Vestas Wind System is the global market leading producer of high technology power solutions. Its headquarters is located on the east coast of just on the Danish mainland. The company was originally founded in 1945 as a manufacturer of a broad line of household appliances and agricultural products. By 1979, however, Vestas recognized the commercial potential of the growing domestic and international wind power market, and therefore started initiating the manufacturing of wind turbines. As such, Vestas was part of the early movement of Danish companies to develop and manufacture larger and more cost-effective wind turbines. Vestas' emergence as an international company coincided with the wind boom of the 1980s. With the growing international demand for wind turbines, particularly from the U.S., Vestas started to nationalize gradually by using Denmark as a basis for servicing key selected international markets. In 1986, however, the industry experienced a major crisis when U.S. tax incentives for renewable energy expired and the cumulative demand dropped. Vestas faced substantial difficulties and decided to reestablish the company with a new business platform of focusing solely on wind power solutions, and thereby discard the household appliances and agricultural products. With this strategy, Vestas embarked on the more diversified nationalization strategy with sales of dispersed to a growing number of markets. These included India, China, Australia, the U.S. and selected markets in Europe. As a result, by the mid-1990s only 10% of Vestas wind turbines were sold domestically, while the remaining 90% were exported to countries all around the world. In fact, thrity countries. Now, today, Vestas employs more than 17,000 employees all around the world and stands with roughly 13% market shares as the largest wind turbine producer in the industry. However, and despite this positive story, the future for Vestas is now more uncertain than ever before. First of all, as Vestas basic business concerns the delivery of energy, it faces a huge threat of substitutes from other energy sources, both sustainable, such as solar and hydro-based solutions, but also from unsustainable ones such as coal, gas, and oil. In particular, as the cost of energy is an ever daunting world for consumers, Vestas faced the challenge of convincing the market that the high up front investment required from installing wind turbine actually makes sense from a business point of view. Second of all, a number of firms, particularly from China, have started entering the industry offering substantially cheaper wind turbine solutions to the global market. Now, while Vestas had traditionally disregarded this threat as to see themselves as operating in the more high end innovative market, it is certainly clear that consumers, to a large extent, started favoring these cost-effective solutions instead of the latest cutting-edge technology. Third, the recent financial crisis has clearly shown how a company such as Vestas is highly dependent upon large-scale government orders. In particular, while business has been good in economic stable times, orders have dropped significantly in times of financial turmoil. So what does this mean for companies such as Vestas? Well, as we shall explore in this module, the attractiveness of an industry is defined by a number of different factors. All have a direct influence on how a company such as Vestas should craft its strategy. Therefore, we will over the next lectures, discuss the different factors that may influence whether an industry is attractive or not, and use this as a basis for understanding effective strategy formulation.
