Introduction
Most companies utilize the SWOT analysis tool to assess their market position. The strengths, weaknesses, opportunities, and threats that face the organizations are established. Vestas Wind Systems A/S, the world’s biggest wind turbine firm, is a well-accomplished company with plants in many countries. Expanding into an international market is not easy and requires much information about how one’s competitiveness would compare to others in the market. The essay aims to evaluate Vestas’s current market position in Japan using the SWOT analysis tool.
Strengths
The first strength Vestas boasts about is that it has a great international presence across many countries. In 2016, their global intake was about 10 GW which is an increase from the previous record a year ago, 8.94 GW, which shows profit. It can be found in every major continent with significant growth realized and can be attributed to plants in the EMEA region and North America. The firm acquired Avalon Holding GmbH and UpWind Solutions Inc., a move that has boosted its competency in the operations service markets for wind turbines. Its international footprint enables it to explore opportunities to expand into untapped areas looking for sustainable energy solutions, for example, Japan.
Another strength is that there is a shift in the power sector toward sustainable energy sources. The electric current demand is anticipated to increase by about seventy percent as of 2040, according to reports by International Energy Agency. Companies producing wind power, for example, Vestas, are in the right position to capture this market.
The third strength is that it has a great technological foundation. Having conducted business for the last three decades, the company has invested adequate resources in technology. It possesses the biggest center in the whole industry for product development as well as testing situated in Denmark. Its aim is to reduce the Levelized energy cost in the market by introducing efficient, high-performing, technological products to offer greater returns.
Weakness
Vestas’ one weakness is that it has been described as having poor management in core markets, especially in developed countries such as the United States and Denmark. Since the demand for sustainable energy is rising, it is important that organizations understand how to develop strategies that will allow them to thrive in the highly competitive industry. From poor execution of plans to lack engagement from employees and customers, poor management practices have resulted in much damage to the firm’s brand. Between 2015 and 2019, there have been cases of a high turnover rate in the company due to a lack of fulfillment of employees. The majority of them have claimed that their roles have been minimized most of the time. This could be problematic when it comes to the Japanese market, whereby the government has set laws and regulations to which every business has to adhere.
Opportunity
One of the opportunities available to Vestas is that more countries are moving toward sustainable sources of energy. Despite the pandemic causing many to halt and redirect their efforts to other issues, it is believed that most of them desire to achieve total sustainability in power by 2050. This is good news as wind power is among the energy sources that are considered green. Currently, a large portion of developed countries is the ones that are more interested in energy than others. However, this is bound to change in the coming years and, thus, an increase in demand which is a viable market for the organization.
Another opportunity is that wind power produced by the company is described as a clean form of energy source and appreciated by multiple nonprofit organizations. In business, image or reputation is important as it can lead to acceptance or rejection regardless of the quality of service offered. Nonprofit groups have for a long time been viewed by the people as their determiner of good businesses. They are concerned with checking firms that not only aim for profits but target to achieve sustainability. Multiple companies have failed to perform acts that are socially responsible and acceptable and, therefore, fallen from the market. Support from the nonprofit groups will enable Vestas to conquer the idea that it is poorly managed.
The third opportunity is the growth witnessed in smart grid infrastructure. This refers to a collection of various generators and customers with improved communication as well as control technologies in the energy system that allows reliable electricity delivery at low costs. It can reduce the net cost of the wind energy produced by Vestas through regulation of fluctuations with demand response. This means that the problem of viewing this form of power as expensive and luxury but not a necessity is solved. It could encourage more people and nations to adopt this form of energy.
Threat
One of the major threats Vestas is facing is an increase in competition. It has encountered this problem from big and startup companies, for example, Siemens, Suzlon, and GE. Whereas both Siemens and GE have focused much of their effort and resources on the United States and European markets, Suzlon is targeting to continue increasing its presence in Asia countries, mainly Japan and India. Their reason for this is due to a significant untapped wind power market availability in that region. Additionally, the competition caused by the Chinese firms rises every day as they aim to expand to foreign markets. As wind energy’s demand increases, the rise in the competition will lead to a decline in market share for the organization. It requires dealing with the issue early to guarantee its anticipated growth by incorporating newer and more advanced technology to improve efficiency and lower the costs to attract more consumers.
The second threat is that there is a rise in bargaining power on the part of consumers. As the world continues to embrace sustainable energy systems and more rivals enter the market, customers get a chance to bargain for a lower process which implies a drop in profit margin for the organization. Therefore, they need to minimize the cost of production to sustain the existing profit margin.
The third threat is that wind power is still considered an expensive form of energy to produce and distribute. Even a developed country such as Japan fears investing in projects that may require them to part with much capital. This is especially after what has been happening in the world over the last two years. The COVID-19 pandemic emerged and ruined many countries’ economies, most of which are still recovering. It is difficult as of now to convince a nation to adopt a costly form of power while the funds can be converted and used in other issues, for example, health or research. It is safe to state that most countries are looking at the matter of wind energy as a luxury due to the financial handicap caused by the pandemic.
Conclusion
The essay has evaluated Vestas’s current market position in Japan using the SWOT analysis tool. The majority of companies utilize the tool or hire business analysts to assess their market position in regions they are planning to enter. SWOT analysis refers to a methodical form of thinking that enables an organization to identify areas it has strengths in and those it does not. Additionally, the paper shows that it informs party areas of opportunity to take advantage of and possible threats to the business. All this knowledge is important, and an international company such as Vestas Wind Systems A/S would be on the right track by considering it. The firm is well-accomplished and has experienced for an extended period to the extent that business analysts and statistics show that it is the biggest wind turbine corporation. Operating in a developed country such as Japan is a difficult process since there are many competitors competing for market share. To maintain relevance, one must possess insight into their position and how to improve.
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