Table of Contents
Business Structure and Industry Focus Areas
Solar City is a solar company founded in the year 2006 with operations across the United States. It is a solar company that is vertically integrated and has its headquarters in California. In the year 2016, Solar City merged with Elon Musk’s Tesla, Inc., becoming a subsidiary of the latter. The company is engaged in the engineering, manufacturing, sale, financing, installation, maintenance, and monitoring of solar energy systems. Solar City also has a focus on energy storage. The company’s major business operations are classified into two main revenue streams: solar energy systems and component sales, and operating leases and solar energy system incentives. In terms of products and services, the firm has a wide range. The product offerings include solar energy systems, solar energy, solar system components such as modules and cells, and energy storage systems. In terms of services, Solar City offers design and engineering, solar energy system maintenance and monitoring, installation, and financing.
According to Malik (1), the firm generates its revenue through both company-owned and customer-owned systems. Solar City’s industry focus areas or end markets are primarily government, commercial, and residential markets. Residential markets mainly comprise of individual homeowners, commercial markets include business customers in various sectors such as retail and agriculture, and government markets include government entities such as the US Military and cities. According to SolarCity (1), examples of such customers include Walmart, Intel, Department of Homeland Security, and cities such as Sacramento and San Jose.
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Management and Leadership Objectives
Solar City was founded by brothers Lyndon and Peter Rive in 2006 with the help of their cousin, Elon Musk. In 2016, Musk’s Tesla Inc acquired Solar City, effectively becoming a subsidiary. Solar City is a publicly traded company with a management and a Board of Directors. The management is headed by brothers Lyndon and Peter Rive as CEO and CTO respectively. Then there is a Board of Directors that is headed by Elon Musk as the chairman. The aim of Solar City’s management is to “put solar panels on every rooftop in America” (Yao 1). The firm adopts an approach of installing systems that meet the highest standards while at the same time making it simple for customers to switch to solar energy. The objective is to revolutionize the delivery of energy by offering customers with an affordable and cleaner alternative.
Methods Used For Business Growth and Expansion
Solar City has two main growth focus areas: company-owned systems and customer-owned systems. Customer-owned systems are those where customers can out rightly purchase the systems, or enter into long-term sales contracts. With company-owned systems, the purchase of energy is done through leases, solar loan products such as MyPower, and power purchase agreements (Malik 1). The company’s loan product MyPower was conceived in 2014 and has terms stretching up to 30 years. Solar City has also sought to increase integration. First, by becoming a subsidiary of Tesla Inc in 2016 meant that the firm could benefit from access to resources, both human and financial. At the same time, the company has made a number of acquisitions which have enabled it to expand its operations into manufacturing the components of solar systems. For example, in 2013, the firm acquired Zep Solar, and in 2014, the company acquired Silevo. These acquisitions have seen the company able to manufacture its own components such as modules and cells. Solar City has also expanded into solar energy storage systems.
Employee Focus (Hiring, Satisfaction, Programs, Development)
Solar City places great importance to its employees who are the driving force behind the company’s operations. According to SolarCity (1), the teams consist of innovators and experts who strive to redefine the energy landscape by ensuring that solar power is easily accessible and affordable to all people. The firm considers its employees to be difference makers. Since merging with Tesla, the firm has a team that is even stronger, and there is a gradual transition of employee focus to Tesla including hiring and development.
Challenges Facing the Company
The biggest challenge facing Solar City is the rising popularity of rooftop solar systems. Consumer sentiment has gradually shifted with customers preferring a one off purchase of rooftop solar systems to solar leases. However, Solar City’s primary business focus has been solar leases. Rather than lease the solar systems for decades, homeowners are choosing to purchase these systems. At the same time, most new developers are already installing these rooftop solar systems on new housing developments. This is quite a challenge to the traditional business focus of the company. However, the company has had to make adjustments by turning to cash installs and loan products such as MyPower. For example, according to (DeBord 1), about 30% of the firm’s September 2016 sales were from loans and cash installs.
Value Proposition of the Company
The firm has quite a simple value proposition which is to offer clean and affordable energy at lower switching costs to customers. The company seeks to lower a customer’s utility bills by offering solar solutions for a meager investment. There are no upfront costs associated with installation, and customers who use the firm’s products have cheaper energy bills.
Solar city has a number of strengths which include a sustainable business model that has seen a growth in customer numbers, a compelling value proposition that is attractive to customers, lower switching costs for customers since they even offer financing services, long-term customer relationships arising from leases, a strong management team, and strategic partnerships such as the merger with Tesla Inc.
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The firm’s weaknesses include the failure of customers to honor their lease agreements, a brief operating history, geographical limitations such as regions experiencing winters, and a fear of being overshadowed by the parent company Tesla Inc.
There are opportunities galore for Solar City as people turn to green sources of energy. With the commitment by governments to invest more in green energy technologies such as wind, solar, tidal, and geothermal, Solar City has an opportunity to diversify into other clean energy generation technologies such as wind. The costs of producing solar energy have also dropped drastically and this is an opportunity for the firm. Due to government incentives, many green start ups are coming up and this is an opportunity for Solar City to make meaningful acquisitions.
The threats facing the company include a shift towards the purchase of rooftop solar systems rather than leases, the traditional power utility companies, lack of adequate technical experts to keep spurring innovation, and the shift by the United States presidency on the realities of climate change.
- DeBord, Matthew. Tesla and SolarCity are Dealing With a Critical Business Problem. 10 Nov. 2016.
- Malik, Saania. SolarCity: An Upcoming Leader in Residential Solar. 28 Aug. 2015.
- SolarCity. About SolarCity.
- Yao, Jay. SolarCity and Its Future Potential. Sept. 18 2013.