Pv Technologies Inc.: Where They Asleep at the Switch?

Advanced Marketing Management

Assignment-2: PV Technologies Inc.: Where They Asleep at the Switch?

Submitted by: Shailee Desai

1. What do we really know about the situation?

PV Technologies (PVT) is a leader in the photovoltaic inverter industry (solar energy) who was bidding to win a major project with their biggest client Solenergy, a leader in energy generation systems, on a contract from the city of Barstow, CA to develop a 100 MW power plant. Greg Morgan at Solenergy performed confidential evaluations of its vendors and his judgements were highly influential making final decisions in the industry. Jim Salvatori, lead salesperson at PVT, recently heard rumours that the evaluation of PVT was poor and that it showed PVT trailing behind its competitors. Greg’s main criteria for supplier selection was based on lower costs as industry is leaning towards major cost cutting strategy while PVT believed their strengths were quality, reliability and reputation in the industry. Due to rumours in the market and fear of losing market reputation, Salvatori, along with PVT’s Director of Sales and Marketing Nathan Rubenstein, had rushed to four alternative courses of action in an attempt to combat this potentially huge blow to PVT’s growth and success. It was quite evident that there was a major gap in communication between Solenergy’s expectation and PVT’s understanding of the demand which could lead to poor decision making at their end. As these inverters only contributed to 4% of PVTs overall profit, losing market reputation was major concern.

1. Is this just a "brush fire" or an important problem?

Impact on Image: Losing a project with an important and powerful client could damage marker reputation of PVT.

Impact on Profit: Inverters’ sales account for only 4.1% of total revenues, the economic loss is not incredibly significant.

It’s an important problem, because if the rumours were to be believed, PVT were not only on the verge of losing the contract with their key customer but more importantly, this would damage their market reputation which could affect remaining 96% of their business in the market segment.

1. How profitable is each of the four alternatives suggested?

First alternative: Even though offering 20-year warranty showed reliability and higher standard, it was an expensive option with less effect on decision making process. PVT were offering 10-year standard warranty already which was higher than market trend of 5 years. This option would lead to same profit as the bid without any alternatives ($7,128,000).

Second alternative: Providing 99% uptime sounded good on paper. But, would result in significantly higher gross expense ($6,980,172) resulting in very small profit ($297,828) and would encourage other customers to ask for the same.

Third alternative: Introducing 1.25 MW superior model would serve market needs by keeping comparable pricing to existing products but would result in higher investment and R&D costs due to accelerated production. It also created potential risk of producing a malfunction product due to testing time frame limitation. This option felt good for the current project but could possibility damage market reputation if product did not perform as expected.

Fourth alternative: Communicating with Morgan and finding out what were his actual expectations was critical to meet his needs. Even with no actual estimate of profit at this point, this would lead to more conclusive product offering which would create higher probability of winning the project. If Morgan did not agree to more reliable and superior product, PVT could still offer more economical option based on his need which would still generate profitability in line with other alternatives.

1. What other product management considerations should be addressed when planning a new product or service introduction or managing an existing product or service in this marketplace?

The product must satisfy what’s needed by the customer in the market. The product also has to be more economical and not just superior in performance due to current market trend on cost savings. It also has to be tested properly to avoid operational malfunction which might put reputation at risk. The intense sales-based culture should be avoided and it needs to be more flexible and responsive in serving the customers. This can be asserted by market analysis, statistical processing, questionnaires or other forms of marketing research and by developing relationship and by establishing communication with the customer. In this case, PVT should have analysed the market well to understand how their competitors are performing, what are current price for the 1 MW inverters in the market before submitting the bid to Solenergy. In addition they should have focused on Solenergy’s needs and by proper communication with Greg Morgan, Solenergy’s chief electrical engineer; they should have figured out that the customer is on a budget cut. These considerations would have helped PVT to submit the bid keeping current situations and needs in mind.  Also, a new product and service should be managed not by solely focusing on that particular product, but by analysing how it affects the company overall in the market. If PVT wants to launch 1.25 MW inverter, they should analyse industrial demand while taking cost as the major consideration to maintain their leadership in this market.