Marketing Plan

Answer

Vestas’ Marketing plan

A business establishment has to make marketing decisions, decisions which ensue from the intricate interaction of a large number of individuals performing various responsibilities in the organization of a company’s marketing process. Marketing planning defines the responsibilities and roles of marketing executives in a manner aimed at achieving the firm’s goals. Thus, marketing strategies and plans are crucial since they make sales easier for a business establishment. When a company targets an ideal customer in a smart way, they minimize their marketing costs and increase their chances of transforming leads into sales.  According to the American marketing Association, marketing planning refers to the work of instituting objectives for marketing activities and scheduling and determining the steps needed to realize such set objectives (Konovalov et al., 2017). Marketing planning, therefore, governs the growth, prosperity, and survival of any business establishment in an ever-changing and competitive environment.  The aim of this paper is to develop a marketing strategy for Vestas Wind System A/S.

Vestas Wind System A/S

Vestas wind System is a wind turbine firm headquartered in Aarhus, Denmark. The company is the largest worldwide player and marketplace leader in the wind turbine manufacturing sector (Pedersen, 2009). According to Sangroya (2015), Vestas has delivered more than 66 GW in more than 80 countries across the world and have production facilities in Latin and North America, Asia, and Europe, among other continents. The company’s revenue had amounted to 6.9 billion EU in 2014, and it is listed at Copenhagen Stock Exchange (Pedersen, 2009). Currently, Vestas holds one of the highest ratings globally in the wind turbine sector, having installed more than 72,143 turbines in more than 80 countries globally (Van der Laan et al., 2019). The company, having realized the potential size of the wind energy to the worldwide needs, they have not ceased investing heavily in R&D. for instance, Vestas’ R&D expenditures in 2019 amounted to $269 million , aiming at improving the efficiency as well as advancements in their products’ technological means (Bujang et al., 2016). Vestas designs, installs, manufactures, and offers services to onshore towers and blades, power converters, and wind turbines. The company also provides solutions from repair and parts to preventive assessments to advanced repairs. Among the services offered by Vestas include fleet optimization, data-driven consultancy, blade inspection and maintenance, gearbox exchange, and power generator repairs, among other services. See figure for Vestas’ strategic framework.

Vestas’ Value Proposition

Vestas is committed relentlessly to making wind energy work better for their customers through four main strategies. First is taking a life time value partnership viewpoint. Customer satisfaction of Vestas, according to Jager et al. (2016), remains high across the years, implying that the company’s operational performance is robust. 82% of its customers, in 2012, were found to consider Vestas as a preferred partner and the study also showed that the company got 31 net promoter score, which implies that Vestas’ crucial accounts would recommend it. Additionally, the company is dedicated to minimizing energy cost. There are various initiatives Vestas is reducing energy cost: higher energy production, lower capital expenditure (CAPEX), lower operating expense (OPEX), and business case certainty, as summarized in figure 1 below.

Figure 1. Vestas’ initiatives of reducing energy cost (Kota et al., 2019).

Thirdly, Vestas is continually increasing business case certainty and lowering lost production factor (LFP). Vestas has kept the LFP below 2% (D’Souza & Yiridoe, 2019). Vestas has the largest group of wind turbine test facilities globally, employing more than 200 engineers and 50 test rigs, spanning 12,000sqm (Van der Laan et al., 2019). The facilities are located in Aarhus (Denmark), Isle of Wight, and Chennai (India) (Vasi, 2019). Similarly, among all OEMs, Vestas has the world’s largest fully integrated wind turbine testing facility available indoors, the V164 facility (Kota et al., 2019).

Another value proposition is that safety comes first at Vestas. Since 2006, there has been a 33% yearly decline of industrial injuries at Vestas (D’Souza & Yiridoe, 2019). The company recorded low 2.8 injuries per 1,000,000 working hours in 2012 (Kumar et al., 2019). Additionally, in 2015, the company registered about 0.5 injuries per 1,000,000 working hours. See figure two below for Vestas’ strategic plan.

Figure 2. Vestas’ strategic plan (Dai et al., 2015).

Vestas’ Market Targeting

The global renewable is projected to become the dominant source of energy in the future. According to Bujang et al. (2016), in the next 10+ years, renewable energy capacity is projected to grow substantially and by 2030, more than $3 trillion will be invested in the industry. The study also projects that renewable energy will surpass fossils and coal as source of energy, implying that renewable energy are likely to be the dominant energy source. The growth in the use of renewable energy is propelled by two main factors. First, there is an increasing demand for new electric capacity across the world. It is projected that electricity demand will grow by more than 40% by 2035 and that there will be substantial retirements of nuclear and coal on the horizon (Konovalov et al., 2017). Secondly, there is a fundamental support for renewable energy to win. There are strong commitment and policies to renewables. Kumar et al. (2019) note that the EU 2030 targets for renewable energy increased to 32% from 27% and EU nations are dedicating themselves even to bolder targets (Denmark to more than 50% by 2030 and Sweden by more than 100% by 2040). Additionally, the Indian government targets for solar and wind increased by 2022 to 227 GW, a rise by more 28% and 100 large worldwide companies are committing to going green (Sangroya, 2015). Apart from robust global policies, there is also an accelerated competitiveness of renewable energy across the world. Thus, Vestas’ target market is prospective, with the use of renewable energy in the future promising.

Vestas’ Positioning

In the past years, Vestas has changed extensively the way in which they think and operate as a high knowhow firm to make sure that it can grow its position as the largest wind power plant’s manufacturer in the world, and thereby playing a crucial role in the wind power proliferation.  The company’s management is cognizant of the fact that it will require substantial investments across its value chain and a repositioning of Vestas’ wind power to retain its market-leading position (Kota et al., 2019). To realize this, the company, according to Jager et al. (2016), is substituting its “The Will to Win,” an internally-focused approach, with the “No.1 in Modern Energy,” an externally-oriented approach. Many of the company’s suppliers as well as their sub-suppliers, as part of the efforts, have begun investing in capacity and new skills, notwithstanding still being a long way from enough expansion rate.  Surana and Anadon (2015) note that No.1 Modern Energy is not changing the former strategic priorities with regard to earnings before interest and taxes (EBIT) margin, market share, and net working capital.

Further, Vestas’ vision of wind, gas, and oil has been employed by politicians and utility and energy customers across the world, despite particular political incentives remaining to be employed in several marketplaces. Wind power will be capable of making a crucial contribution to increasing energy needs since it is competitive with unoriginal power plants with regard to costs; (i)since the cost of wind is known for eternity; (ii) since wind is a domestic power source that minimizes reliance upon imported energy; (iii) since wind power can quickly be installed; and since wind power is eco-friendly, with no hazardous CO₂ emissions, among other emissions (Jager et al., 2016). Equally, unlike nuclear and coal-fired power plants, wind power does not need water. Wind turbines are recyclable at the end of their life cycles. After about seven months, modern Vestas’ turbine generates as much power as is employed to transport, install, manufacture, and dismantle the turbine.  There is no other energy source that is presently capable of matching wind power with regard to this.

Stentoft et al. (2016) state that Vestas’ anticipates that wind’s share of the universal power generation – currently approximately 1% - will grow to about 10% by 2025. Targets for renewable energy will, in China and the E.U., account for 20% and 15%, correspondingly, by 2025, and the U.S. is projected to employ similar targets (Vasi, 2019). These targets imply that installed capacity is likely to rise from 2006’s 75 GW to at least 2025’s 1,000 GW, which translates into a yearly growth of at least 20% (Lacal-Arántegui, 2019).

As market-leader, Vestas is committed to lifting the whole supply chain’s capacity to substantively increase production quality and output, by extension, profitability across the supply chain in the future; this is a precondition for Vestas to realize its Wind, Oil, and Gas vision (Surana & Anadon, 2015). To supply all their stakeholders with a fact-based decision-making foundation as well as an overview of the legislative measures needed to realize the political objectives for consumption of energy, Vestas has intentions of heavily investing in an information campaign targeted at putting wind energy at the world’s power agenda, where the political objectives in most nations have been defined already (Stentoft et al., 2016). Vestas’ goal is that by 2025, at worst 10% of the world’s energy production ought to be based upon wind power. To realize this, the wind turbine sector must have install a minimum of 900,000 MW installed by 2025.

Additionally, Vestas’ portfolio comprises of three attractive renewable energy segments: onshore wind, wind service, and offshore wind, as summarized in figure 3 below.

Figure 3. Vestas’ attractive renewable energy segments (Stentoft et al., 2016).

From the figure, Vestas has huge growth potentials into various marketplaces. Despite that, the company is still determined to remain the market leader and to remain dedicated to gaining marketplace share. Currently, the company is the largest marketplace shareholder of the U.S. marketplace, increasing its marketplace share in Latin America (LATAM), leading in Europe, the Middle East and Africa (EMEA), the largest non-Chinese wind energy manufacture in China, and holds a positive development within the broader APAC (Lacal-Arántegui, 2019). See figure 4 below.

Figure 4. Market share 2017 (Lacal-Arántegui, 2019).

To remain the market leader, Vestas has four fundamental differentiators within the wind energy marketplace: global reach, technology and service leadership, scale, and proven execution. Regarding global reach, Vestas had order intake from 33 nations across the world in 2017. It is regarded as the experienced and pioneer wind energy company across the world and has prospects of growth platform and global reach in manufacturing, sales, service, and installation (Vasi, 2019). See figure 5 below.

Figure 5. Vestas’ global reach (Stentoft et al., 2016).

Concerning service and technology leadership, Vestas is continuing to lead the sector on its crucial competitive parameters, which include industry-leading wind power company offering 2+4 MW platform knowhow upgrades, groundbreaking hybrid projects,  offering world-class siting potentials, offering modular product design, providing industry-leading service cost and value, scale leverage, leading multi-brand potentials, has a huge data insight source, and offers unique digital offering via utopus insights (Schumacher & Yang, 2018). Regarding scale leadership, Vestas is well situated to leverage leadership economics.

Concerning proven execution, Vestas produces high quality products and this continues to bring comfort to its customers. The company offers low warranty consumption and realized 1.4% of revenue 2017. Additionally, Vestas’ lost production cost (LPC) is consistently below 2% and capitalizes on turbine performance. 

Vestas’ Market Segmentation

Client

Concerning the goal of this paper, where the most crucial thing is to see Vestas’ positioning from its direct competitors, and owing to the fact that the company engages in the business-to-business industry, it is more helpful to segment Vestas’ market by answering the criteria who and the criteria what. See figure 6 below, showing the different marketplace segmentation for each criterion, as will be discussed thereafter.

Figure 6. Wind energy market segmentation by clients (Lacal-Arántegui, 2019).

Suppliers

Wind turbines have at least 8,000 components. Companies in this sector typically engineer their individual design and contract an array of suppliers to produce the components. There are three main ways through which companies operate in this sector: (i) purchase all components; (ii) produce all the components; (iii) produce the crucial components and then outsource the rest (Van der Laan et al., 2019). The increasing size of the wind energy business is creating intricate problems on the industry’s supply chain. Decisions are important and companies have to make sure the best effectiveness with regard to their value proposition. Some companies can opt to avoid bottlenecks by regulating all the components’ manufacture, yet others can opt to concentrate on their core competencies by way of outsourcing (Pedersen, 2009).

The wind industry is characterized by a two tier supply chain: 1^st tier, which comprises of suppliers of large turbine components, like blades, towers, gearboxes, among other parts; and 2^nd, which comprises suppliers of fiberglass, ladders, machined parts, resin, electrical parts, and motors, among other components (Schumacher & Yang, 2018). For Vestas’ case, the tier 2 suppliers are employed to the company’s approach. The company keeps local the manufacture of its crucial components and avoids bottlenecks by way of having internally a supplier management team and often two suppliers for each component that they require (Van der Laan et al., 2019). Presently, Vestas has more than 1,000 suppliers across the world. The figure below gives a strategic positioning of Vestas. Strategic since Vestas is trying to have all their suppliers as close as possible for their manufacturing plants.

Figure 7. Vestas’ supplier spread across the world (D’Souza & Yiridoe, 2019)

Industrial Attractiveness

Figure 8 below shows the attractiveness of each segment in power sector.

Figure 8. Energy industry’s attractive segments (Kota et al., 2019).

Vestas produces and sells wind turbines. This segment is regarded as penetrated the projected growth is prospective. Nonetheless, this form of energy has huge fixed costs, and to make the segment competitive, the profitability margins are lower compared to other segments, like petroleum, coal, natural gas, and nuclear energy. Regarding risks, the segment has low risk levels because of the prospective changes in consumer behavior along with the increasing political initiatives (Eagle et al., 2017). Nonetheless, risk levels are high due to the high chances of being substituted by other renewable sources of energy, like solar, biomass, and hydroelectric forms of energy (Shu et al., 2018). See figure 9 below.

Figure 9. Wind energy market segmentation by sectors (Vasi, 2019).

Vestas sells its wind turbines to its final customers, but to the customers work as suppliers of energy, a category of customers included in the industrial segment in the figure above. The industrial segment is an attractive one for Vestas with the increasing forecast growth along with the worth that can be explored in the years to come owing to the fact that the segment has huge profitability margins and an average medium risk (Noori et al., 2014). The segment has medium risks largely because of the necessary costly infrastructure to efficiently provide energy (Eagle et al., 2017).

Vestas’ Marketing Mix

The 4Ps model will be used in this analysis.

Product

Vestas designs, installs, manufactures, and offers services to onshore towers and blades, power converters, and wind turbines, and provides solutions from repair and parts to preventive assessments to advanced repairs. Vestas also provides services like fleet optimization, data-driven consultancy, blade inspection and maintenance, gearbox exchange, and power generator repairs, among other services (Eagle et al., 2017). See figure for Vestas’ strategic framework. In all these, high quality standard is upheld.

Price

Vestas’ present strategy is dubbed Profitable Growth for Vestas, a strategy which was inaugurated after the 2012 downturn.  This strategy focuses on expending cuts and is set to three concentration areas: cost reduction via operational excellence, investments reduction via asset-light solutions as well as simplified product roadmap, and enhancements of capacity utilization as well as capital efficiency via divestments and supply to third parties (Arafah et al., 2018). The change has reflected in reduction of personnel and investments. The levels of investment in 2009, 2010, and 2011 were $808, $789, and $761 million correspondingly (Shu et al., 2018). The decline was from 2011’s 13% to 2012’s 5% of revenue. Additionally, after the employment of the program, the number of employees reduced from 22 million to 17 million (Arafah et al., 2018). Nevertheless, these figures have resumed their positive trends after the global economy stabilized; with the company currently have more than 25,000 staff. According to Liao (2016), Vestas’ mission is to deliver profitability, efficiency, and focus, so that their services become extra competitive across the global markets both in the wind turbine production industry and other energy sources industries. Substantial cost cut programs, along with product standardization by abridging product roadmap, shows that Vestas prioritizes low prices over innovational know-hows.

Place

Vestas has its headquarter in Denmark, and provides products via power solutions and service segments. Despite being headquartered in Denmark, the company has a global presence, operating in more than 80 countries globally with production facilities in Asia, North America, and Europe, among other continents. Additionally, the company has its manufacturing plants distributed across the globe, with more than 25,000 employees. With its plants and employees across the globe, Vestas is able to reach to all its customers across the world. Whereas there are numerous manufacturing plants across the world, the quality of products and services, along with the brand image, is kept constant (Liao, 2016). The company provides efficient and suitable energy at reasonable in all its plants. Nonetheless, there are some regions that are still not tapped into properly, like Africa.

Promotion

Creating awareness in the mind of consumers about a brand is important. Vestas employs advertising, promotion, direct marketing, and public relations to reach out to its customers and potential customers. Being a market leader in terms of cost and in the wind energy industry as the largest company globally, the company enjoy a competitive bran image, allowing it to attract many customers through public relations (as an environmental friendly company), advertisements, sales at relatively lower prices, direct marketing, and promotions. The company is also currently online promotional techniques to reach online users.

People

The company offers very enticing offers to their clients. In some cases, the company offers free installation of wind turbines, especially when the company is accessing an regions that have not been entered (Noori et al., 2014). The company also offers various customer services and after sales services. The company also has online based ways of reaching out to their customers, saving their customers the cost of travelling to their physical offices.

Conclusion

From the analysis, it is evident that the wind energy industry is promising to expand, with the increased demand for eco-friendly energy sources and policies encouraging the use of renewable sources of energy. Despite being a market leader in various fronts, Vestas needs to reorganize its strategic objectives for it to remain competitive. With more companies entering the industry, Vestas should consider entering new marketplaces, like Africa. Additionally, the company needs to stop over relying on the U.S. marketplace, but should consider internationalizing its operations.