Energy Division Of Rotary Engineering Uk Limited Marketing Essay
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Published: Mon, 5 Dec 2016
Established in 2003, Rotary Renewables is the energy division of Rotary Engineering UK Limited. This company brings its engineering skills to renewable sectors which have been developed over the last 30 years. They expanded its renewable business in 2007 which has grown steadily and now includes wind turbines and solar photovoltaic. Nowadays, usage of renewable energy sources became critical as the energy costs increase every year and there is a need to reduce the impacts of carbon-dioxide outputs. Rotary Renewable provides renewable energy solutions which helps in finding energy saving solutions and generation of long term income from renewable energy. Their core business expertise includes workshop equipment, electromagnets and commercial renewable installations. They have a reputation over customers that are reflected in their business to meet the customer needs and these facilities indicates that they are no small player in market and can rise to high extent and can aim for becoming a market leader. This paper discusses the various aspects of renewable energy sources as well as solar photovoltaics within the market which are to be considered and would help in making a decision whether to move forward with solar installations. As the report progresses, it would be made clear whether this would be a good idea to implement or not.
Rotary Engineering is aiming to exploit the renewable energy market by using these solar photovoltaics. There are over 100,000 small solar heating systems in UK but very few houses have PV (photovoltaic) panels. Solar energy supplies less than 0.1% of the UK’s electricity. The figure below represents that there has been a considerable growth in solar photovoltaic all around the world in the following years:
Fig 1: Worldwide Solar PV Growth
From the graph, the solar industry had seen a remarkable growth in a rebound from 2009 recession and the five year growth rate from 2007 to 2011 can be estimated to be 70% per year. The gradual decrease to 10% in 2012 is due to the reduction in incentives in several European countries.
From recent research in renewable energy sources in UK, only 12% of the renewable energy accounts for total energy consumption in UK comprising bio energy (77.1%), wind power (15.4%), hydro-electric (4.9%) and other sources such as geo-thermal and solar sources (1.5%).
Current UK solar market
Following the introduction of Feed-in-Tariff (FIT) cuts in the UK from 43 pence to 21 pence (March 2012) and 16 pence (August 2012), UK solar market is gradually showing some improvements. The chart below shows the effect of changes to FIT on installation rates of solar PV in UK:
Fig 2: Weekly PV installations in UK
The above chart shows the weekly installations below 4kWp in the UK after the introduction of FIT from April 2010. It can be inferred that from 2010 to 2011, there had been 4% growth in every week (FIT of 43 pence); from April 2012 to June 2012, 12 % growth every week with FIT of 21 pence and from August 2012 to October 2012, there had been 10% growth every week with FIT of 16 pence. This growth pattern illustrates the demand of solar panels in UK as the people began to realize that financial return is moreover same or better on the new Feed-in-Tariff due to decrease in price in solar panels.
After each FIT cuts, the demand for solar panels had been reduced by about 90-95% and still the number of solar panel installations has been considerably growing since August cuts that shows that people have realized to move forward financially with solar.
The external environment of any organisation/company can be analysed by conducting PEST analysis. It examines Political, Economic, Social and Technological environments that affect companies.
The PEST factors mentioned in the table below plays a significant role in creating an amount of opportunities for the company in developing strategy. Prices can also be increased during economy thus increasing profitability and alternatively changing social attitudes that force the company to be more environmentally aware, thereby increasing costs and cut profits. The following table lists out the PEST factors:
Funds, grants and initiatives
Decline in Feed-in-Tariffs
Advertising and Publicity
Buying access and trends
Brand, company and technology image
Rapid changes in Technology
Impact of rise in internet marketing
Materials and Manufacturing Processes
Information and communication
SWOT Analysis has been examined and determined in order to analyse the company’s actual position in the market. It stands for strengths, weaknesses, opportunities and threats and summarizes the current state of Rotary engineering Ltd., helping them to construct a future plan by applying existing strengths, compensating existing weaknesses, accomplishing threats and preventing threats. By analysing all these aspects mentioned below, it would provide stability in the market.
Strong Technical and Management Team
Expertise and passion for diversification
Good relation with customers and employees
Business enhancement through improved facilities
Low budget for marketing
Lack of employees for sales and marketing
Inexperience in PV market
No information of experience on renewable projects in website
Expansion of renewable energy business
Merging recognised brands for partnership
Awareness and advertising fairs for renewable energy
Stabilising market after the fallen state
Government goals and activities for renewable energy sources
Frequent legislative changes in Feed-in Tariffs
Climatic conditions (less sunlight in winter)
Competitive quotations by competitors
The company being developing over the last 30 years would indicate the expertise in the market and the aware of all aspects of business would help in making better decisions. The existing competitors would make it difficult for Rotary Renewables to compete in the solar panels and this company should be considered as a threat to all other competitors. There is an opportunity for the company to exploit the renewable energy market as market research indicates a growing demand for solar panels.
Segmentation, Targeting and Positioning (STP)
Market segmentation is necessary in the company’s campaign as it provides a better understanding of the needs of the customer. It is because customer needs differ in many ways and creating each segment provides customer a better solution. Also, income of each customer varies and sensitive to price, so by segmenting markets the business can raise average prices and finally enhance profits. The market segmentation can maintain more customers by marketing products that addresses to customers at their different stages of life. It also helps in targeting the relevant customers and at lower cost. So with careful segmentation and targeting, the company can achieve competitive production and specific choice of customers and distributors.
From the research drawn, the solar market can be divided into five distinct segments which are shown in the following table:
Total Generation (MW)
Building Mounted (Non-Residential)
Building Mounted (Non-Residential)
Total energy generated in UK
Fig 3: Market Segmentation
From the segmentation, the two segments are chosen as targets in order to make the company more profitable. The target focussed should be domestic market (4 KW>Power output<100 KW) comprising residential and building mounted solar photovoltaic. From the above chart, it can be clearly seen that domestic market constitutes 43% of the total market. In UK, there are about 4.4 million residential properties to focus, thus providing maximum business possibilities. Also, the company has already been established in these segments thereby providing better understanding of the customer needs.
Based on the segmentation and targeting of the product, the position of the product in the market should be in terms of power output that is greater than 4 KW or less than 100 KW, price, promotion and distribution. This positioning is required to differentiate the product in minds of segmented and targeted customers. There are many key competitors such as Sharp Solar, EvoEnergy, Sanyo, Heatwise Southwest Renewables in this market that makes this company difficult to position their products in the market. This indicates that the company is going to struggle in positioning in this product.
Assumptions and Given Data
As the available data was insufficient, series of assumptions has to be made under consideration. Considering, Rotary Engineering provide a standard 50 KW solar panel installation system. From the given data, the initial costs in the installation are as follows:
Solar panel cost = £ 29,400
Equipment cost = £ 16,500
Labour cost = £ 8,000
The overhead costs can be estimated on 25 per cent of material costs (Solar panel and equipment costs) and predicting a rise in 3 % of labour and material cost every year. An analysis has been carried out for the company for the next five years evaluating the total production cost and net present value to foresee the company’s financial viability.
Initially, the total production cost per system is determined for each year by adding all the costs. A profit margin of 10 % has been selected for the company by assuming how moderately it manages the costs of inventory; passing the costs to the customers and also considering a competitive success (profit margin) for the business. Firstly, a target of five solar panel system installations has been set in the first year and an increment of two for the next year and increment of five for next three consecutive years. Then the total production cost is obtained for the number of systems installed per year.
Net Present value is one of the fundamental tools which are used for financial decision-making. It analyses whether this product can be a profitable investment and also determines the cash flows (in and out) associated with this product or investment. These cash flows can comprise initial payment costs; on-going maintenance costs etc. and can come in and go out for a period of years and shown for next five years in the table below. In order to compare the analysis in the present, an appropriate discount rate of 5 % (suggesting worth the investment) has been given to convert the expected future costs into present values. There can be multiple cash outflows in each period and considered an approximate amount of £ 20,000 for the five years for periodic maintenance, marketing, equipment purchase and sales and so on.
The total production cost for the next 5 years is being evaluated and tabulated below:
Solar Panels Cost (£)
Equipment cost (£)
Labour charges (£)
Total Amt/System (£)
Profit Margin of 10 %
Total Production Cost for 5 Years
Table 1: Evaluating Total Production Cost
The net present value is calculated and tabulated below:
Total Amt/System (£)
Profit Margin of 10%
No of Systems installed/yr
Total production cost
Total Cash In
Total cash out
Discount Rate of 5%
Net Present Value
Table 2: Evaluating Net Present value
This analysis summarizes the company’s financial information in assessing its financial health and the net present value is estimated to be £ 159, 300. This net present value indicates that this business is profitable assuming the expected cash flows and can proceed with the investment.
From the analysis shown in the previous section, assumptions could be made that by 2020, about 1650 MW can be generated by the solar panels and also government target of about 30% of electricity can be achieved to be generated. This is illustrated in the chart below:
Fig 4: Future Market
(IMS Research PV Demand Database)
The above chart shows the growth of PV installations per year in the three scenarios namely conservative, most-likely and optimistic scenarios. It can be revealed that in the most likely scenario, PV installations has risen from 27 GW (2011) to 29 GW (2012) and 32 GW this year. Despite the cuts in incentives, the solar market is still growing. The optimistic scenario also shows the growth of 21 % this year. Therefore, the figures can be expected to rise higher over the next five years.
Considering financial and marketing analysis, it does give a clear picture of Rotary engineering in this market. Financially it shows that it is viable for the next five years as the net present value of £ 159,000 is evaluated as shown in the previous section. From the marketing analysis, it indicates that there will be a conflict in the positioning the product as there will be heavy competition among other competitors (many DECC registered installers) and involvement of risks in other marketing aspects. It can be recommended for the company to examine other segments such as products with output greater than 100 KW (commercial/off grid). These segments are the most potential areas in the market where Rotary Engineering Ltd. can exploit with their primary products and other resources.
The competitive prices should be set to meet the expected profits or goals of the company in order to stabilize the current company position in the market. The financial support could also be provided to domestic customers through related financial institutions and attractive schemes should be set for 50 KW and above projects.
Considering myself as a Rotary Engineering, I am happy with the analysis as it clearly shows that the profit of this market for next five years is acceptable i.e. financially viable. Also it has been clearly defined that the company would not be easy to position itself in the market as it is very competitive. I would suggest Rotary Renewables to consider other segments in the market and its operations to identify potential customers and suppliers. The company’s business structure should be analysed depicting major products and services, subsidiaries and key competitors. There should be a better understanding on competitors’ business structure and strategies and taking advantage on their weaknesses. Rotary Engineering should consider updated with the major developments that affect the company.
It can be concluded that Rotary Engineering Limited should concentrate on renewable business as they have good potential segments and aim for increasing their business and progress towards market leadership. As today, global warming is being rapidly caused and running out of resources. These renewables regardless of their flaws are going to be needed in big numbers so in my opinion Rotary Engineering should carry on with their renewable business. There is an increasing demand of renewable energy sources due to increasing energy prices and inflation. This market itself is very competitive as there are many DECC (Department of Energy and Climate Change) registered installers in UK. The financial and marketing analysis shows expected market stability for Rotary Engineering for at least ten years.
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