the life cycle? Explain your answers
in detail.
Type your answers starting from here:
The analysis relating to lifecycle of a product is considered to be important as the same
effectively positions the business in a market and also shows how much developed is a
product in the market. The analysis of the business of Vestas Wind Power System
effectively shows that the business is well placed in the market and some of the products
which is offered by the business is quite popular in the market. The business is placed in
the high growth stage as the business is still expanding the operations of the business
(Zhang et al., 2017). The products of the business are quite popular in the market and
therefore, it would help the business to enhance the sales of the business. This is the stage
in which the business would looking to expand the operations of the business and make
use of the suitable position in the market for enhancing the market share of the business.
It is at this stage that the business undergoes rapid development and further expand the
revenue of the business (Soto-Acosta, Placer-Maruri & Perez-Gonzalez, 2016). The
stages of life cycle of the business show that the business would be able to achieve
maturity with an increase in the market share of the business. Therefore, in order to move
forward to the next stage in the lifecycle of the business, the management of Vestas Wind
System needs to focus on growth and development of the activities of the business. The
analysis for the company shows that the business would be aiming to enhance the
operations of the business. The analysis of the lifecycle of the business would be
providing valuable insights to the business to take appropriate decisions regarding the
operational process of the business and also regarding how to enhance the revenue of the
business.
2. PEST Analysis (A look at the overall environment)
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 Please note that you should discuss all factors that are relevant to your company and discuss how
each factor and its movement affect the company. You should also predict the future trend of the
factors in order to identify opportunities and threats.
 Since PEST are the factors at geographic level, you should focus on the key markets (or
countries) where your company operates, esp. if your company has a significant global operation.
2.1 Discuss all relevant political factors that may affect your company. Political factors include geo-
political conditions, tax policy, environmental policy, trade restrictions, labor law, health &
infrastructure policy, intellectual property regulation, privacy policy, consumer protection laws, and
political stability.
Type your answers starting from here:
The political factors which can have an impact on the decisions making process of a business and also
affect the revenue generation of the business are discussed below in details:
 Geo-Political Conditions: The political factors of a business include the political relation which
exist between the countries in which the business is operating. The trade relations between two
countries also affects the operations of the business (Gupta, 2013). The business operates in
America and Middle East and African nations. However, it is to be noted that the regulations
which are applicable on such countries and political environment need to be considered before
taking appropriate decision regarding the activities of the business.
 Tax Policies: The tax policies which are applicable on a business can affect the operations of the
business and thereby must be considered in taking important decisions of a business. The taxes
which a business needs to pay affects the profitability of the business and therefore must be
considered. The company needs to pay corporate taxes at the rate of 30% as per the regulations
which are set by the ATO.
 Environmental Policy: Every business needs to fulfill its own CSR policies and the same
includes environment protection regulations. This needs to be followed by the business and the
management needs to ensure that no policy of the business adversely impacts the surrounding
environment. Vestas made a joint venture for offshore wind turbines with Mitsubishi Heavy
Industries, including the 7-9 MW Vestas V164, the most powerful turbine on Earth. This shows
the commitment of the business for maintain environment balance in energy conservation
 Trade Restriction: The trade restriction in the country also affects the operations of the business.
The business needs to acquire trade license for other countries in order to ensure there is no trade
restriction on the business. These factors affect the smooth operations of the business and
therefore proper consideration should be placed on the same while taking major decisions
regarding the business.
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 Labor law, health & infrastructure policy: The labor law and health infrastructure policies are
important part of the code of conduct of the business. These policies need to be followed by the
management of the company for the welfare of the employee and also ensure that the employees
are satisfied with the operations of the business.
 Intellectual property regulation: The business of Vestas Wind System is engaged in the business
of using wind turbines and generation of power and therefore, it is imperative the business has its
own intellectual property which needs to be protected (Sammut‐Bonnici & Galea, 2015). In a
similar manner, the business also needs to adhere to regulations which is set for intellectual
properties. Furthermore, the business also needs to ensure that no such property is damaged or
copied from other businesses.
 Consumer protection laws: The business must also have a knowledge regarding the customer
protection and ensure that no activities is undertaken by the business which can affect the rights
of a consumer. In violation of any such rights heavy penalty is applicable on the business. The
consumer laws are universally applicable on all businesses and therefore decisions relating to the
same needs to be taken appropriately.
 Political Stability: The political environment of the country in which the business is operating is
also a vital factor which affects the revenue generation of a business. If a country is facing from
political instability than the business would not be able to generate appropriate amount of
revenues and it would also be difficult for such a business to survive in such an environment.
2.2 Discuss all relevant economic factors that may affect your company. You should discuss at least
four economic factors (1) economic growth, (2) interest rates, (3) exchange rates, and (4) inflation
rates. Note that you should put more effort if your company has a significant global operation.
Type your answers starting from here:
The economic factors which can have an impact on the operations of Vestas Wind System are provided
below in details:
 Economic Growth: Any business which is trying to enhance the revenue of the business would
be focusing on achieving economic growth from the operations of the business. The management
of Vestas Wind system is also looking for more revenue and the same can be achieved by
economic growth (Gerwick & Sparks, 2014). The business of Vestas Wind System would be
focusing on achieving economic growth for achieving more profits in the future.
 Interest Rate: The interest rate affects the business if the business utilizes debt capital in the
capital structure of the business. The increase in interest rate affects the operational costs of the
business and thereby can affect the profits which is generated by the business.
 Exchange Rate: The business of Vestas Wind system has operations different countries and
therefore fluctuations in exchange rates of currency also can affect the operations of a business
Any major fluctuation in the exchange rate can have an impact on the profits which is generated
by the business and also affect the operations of the business.
 Inflation rates: One of the major economic factors which can have an impact on the operations
of the business is the inflationary pressure in the economy. It can affect the costs of the business
as high inflation can increase the costs of inputs and thereby affecting the profits and the prices
which is charged by the business (Cadle, Paul & Turner, 2014). Therefore, it can be said that
inflationary pressure in an economy plays a vital role in the decisions which is taken by the
business.
2.3 Discuss all relevant social factors that may affect your company. Social factors include demographic
change and the related consumer habit, aging society & related problem, lifestyle trends, health
consciousness, career attitudes, and emphasis on safety.
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Type your answers starting from here:
The social factors which can have an impact on the operations of a business are listed below in details
and how the same can have an impact on the operations of the business:
 Demographic Change: The change in the demographic structure of a business also can affect the
operations of a business and the same needs to considered while taking major decisions for the
business. Any changes in the habits of the customers or changes in the utilization of energy
source can impact the operations of the business (Rakesh, 2014). The business of Vestas Wind
system produces renewable energy and any change in the preference of the customers can impact
the operations of the business. The demographic change can affect the impact the revenue and
also the presence of the business in the market.
 Aging society & related problem: The ageing and related problems does not impact the
operations of the business more. The most basic problem which the business can face is
transitioning the habits of the people to use renewable sources of energy instead of non-
renewable sources. The business needs to promote renewable sources and also sustainability
practices in the business. This can promote the revenue as well as sustainability practices in the
economy.
 Lifestyle trends: The lifestyle followed by the residents also place a vital role in the decisions
which is taken by the business relating to operations of the business. The lifestyles trends of a
business depend on the general use of energy by people and what source is used by the business.
The lifestyle of people also has an important role in the growth of the operations of Vestas Wind
Systems.
 Safety: The management of the company also needs to consider on factors such as safety of the
employees as well as the customers. The equipment and wind turbines which is used by a
business is an important factor which can have an impact on the revenue generation of the
business (Igliński et al., 2016). Therefore, it can be said that the safety of the employees and
customers are important factors which affects the decisions of the business.
2.4 Discuss all relevant technological factors that may affect your company. Technological factors
include technology advancement such as artificial intelligence (AI), machine learning (ML), financial
technology (FinTech), online retail, the Internet of Things (IoT), new manufacturing technology, and
etc..
Type your answers starting from here:
The technological factors which have an impact on the operations of the business and can led to the
development of the business:
 Artificial Intelligence: The development of technology in the market has reached new heights as
artificial intelligence has been introduced in the market which helps in controlling wind turbines
and also distribution of energy. The use of such technology can enhance the efficiency of the
business and increase the revenue which is generated by the business (Barbara et al., 2017). This
would also help the business to offer new and efficient wind turbines for generation of power.
 Manufacturing Technology: The manufacturing technology is also a vital part of the operations
of the business (Boons et al., 2013). The use of better technology can help the business to
develop a better model of wind turbine which would help the business to generate more energy.
Better technology would be beneficial for the business and this would ensure better energy
generation in the business.
 Access through Internet: The management of the company needs to develop such a technology
so that the government and other private institutions can utilize such an energy by the internet to
enhance the revenue and efficiency of the business (Yi, 2014). The revenue which is generated
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by the business would be enhanced significantly if such a process is followed by the
management of the company.
3. Industry analysis
3.1 Industry overview: focus on the main industry your company operates on:
 Discuss the current size of the industry and its future: whether there is growth or decline, is there
a ceiling on growth? Use numbers to support your argument. (I suggest that you do a Google
search, or look it up in your company’s annual report).
 Discuss your company’s market share in the industry.
Type your answers starting from here:
The application of renewable energy as a source of power is becoming more and more eminent as the
nations realize the threats of using non-renewable source of energy. The energy industry in Australia is
already enormous in size and with further growth in the population of the nation the same would be
increasing several folds. In such a market, the need for an alternative and cleaner source of energy is
required. The year 2018 has been one of the best years for clean energy development in Australia and
has witnessed significant growth in the generation of power. As per the cleanliness report in energy
sector, more than 2.3 GW of new renewable energy capacity entered the market in 2018 as 38 projects
were completed throughout the year (Engelken et al, 2016). This shows significant growth in the energy
sector in Australia and further it was estimated that Australia generated around 21% of the total power
needed from renewable sources of energy generation which speaks a great deal regarding the
government of Australia.
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The percentage of energy which is generated by Australia is clearly demonstrated in the above figure
and the same speaks lengths about the energy and power industry operating in Australia. The above
figure also shows that wind energy contributes around 33.7% to the total power which is generated by
the wind turbines. The business of Vestas Wind Systems contributes most to the generation of wind
energy in the economy and also in generation of power (Taran, Boer & Lindgren, 2015). The business
has generated 11.9 MW of power through wind energy and also started several projects which involved
installation of wind turbines. One of the largest and most successful project of the business was MHI
Vestas Offshore Wind which received 950 MW order in the UK. This shows the efficiency level of the
business in generation of energy. The company aims to become global leaders in generation of
sustainable energy and thereby also contribute to the revenue which is generated by the business
(Strupeit & Palm, 2016).
The market share of the business is also impressive as the business is considered to be a leading business
in generation of power and utilization of wind energy. In terms of market share, the business is
considered to be leaders in generation of power globally (Masini & Menichetti, 2013). The same can be
shown in the chart which is provided below:
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The company has produced more wind turbines in 2018 and this shows the emphasis of the company in
development of wind energy as a source of power. It is estimated that the business would be able to
achieve more growth in the years to come and thereby increase their generation of power in the country.
3.2 Competitive Strategy: Position your company in the matrix below. Briefly discuss your answer:
Type your answers starting from here:
As per the strategies which was devised in Porter’s Generic strategies, the business of Vestas Wind
Solutions can be placed in the product differentiation quarter. The business is known for its innovative
style for generation of power more efficiently. The company is trying to keep the prices of energy as low
as possible and also making the same available easily in the market. The renewable source of energy is
still at its infancy stage and therefore the same is not as used as non-renewable sources and therefore
differentiation strategy is followed by the business (Yildiz, 2014). The company also considers that the
costs of wind energy in future would fall significantly considering the growth level in technology. The
company also has operations in several other countries which makes the reach of the business significant
and also allows the business to access resources of different countries. Therefore, it can be said that the
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company is trying to differentiate the products which is offered by the business so that the business is
able to maintain and further built its dominance in the market.
3.3 Competition details: list the company’s top 2-3 main competitors. Comment on the company’s
competitive advantage, focus on what the company does better than its competitors and how long you
think the company will keep the competitive advantage (core competence). Or if the company is not
doing better than its competitors, discuss the situation and whether you see the potential for your
company to improve.
Type your answers starting from here:
The business of Vestas Wind Solutions also faces competition in the market of generation of wind
energy and some of the major competitors of Vestas Wind Solutions is Xinjiang Gold Wind Energy and
General electric. These companies are also global leaders in production of wind energy globally. The
Company of Vestas Wind Solutions effectively faces competitive pressures due to the number of
turbines which has been installed by the business and also due to the offshore projects which is
undertaken by the business. The business has an excellent distribution network of energy which makes
the distribution effective. The business is able to generate more MW of energy than its competitors and
thereby the business is able to generated more revenue in comparison to its competitors from primary
business activities. In addition to this, the company also follows an innovative model for generation and
execution of different projects. The business follows a differentiation strategy for getting a competitive
advantage over the competitors. However, the business derives the main advantage from the numerous
wind turbines which are already established by the business in different regions. In this manner, the
business is able to generate significant amount of energy from the market. The competitors are closely
follows the techniques of the business and therefore would eventually reach the position of Vestas Wind
Solutions for providing more competition. The business of Vestas Wind Solutions needs to improve the
cost structure which is followed for providing the energy to the public. The management of the company
needs to take steps to reduce the costs and therefore offer energy at a lower price so that the same is
affordable by all. Therefore, at current situation, the business of Vestas Wind Solutions is at a much
beneficial position in the market being the global leaders in supply of energy.
Part 2: Financial Analysis (10 points each)
Note
 First of all, get the financial statement of your company from the last 4 years, copy & paste balance
sheet and income statement to an excel sheet. Then do all your calculations on the excel sheet for the
past 3 years. Also find your company’s closest 2 competitors and download their last 4 years’
financial statement and calculate ratios for the last 3 years. This is to ensure that you track your
company throughout the years and also compare with competitors.
 You should calculate all the ratios based on our lecture slides. You should not look for other
formula from online sources.
 For stock price, just find the price at the financial statement report day. For instance, if the financial
statement report day is July 31, 2018, use the stock price (closing price) on July 31, 2018.
 For each ratio, you have to do the following:
1. List the ratio of your company for the three years, with your competitors’ 3 years, such as:
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Your company name Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Current Ratio 1.24 1.23 1.16 0.09 0.26 0.19 1.92 1.81 1.81
2. Describe what it measures and what it says about your company,
3. Explain any trends that you have noticed in your company’s financial ratios over the past 3
years,
4. Explain how well the company is doing with the ratios compared to industry averages,
5. Explain what the company needs to do if they are underperforming with a given ratio.
6. You should also discuss certain aspects of your company by considering several related ratios
together.
7. It should take approximately one or two paragraphs per ratio to cover these items.
8. You should calculate all the ratios based on my lecture, and you should not take the ratios
directly from any online sources.
1. Short-Term Solvency:
1.1 Current and quick ratios:
1) Current Ratio
2) Quick Ratio
Comment on the ratios above and discuss your company’s general ability to pay off its current liabilities.
Type your answers starting from here:
Current Ratios
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Current Ratio 1.24 1.23 1.16 0.09 0.26 0.19 1.92 1.81 1.81
The above table shows the estimates of current ratio which is considered to be one of the important part
of liquidity ratios. The current ratios show the ability of the business to meet the current obligations of
the business and also maintain the liquidity position of the business. The current ratio of the business
also shows the cash reserves which is maintained by the business for managing the operations of the
business (Palepu & Healy, 2013). The ratio estimate of Vestas Wind Systems shows that the liquidity
position of the business has declined which means that the management of the company needs to pay
special attention. The current ratio of Vestas Ltd is shown to be 1.16 in 2017 but the same was 1.25 in
2016 therefore a decline is apparent. The estimate of General electric is much better in comparison to
Vestas Wind Systems which shows that the business of General electric has a better current liquidity
position in comparison to other competitors. The company of general electric can pay off its current
liabilities better than its competitors.
The management of Vestas Wind Systems needs to maintain its liquidity position and ensure that the
cash inflows of the business is much more than the cash outflows of the business. The management of
Vestas Wind Systems also needs to control the expenses of the business so that the management is able
to maintain its cash reserve.
Quick Ratios
Vestas Wind Systems Xinjiang Gold Wind
Energy
General electric
2015 2016 2017 2015 2016 2017 2015 2016 2017
Quick Ratio 0.76 0.67 0.58 0.95 0.93 0.77 1.56 1.44 1.41
The above table shows the quick ratio of all the three businesses which is engaged in the energy sector
and the ratio is closely related to liquidity position of the business. The calculation of such type of ratio
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