First Solar Case Study: Evaluating Competitive Advantage & Threats

This case study provides an in-depth analysis of First Solar, a company in the solar industry, focusing on its competitive advantage and sustainability. It begins by introducing the solar industry and its attractiveness, highlighting First Solar's early dominance with its thin-film cadmium telluride (CdTe) technology. The analysis includes a Porter's Five Forces model to assess the industry's competitive landscape, followed by calculations of ROA and ROIC to evaluate First Solar's financial performance. The study identifies First Solar's competitive advantages through a VRIO analysis, examining factors such as global presence, technology, and market focus. It also addresses the sustainability of the organization and the biggest threats to its strategy, particularly from Chinese manufacturers and evolving renewable energy technologies. The case study concludes with recommendations for First Solar to maintain its competitive position and ensure long-term growth in the face of industry challenges.

Running head: FIRST SOLAR CASE STUDY
First Solar Case Study
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1FIRST SOLAR CASE STUDY
Table of Contents
Introduction...........................................................................................................................................2
Solar industry and its attractive industry................................................................................................2
Porter’s Five Force Model.................................................................................................................3
ROA and ROIC model.......................................................................................................................4
First Solar’s competitive advantage.......................................................................................................4
VRIO Analysis..................................................................................................................................5
Sustainability of the organization......................................................................................................6
Biggest threats to First Solar’s strategy.................................................................................................7
Recommendations.................................................................................................................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10

2FIRST SOLAR CASE STUDY
Introduction
As opined by Schulze and Schmidt (121), the term ‘competitive advantage’ had become the
catch-phrase of the contemporary business world and the net result of this is that the different
organizations are striving to gain competitive advantage within the business market in which they are
operational. However, Hosenuzzaman et al. (296) are of the viewpoint that the organizations often fail
to take into effective consideration the notion of sustainability and thereby over-utilize the resources
or the technologies that had initially helped them to gain success. The net result of this is that the
organizations so as to maintain their competitive advantage over their competitors needs to undertake
the process of continuous development so as to keep on changing their business practices in
accordance with the requirements of the business environment in which they are operational. This
paper will undertake an analysis of the concepts of competitive advantage and sustainability in the
particular context of the organization First Solar.
Solar industry and its attractive industry
The origin of the solar industry can be traced back to the 19th century when the French
scientist Edmond Becquerel undertook the discovery of the photovoltaic effect which in turn was used
for the development of the solar panels. This was since the contemporary organizations related to the
solar industry take the help of these solar panels for the generation of electricity and is also the major
product which is being offered by these organizations to the customers (Sahu 631). As a matter of
fact, it is seen that the contemporary solar PV panels which are being offered to the customers are
primarily of two types, namely, the thin-film and the crystalline silicon. More importantly, the
industry contributes in a significant manner towards the world economy and at the same time had
reduced the dependence of the different individuals as well as organizations on the various no-
renewable sources of energy. However, in the recent times it is seen that the emergence of different
kinds of technologies and also the reduction in the price of silicon had changed the landscape of the
solar industry in a significant manner (Kannan and Vakeesan 1104).
The organization First Solar started as a glass manufacturing organization in 1984 however
the organization soon realized the business opportunity offered by the solar panel industry and thereby
switched over to the solar industry. More importantly, the organization under discussion here
specializes in the manufacture of thin-film cadmium telluride (CdTe) which helped it dominate the
solar industry in the early part of the 21st century. Furthermore, the organization resorted to the
manufacture of thin-film cadmium telluride (CdTe) because of the high price required for the
procurement of silicon and also the technology which was required for the manufacture of silicon
based solar panels. Moreover, it was seen that the organization was able to hold a monopoly in the
solar industry in the initial phase of the 21st century before the price of silicon was reduced and

3FIRST SOLAR CASE STUDY
innovative technologies were used for the manufacture of thin film solar panels. Taking the help of
this innovative technology and the reduction in the price of silicon China had emerged as one of the
leaders in the solar industry.
Porter’s Five Force Model
First Solar is observed to belong to the solar energy industry and the industry attractiveness of
the company is explained through analyzing porter’s five forces model that is indicated below:
 Rivalry- As the company operates within the solar industry it competes with several
semiconductor companies within the solar energy sector. The industry is deemed to be highly
competitive along with being rapidly changing. The global solar energy market is attaining
growth at an annual growth rate of 30% (Nebojsa and Sharma 5552). One major factor that is
increasing rivalry within the industry is absence of product differentiation. As solar energy
products have distinct cost structures along with efficiency ratings and as this industry is
determined by price it is driven to offer high cost rather than on superficial product aspects.
Competition is also increasing from organizations those currently offer or developing certain
renewable technologies like geothermal and power generation sources which burn
conventional fossil fuels.
 New entrants- There are several barriers to the entry within the solar power industry and
among the major barriers of entry is an increased amount of research and development needed
to be able to manufacture a competitive technology at a competitive price. Government along
with cultural interest within renewable and green technology makes the social industry
increasingly attractive for the new companies (Sahu 631). Moreover, the governments of
Germany and France start decreasing attractive subsidiaries along with incentives, the
expense to enter the market sector will increase that can turn out to be less attractive sector for
new organizations.
 Threat of substitutes- First Solar faces intense competition from the manufacturers of
crystalline silicon solar modules, thin-film solar modules along with solar thermal along with
PV systems. The solar industry is also observed to have several substitutes that encompass
silicone based photovoltaic cells along with other types of renewable energy. First Solar
Company might be affected by rising popularity of other renewable generation technologies.
The market for the fuel cells is increasingly evolving and the new technologies are developed
through employing fuel cells for to produce decreased carbon emissions along with
generating high electricity levels (West, Ford and Ibrahim 154). In addition, continuous
research and development in such technologies might result in novel and effective
technologies which might impact business of First Solar.
 Supplier bargaining power- Supplier bargaining power is observed to be high for the First
Solar Company for the reason that Chinese subsidization of suppliers is complex to identify.

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Government incentives particularly improved the returns for the solar providers in two
manners through offering higher prices for the solar energy suppliers or attaining necessary
utilities to purchase specific solar power amount. Considering the same, it is observed that
First Solar employs 30 distinct raw materials along with components to develop an effective
solar module. Most of the First Solar Company’s suppliers are small organizations and they
attain supply of these materials from several suppliers on the basis of purchase order along
with entering into long term contracts. First Solar might deal with production disruptions that
can affect its contractual agreements (West, Ford and Ibrahim 154).
 Buyer bargaining power- This threat in the solar industry is strong and in this industry the
products are differentiated based on watt and cost efficiency that facilities buyers to be very
discriminate. First Solar has significant distribution and marketing options within the nation.
The consumers’ substantial international consumer base subjects the organization to risks
encompassing unfavorable regulatory and tax authority within the foreign nations along with
their consumer base. It has also been observed that PV solar cell use has widened to consumer
applications like the watches and calculators and the utility organizations have turned out to
use PV solar plants. However, the company is dealing with threat from buyers bargaining
power as the costs are continuously being increasing than nonrenewable energy sources.
ROA and ROIC model
ROA (Return on Assets) = Net Income / Total Assets
= 39,493 / 5,777,614
= 0.006
ROIC (Return on Invested Capital) = (Net Income – Dividends) / Total Capital
= (39493 - 176,448) / 605,619
= (0.22)
First Solar’s competitive advantage
The years 2007-2011 were especially profitable for the organization First Solar not only from
the perspective of the financial growth that it was able to attain but at the same time from the
perspective of the monopoly that it held in the global PV solar panel business. For example, it was
seen that in the USA market alone in the time period mentioned above the organization was able to
hold monopoly with “16% of residential, 43% of commercial, and 41% of utility” used by the
customers which was way higher than the market share held by the other companies like SunPower,
Suntech, Yingli and others. More importantly, the organization was able to derive more than 74% of

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total sales from the nation of Germany itself and this clearly indicates the dominance held by the
organization in the concerned nation. Furthermore, in the nation of China it was seen that more than
90% of the PV solar panels which were exported from offshore companies were offered by the
organization under discussion here. These evidences clearly point out the monopoly held by the
organization under discussion between the years 2007-2011 and also the profitability of the
organization as well. Moreover, the net debt of First Solar between the years 2007-2011 was $276
million whereas SunPower had $687 million, Suntech had $1.7 billion, and Yingli Solar had $1.1
billion in the same time period along with the nominal market shares that they held. Thus, it can be
safely said that the organization First Solar was more profitable than the other organizations
operational in the PV solar panel business in the time period of 2007-2011.
VRIO Analysis
An analysis of the organization First Solar and its business activities between the years 2007-
2011 is likely to reveal insightful information regarding the profitability as well as monopoly held by
the organization-
Resource or
capability
Valuable Rare Inimitabl
e or non-
substituta
ble
Organiz
ed to
exploit
Impact on
Competitive
Advantage
Strong Global
Presence
Yes Yes Yes Yes Realized sustainable
competitive advantage
High quality thin-film
cadmium telluride
(CdTe) PV solar
panels offered by the it
Yes Yes Yes Yes Enabled the
organization to earn a
higher amount of profit
and thereby gain
competitive advantage
Focus on emerging PV
solar panel markets
like Germany, China
and others
Yes Yes Yes Yes Through the usage of
this strategy the
organization was able
to gain monopoly in
these emerging
markets and thereby
competitive advantage
Low manufacturing
cost because of the use
Yes Yes Yes Yes The use of this practice
enhanced the profit

6FIRST SOLAR CASE STUDY
of thin-film cadmium
telluride (CdTe)
technology rather than
silicon
margin of the
organization and thus
helped it to earn
competitive advantage
Extensive focus on
commercial and utility
customer base
Yes Yes Yes Yes The focus of the
organization on
commercial and utility
customers enabled it to
sell large volume of
solar panels and
thereby enabled it to
gain monopoly and
competitive advantage
within the business
market
Low space required
for the installation of
the PV solar panels
offered by the
organization
Yes Yes Yes Yes This actually
encouraged the
customers to opt for
the solar panels offered
by the organization and
thereby enabled it to
earn competitive
advantage and higher
profitability
Sustainability of the organization
Laszlo and Zhexembayeva (131) have articulated the viewpoint that the concept of
sustainability can be defined as the process through which the business enterprises are being able to
attain long-term growth without causing the over-exploitation of the resources that it is using for the
manufacture of its products or services. As opined by Cantele and Zardini (171), there are various
factors like the manufacturing cost incurred by the organization, the nature of products or services
offered by it, effective usage of the business market in which it is operational and others. In the
particular context of the organization First Solar it can be said that the decision of the concerned
organization to opt for the use of thin-film cadmium telluride (CdTe) PV solar panels in the light of

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the expensive cost of silicon enabled it to offer relatively cheaper products to the customers which in
turn enabled it to grab a large number of customers and thereby earn a higher amount of revenue
(Kwarteng, Ato Dadzie and Famiyeh 116). More importantly, the lesser space needed for the
installation of the solar panels offered by the organization was another factor which helped the
organization to have a larger customer base (West, Ford and Ibrahim 154). Furthermore, the focus of
the organization on the commercial as well as utility customers was another factor which contributed
towards the profitability of the organization between the years 2007-2011. In addition to these, the
decision of the organization to expand its business in countries like Germany, China and others
wherein the market for solar panels was just emerging was another factor which directly contributed
towards the competitive advantage as well as the sustainability of the concerned organization (Lloret
421). Moreover, the durable as well as inimitable nature of the services offered by the organization is
another factor which had contributed towards the competitive advantage of the organization (Davcik
and Sharma 5551). For example, it is seen that the services offered by the organization are not only
durable but at the same time very hard to imitate as well. Thus, it can be said that it was the
conglomeration of all these factors which not only helped the organization under discussion here to
gain competitive advantage but at the same time sustainability in the timeframe 2007-2011.
Biggest threats to First Solar’s strategy
Amui et al. (319) are of the viewpoint that the organizational prospects of an organization
greatly depends on the effectiveness with which it is being able to mitigate the adverse effects of the
threats presented by the business market where it is operational. The biggest threat that the
organization First Solar currently faces is on the score of the reduction in the price of silicon which is
being used by Chinese organizations to manufacture solar panels (Daidj and Aras 205). More
importantly, with the use of recent innovative technologies, China had been able to significantly
reduce the amount of silicon which is needed for the manufacture of these solar panels. Another
important threat that the organization under discussion here faces is the cost leadership strategy
followed by the different Chinese organizations for the solar panels that they are currently offering to
the customers (Liu and Liang 1021). Furthermore, the Chinese manufacturers by considerably
reducing the amount of silicon which is needed for the manufacture of solar panels had been also able
to reduce the space that is being needed by these solar panels (Epstein 144). This had made the solar
panels more convenient for the domestic customers, a customer base which the organization First
Solar had completed neglected in the earlier times. The threat of bankruptcy is another major threat
that the organization is currently facing because of the financial underperformance and also the large
debts that the organization had incurred (Carayannis, Sindakis and Walter 99). These in short are
some of the major challenges that the organization is facing currently.

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Recommendations
Option Pros Cons Recommendation
Focusing on the
domestic customers
The organization in
the earlier times had
just focused on utility
and commercial
customers thus it is
likely that the
organization by
focusing on this
customer base will be
able to enhance its
customer base and
thereby profitability
in a significant
manner.
This is likely to shift
the focus of the
organization from the
utility and
commercial
customers who were
the main source of
income for the
organization
The organization
needs to enhance its
existing customer
base and incorporate
the domestic
customers as well for
the products that it is
currently offering.
This will apart from
increasing their
existing customer
base will also
increase the amount
of profit earned by it.
Use of silicon rather
than thin-film
cadmium telluride
(CdTe) for the
manufacture of PV
solar panels
The organization will
be able to reduce its
manufacturing cost in
a significant manner
along with the
opportunity to reduce
the space that is
needed by the solar
panels offered by it.
This will in turn
increase the profit
that they earn from
each of the solar
panels sold by them
This is likely to shift
the focus of the
organization from the
thin-film cadmium
telluride (CdTe)
technology the use of
which initially helped
the organization to
gain success
The organization
needs to take the help
of silicon for the
manufacture of solar
panels. This will not
only reduce the
manufacturing cost
incurred by it but will
at the same time
increase the appeal of
the product offered
by it as well.
Expansion into the
business markets of
developing countries
This will offer the
opportunity to the
organization to
significantly increase
The organization is
currently facing
various kinds of
financial,
The organization in
order to increase the
amount of profit
earned by it can

9FIRST SOLAR CASE STUDY
its customers and
also the opportunity
to earn a higher
amount of profit.
This in turn will help
the organization to
recover from the
financial crisis that it
is currently facing.
management and
other problems and
expansion into other
nations is likely to
add to the challenges
that it is currently
facing.
expand into the other
developing nations.
Furthermore, the
organization through
the usage of effective
business as well as
management
practices can further
enhance the
efficiency or quality
of the products
offered by it to the
customers.
Conclusion
To conclude, the different business enterprises are vying to attain competitive advantage over
their competitors in the business market in which they are operational. However, for the attainment of
sustainability as well as competitive advantage the organizations need to effectively mitigate the
adverse effects of the threats that they are facing in the business market. In addition to these, the
organizations are trying to enhance the inimitability of the services or products that they offer so as to
gain an upper-hand over their rivals. These aspects of the contemporary business world become
apparent from the above analysis of the organization First Solar and their business activities.

10FIRST SOLAR CASE STUDY
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