Solarcity-Current Market Conditions Competitive Analysis

SolarCity-Current Market Conditions Competitive Analysis

Team A

ECO/365

10/8/2014

David Faiella

SolarCity-Current Market Conditions Competitive Analysis

Completing a competitive analysis of any new product or idea has to take many factors into consideration, with the most significant including examining current market conditions and determining what can make us competitive against others. We will consider reviewing SolarCity and its competitive product, which is a service provided to residential and business customers that includes solar panel installations and providing solar electricity systems nationwide. Their approach is working and we need to evaluate why and how they maintain growth and consider our efforts in ensuring we consider the same approach and ideas in developing our new products and services.

As researched in the history summary of Solarcity.com, they were founded in 2006 and have gained tens of thousands of customers in 15 different states in the nations which continues to increase and is now considered America's #1 full-service solar provider. They offer customers cleaner energy usage and perform the entire process of using solar energy to include installing the already purchased high quality solar panels, providing ongoing monitoring and repair services all from one single source (solarcity, n.d.). Additionally, they are a energy company and as they buy their own panels, they are able to sell the energy to customers at low competitive rates and focus on strong markets that have significant sun exposure but also those that allow them to sell energy at lower prices than regular electricity utility companies would (Lashinsky, 2013). In our current position in the state of California, we need to focus on the potential for growing customers who are increasingly concerned with using cleaner energy and with all the sun exposure, specifically in Kern county, the potential for this market of solar energy is rising.

Solar city and its competitors operate is the energy market, which deals specifically in the trade and supply of energy to consumers. This includes the sale of solar modules and the installation of solar systems and equipment. Solar energy demand has grown as a market over the last 20 years, due to rapidly declining costs and prices. The manufacturing scale, technology improvements, and the efficiency of solar cells have all contributed to the decline in cost.

Solar City is a major player in residential solar energy. Its largest competitors are Vivint Solar and Sunrun Inc. All three companies have vertically integrated, owning origination, installation, and financing of solar energy. Potential customers include, consumers with owner occupied homes and socially conscious demographics who are concerned with high energy costs and saving for the future. Potential buyers include consumers looking to purchase a residence.

There are a few main factors that affect the supply, demand and market equilibrium of solar electric energy. The rapidly increasing population is the main factor for the demand of alternative energy resources. Government regulations for energy sources are also one of the main factors affecting the energy industry. These regulations include taxes, market directives, emission standards, and guidelines which all affect fuel sources (Miller, 2014).

Environmental concerns are another factor that affects the energy market. Different fuels sources contribute to greenhouse gas emissions and the possibility of harming the environment. The contaminations of water, land and air with radioactive waste are critical concerns. Due to the high risks of disrupting the natural environment an increase for alternative solutions for energy are rapidly growing and encouraged. The enthusiasm to go green, incentive programs led by federal and state governments, electricity taxes, and sunlight conditions all add to the increasing demand of solar electric energy. And lastly, infrastructure critically impacts the fuel sources, without a network in place it would be difficult to supply energy needs (Miller, 2014).

SolarCity continues to be innovating in the market of clean energy. Since their creation in 2006 (SolarCity, n.d.) SolarCity continues to grow their customer base not only for commercial business but they continue to target and grow there residential customer base. With SolarCity's personal growth we see that their variable cost as it pertains to labor continues to also grow. Variable cost includes those expenses such as, salaries, labor, and the cost for materials to produce the product. Unlike fixed cost, variable cost can be controlled. SolarCity has an extensive labor personal that consists of system designers, installers, customer support representative, software engineers and sale reps.

According to SolarCity's 10-Q, the company has experienced an increase in their operating expenses reported at the end of the first quarter of 2013 compared to that reported at the end of the first quarter in 2014. Sales and marketing increased by 34.4 million which was an increase of 161% (SolarCity, 2014). SolarCity credited this massive increase to their amplified efforts to promote their product. They boosted their sales department and implemented a door-to-door sale strategy in the third quarter of 2013. This strategy increased the marketing and sales department personnel by 234% report in 2014 (SolarCity, 2014). With the increase in personnel SolarCity also experienced an increase in administrative expense of 75%, from 2013 to 2014 (SolarCity, 2014). With the enlarged number of employees, SolarCity experienced an increase in the amount of salaries paid, insurance fees and other administrative activities. The last section reported on