First Solar

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 Table of contents:
i) Introduction
ii) Summary of the global market & market segments
iii) Business model & strategy
iv) Finance assessment
v) Challenges
vi) Recommendations and conclusion
 i) Introduction:

• For the first time in American history, a handy and sustainable energy source has
been so critical to the nation's economic growth and job creation in a globe
increasingly requiring 24-7 power.
• Even while small-scale industries and distributed power production have shifted their
attention to more efficient utility-scale projects in recent decades, they are still
focused on delivering great power at the lowest possible cost. In many developing
countries, the decision to organise large-scale renewables is now a financially simple
one.
 PV solar-based technology
• PV solar-based technology has seen a dramatic increase in utilization
during the past decade. It's no secret that several governments have
stepped their efforts to promote solar energy as a reliable source of power.
In order to meet demand and regulatory regulations at any given time,
producers have had to come up with new solar technologies.
HISTORY

First Solar is among the largest solar companies

in the United States

Founded in the year 1999

Roots back from the glass business owned by

Harold McMaster

McMaster, however, came up with a cheaper

solution which involved replacing crystalline
silicon with cadmium telluride, giving the
company an edge over others.
Market growth and segments:
Between 2008 and 2009, this market's expansion stalled.
Recessions during this time period were cited as a contributing
factor. At this level, most governments have slashed spending
and incentives in the energy sector.
Solar energy usage is expected to rise by 48 percent over the
next five years, according to experts. Producers and consumers
in the dominating market
 Phases that led to the growth of First Solar

1948 1984 1999 2005

Harold McMaster
Harold McMaster First Solar began
made his fortune in
shifted focus from First Solar was mass producing
the glass industry
glass industry to founded cells at an Ohio-
by producing
the solar industry based plant
permaglass
Why was the market valuing First
Solar with high multiples?

First Solar valued long-lasting customer

relationships
First Solar boasted of great revenue and
profit margins
Replacement of crystalline silicon with
cadmium telluride had an overall effect in
cutting costs
The global network of consumers of the
industry
 Business strategy and model:
• Cost leadership and differentiation strategies are interwoven in First Solar's
approach to business strategy. For example, First Solar produces thin-film cadmium
telluride for its solar panels at a lower cost-per-watt than its rivals.
• This strategy is seen in First Solar. Further evidence of this trend may be found in
First Solar's decision to vertically integrate the company and divide it into two
separate but closely related subsidiaries.
• Solar panel parts are manufactured by one company, while panels are assembled
using the parts manufactured by the other. Solar panels with low production costs
per watt might be targeted by the company through this technique.
 Business strategy and model:
• System integration, development, and operations were the first products
and services offered by First solar.
• For the First solar, these industries were lifeblood. In addition, the
European market brought in a large number of new customers for the
company.
 Potters five force Model:
• The competitiveness of a company can be measured using the Porter Five Forces. I will use the
Porter Five forces model to precisely and efficiently evaluate and appraise the company's market
position and comprehend the competitiveness of the PV solar industry. My analysis of the
company's overall profitability and the competition in the solar business will be aided by the model.
The industry is a competitive one.
• The quantity of competitors and their abilities are the two most important factors influencing
industries (Dälken, 2014). As a result, a corporation can't raise prices or other terms for customers
and suppliers in order to boost profit margins in such a situation. One thing to keep in mind is that
the competition in the PV solar market continues to evolve. The demand for PV solar electricity in
the local and global markets grew.
 Potters five force Model
Buying power of the supplier
• The prices of items on the market are set by suppliers with greater negotiating power. If there are only a few providers in a market, they are more
likely to be able to influence the availability of products and their prices. The problem is that when there are a lot of people, their negotiating
power is low, and firms can set the price.
The power of the buyer
• One of the Porter forces that determines an industry's competitiveness is the strength of the buyer. Products' prices can be influenced by
customers' quantities and available options (Dälken, 2014).
Substitutes are readily available.
• Having a close product that may be used as a substitute in the event of a price increase is advantageous for consumers. Therefore, the presence of
competing items can influence a company's pricing policy.
Threats of a new entrance into the world
• It's not easy to break into the solar energy market because manufacturing technology is so advanced and the startup costs are so high. Many
governments are supporting green energy production and use, but they are not subsidising it as was previously the case (Thompson & Ballen,
2017).
 iv) Finance assessment:
• The company's ability to raise capital is a major source of competitive advantage for it. The company's current ratio shows that it is
financially sound.
• The current ratio is calculated by dividing the company's current total liabilities by the company's current total assets. More than 2
indicates that the company's finances are secure.
• A higher value score than its competitors shows that it is financially secure. It is obvious from Table 2 that the company borrows
less than other players and has more liquid cash and limited liability, as well as constant growth, thanks to considerable investment
in the development of rapid and rapid (Thompson & Ballen, 2017).
• The company's financial resources are an asset because they add value and the company is prepared and organised to take advantage
of the resources.. Because they are already saddled with enormous debt, its competitors are unable to match its financial resources.

f revenues reported by First Solar in 1Q 2009evenues reported by First Solar in 1Q 2009

Assessment of quality of revenues reported by First Solar in 1Q 2009
Assessment of quality of revenues reported by First Solar
in 1Q 2009
Total revenue and Cost of Sales

As noted from the CRFA report, First

Solar registered a decrease in its total
revenue in the first quarter of the year
2009

In the last quarter of the year 2008,

First Solar registered an increase in
the cost of sales

In the first quarter of the year 2009,

First Solar registered a drop in the cost
of sales
Receivables and inventories

 In the first quarter of 2009, gross

accounts receivables shot up

from the last quarter of 2009 by

almost triple of the amount.

 Increase in its amounts in the

inventories section
Comparison between FLSR and its competitors in terms of inventory growth

 As shown in the chart, First Solar was

having huge inventory growth
percentages compared to its competitors
 An increase in the inventories means a
company ends up paying higher taxes
Challenges  Finance
faced by First
Solar in the  Overproduction

early 2009  Other challenges

Finance
Financial crisis at First Solar scared off investors, dampening investor confidence and optimism
The crisis halted growth of solar in Europe.
Germany and Spain cut subsidies to utilities and construction of new projects had to be halted
Overproduction
Overproduction of materials led to a dramatic decrease in product prices
Polysilicon production began to speed up drastically reducing its prices
The CEO ought to have a taken a step to reduce production so as to cut down on the supply which
was at an efficient equilibrium to the market demand
 Other business and accounting challenges to be considered

Decline in product demand

 Results in a decrease in prices
 Results in a decrease in supply

Increase in market competition

 Leads to a decrease in sales

Decrease in profitability
 Results from a decrease in sales
 Recommendations:
• First Solar sells photovoltaics using a unique technology. That has allowed the company to produce
solar cells at the lowest cost in the world.
• Additionally, First Solar should begin preparing for a transition to third-generation solar cells or
another alternative technology.
• First Solar's recent success has allowed the company to amass a sizable amount of cash. Optisolar
was recently purchased by First Solar.
• Oasis Consulting's recommendations for the company are perfectly aligned with this acquisition.
• It's risky for First Solar to devote all of its resources to developing a single product in a market that is
flooded with new technologies.calory in one date
• We advise First Solar to broaden its product offering in order to mitigate this risk.
 Conclusion:
• A final thought: while there is still volatility in the solar energy market,
the growth potential is huge! Because of the intense competition, any
business that wants to remain in business must put quality as a priority.
• After reading and analysing the case study, I found that First Solar Energy
still outperforms the competition despite a number of setbacks.
• Its competitive edge is derived from its financial, physical, and
technological capabilities. The high level of competitiveness and the
scarcity of raw supplies remain, though.
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• Thompson, N & Ballen, J.(2017).First Solar. Retrieved on 8th October 2019 from
https://mitsloan.mit.edu/LearningEdge/CaseDocs/17.181.FirstSolar.Thompson.p
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