Competitive Forces in the Solar Power Sector

Rivalry in the Solar Panel Industry

The solar panel industry has experienced considerable growth in the recent past given the problem of global climate change, which has necessitated the need for alternative sources of energy. According to recent reports, this industry has experienced as annual growth rate of approximately 78% between 2006 and 2011. Moreover, the market value of this sector increased to $11.5 billion from $8.6 billion between 2011 and 2012 (Pritchard, n.d.). Given this recent growth, it is estimated that the solar panel industry will experience approximately 35% increase in electricity produced by this source of energy. Currently, solar panel industry is the rapid growing source of energy across the world as evidence in the increased installations of solar capacity since 2010.

The growth of the solar panel industry has also been characterized by increased competition between companies. Business organizations in this industry are increasingly developing and utilizing strategic plans to invest huge amounts of capital in solar electric power generation. The increased competition is attributed to the fact that the solar panel sector is the fastest growing industry across the globe. However, the competitive environment in this industry is influenced by various factors that determine profit potential including suppliers and buyers' bargaining power, threat of substitutes, and threat of new entrants.

These factors form the basis of the conceptual model of this study that seeks to examining rivalry among existing competitors in the solar panel industry. The conceptual has been developed on the premise that each of these factors plays a crucial role in shaping the competitive environment as well as profit potential. These competitive forces have significant impact on the profit potential of large companies in the industry while they generate intense rivalry among small companies that lack a certain niche in the market or environment.

Bargaining power of suppliers

Bargaining power of buyers

Threat of new entrants

Threat of substitutes

Rivalry among competitors in the industry

Purpose of Study, Research Question and Sub-questions

The main goal of this study to examine how bargaining power of suppliers and buyers, threat of new entrants, and threat of substitutes influence rivalry among competitors in the solar panel industry. In this case, the researcher seeks to highlight how these factors play a crucial role in the rapid development and growth of the industry in relation to their effect on large and small companies in the solar panel business segment. Therefore, the study will contribute to a better understanding of the competitive environment of solar panel industry.

The researcher will accomplish the purpose of the study through developing a research question to be examined. The research question for this study is, "To what extent do bargaining power of buyers and suppliers, threats of new entrants and threats of substitutes influence the rivalry among existing competitors in the solar panel industry?"

This central research question will be accompanied by a set of sub-questions relating to it and the issue under examination as follows:

What is bargaining power of buyers and how can it be measured?

What is bargaining power of suppliers and how can it be measured?

What is threat of new entrants and how can it be measured?

What is threat of substitute industry and how can it be measured?

What is rivalry among competitors and how can it be measured?

What is the relation between bargaining power of buyers and suppliers, threats of new entrants and threats of substitutes and rivalry among competitors?

Research Methods

In order to examine the research question and accomplish the purpose of the study, the researcher has identified a suitable research methodology. In this case, this study is quantitative and will incorporate conducting surveys as well as using previous research. Generally, quantitative research entails explaining phenomena through data collection and analysis that are based on mathematical methods, especially statistics ("Introduction to Quantitative Research," 2010). The use of quantitative research in this study is influenced by the fact that this research methodology is more reliable and objective unlike qualitative research. The nature of this study requires using statistics and available data to generalize findings, which will be accomplished through conducting a quantitative research involving surveys and use of previous research.

Scientific and Managerial Relevance

From a scientific perspective, this study will contribute to an understanding of the competitiveness of solar energy with conventional electricity generation technologies or systems (Stone & Associates, 2011). The study seeks to demonstrate the importance of solar energy in the global energy mix, particularly as a suitable renewable energy source with minimal environmental impacts. Through this study, more scientific attention should be given to development of solar energy panels to help increase the percentage of solar energy in the global energy mix since it is less expensive and more beneficial than conventional energy sources.

From a managerial perspective, the study seeks to demonstrate how different factors in the competitive environment influence a company's ability to obtain competitive advantage over its rivals. Since this study is based on an industry analysis, it will help business managers understand the impact of industry forces on the success and profitability of their businesses. Moreover, the study will help demonstrate how effective management in light of these factors can be utilized to reap significant profits based on the growth of the solar panel industry (Jenkins, 2013).