Case Study: Dyesol

Case Study: Dyesol | PARTNERING TO HARNESS THE POWER OF THE SUN

Case Study: DyesolPARTNERING TO HARNESS THE POWER OF THE SUNBy Group 7:Ranjana SharmaNick Marty (D)Vijay Sai SomayajulaVenkat Sumanth ValligetlaContentsIntroduction2SWOT Analysis5SWOT Analysis for Dyesol:5Porters Five Competitive Forces model for Dyesol6Degree of Existing Rivalry - LOW:6Threat of Potential Entrants - MEDIUM:7Bargaining Power of Suppliers - LOW:7Bargaining Power of Buyers - LOW:7Threat of Substitutes - MEDIUM:7Discussion Questions8References14

Introduction

In the current era of rapid globalization, the world is running out of its natural resources that help us survive and have a better quality of life. Most of these natural resources are consumed by huge manufacturing companies which are deteriorating the environment year by year, not just by running out these natural resources but also polluting the fresh air and water. In the current scenario, when the world desperately needed the firms that generate energy through renewable sources, emerged the company called Dyesol which serves the purpose.

Dyesol is the world's first and foremost firm that produces the materials that are coated with dye-sensitized solar cells (DSC). Dye-sensitized solar cells were first of its kind which is low of cost; where its thin-film solar cell can be used to generate the electricity by absorbing the solar energy, similar to the way plants absorb sunlight in order to conduct photosynthesis. Plants, with the help of chlorophyll in their leaves, absorb the sunlight and use it to transform water and dioxide into carbohydrates and oxygen. Whereas in DSCs leaves are replaced by porous titania nano-structures, and a substance called long-lived die acts as chlorophyll. DSCs process comprises of a 2 step photovoltaic process unlike conventional photovoltaics. However, DSCs had the potential to be less expensive than the regular solar cells in terms of both inputs and manufacturing process. Moreover, DSCs can be made into tough flexible transparent sheets which can be deployed onto the roofs of the huge buildings without any delicacy. Despite of DSCs lesser ability to generate the solar energy compared to other solar cells, it was still considered as the most promising innovation and had an immense potential to evolve.

The roots of Dyesol's innovation were formed way back in 1960s when a group of scientists came to the consensus that illuminated organic dyes could generate electricity using oxide electrodes. From then on, scientists have worked upon developing the process of "artificial photosynthesis". However, due to the lack of ideal and efficient technologies, scientists had to abandon the efforts. But, in 1988, at the Ecole Polytechnique Federale de Lausanne, scientist Michael Gratzel discovered a nanotechnology that could make artificial photosynthesis work. He created a sponge that had extremely thin layer of pigment which drastically increased the surface area to capture more sunlight, which improved the efficiency of the cell. He then started working with scientist Brian O'Regan where he invented Gratzel cell which was an early version of DSC.

Sustainable Technologies International (STI), Greatcell Solar, and Ecole Polytechnique Federale de Lausanne eventually worked for the next decade and a half on converting the DSC technology into commercialized form. However, various capital investment firms were not at all enthusiastic in championing the technology due the high risk that was involved. As a result these group of organizations changed their approach by forming a separate firm called Dyesol in 2004 in Australia. In order to accelerate its supply to various firms, Dyesol formed joint ventures with two major firms called Tata Steel and Pilkington.

Tata steel is one of the world's largest producers of steel and is a subsidiary of Tata Group which is based in Mumbai, India. Tata Steel's revenue was $26 billion as per 2011 and is rated as 5th largest steel maker in the world. Dyesol's joint venture with Tata Steel could assist them in accessing good amount of capital, manufacturing expertise and also marketing expertise which could help Dyesol get better recognition in the international market. In 2011, Tata Steel Europe and Dyesol have made an announcement that they have created world's largest DSC module printed onto steel in continuous line. The first TATA-Dyesol "Solar Steel" roofing was being installed on the Sustainable Building Envelope Centre in Shotton, Wales in 2012. Despite various advantages that Dyesol could have had with their joint venture with Tata Steel, they also have a fear that Tata's chemical wing could unlock their unique formula of manufacturing DSCs by reverse engineering which would cause a huge blow to Dyesol as Tata Group is much more established and had very deep pockets.

Pilkington on the other hand was a multinational company which was an expert in glass manufacture. Pilkington is headquartered in St. Helens, United Kingdom where its revenue was $373 million in 2011. Pilkington's specialty was to manufacture a glass which involved the process of floating molten glass over the molten tin. This process was first invented in 1950 which was revolutionary. In 2006 Nippon Sheet Glass (NSG) of Japan has acquired Pilkington and together they have become largest sheet-glass maker in the world. Pilkington's North American wing and Dyesol have formed a joint venture with equal share for each other. Similar to TATA-Dyesol joint venture, Dyesol had access to good amount of capital and Pilkington would manufacture and market their architectural glasses coated by Dyesol's DSCs. However, the commercial market was uncertain and not ready for this innovation which could be a drawback of this collaboration.

Dyesol still has various options open in order to evolve as a firm. One of the possible next steps they are considering is, licensing their product to various manufacturing companies. However, they are still somewhat skeptical in doing so, because the current state of market is still nascent in terms of embracing DSC technology and also licenses may not ensure deployment of the technology which is of highest quality.

Dyesol's innovation is path breaking and could very much turn out to be a necessity for us in the near future, given the circumstances of the world, which is craving to save the natural resources and use more and more renewable resources.

SWOT Analysis

A SWOT Analysis or SWOT Matrix is a planning method for exploring the four major aspects of a business venture, i.e. the Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis can be anything from a simplified document created like a mind map to a complex analysis based on available facts and figures. A SWOT analysis can help explore the critical aspects of an organizations products, projects and even its reputation and goodwill.

SWOT Analysis for Dyesol:

Porters Five Competitive Forces model for Dyesol

Porters five forces model is an excellent tool used to analyze an industry. This helps companies to evaluate their current and future market growths and also provides better understanding of the opportunities and threats to them. This model is an integral part of planning for any organization, as it helps in taking advantage of its strengths, improving from a position of weakness and helps in avoiding wrong decisions.

Degree of Existing Rivalry - LOW:

There are not many organizations that produce dye-sensitized solar cells (DSC) in large scale, apart from Dyesol. Moreover, it was assured to become the worlds single largest producer of building materials coated with DSCs in 2012.

Threat of Potential Entrants - MEDIUM:

Some companies have already established production of Dye-sensitized solar cells, though Dyesol still is the leading manufacturer. Companies like Solaronix, SolarPrint, G24innovations and Sony Corporation are starting to invest more in DSCs thereby leading to wider competition in the market in future.

Bargaining Power of Suppliers - LOW:

Though Dyesol has clearly benefited from the advantages of being an early mover into the DSC market, bargaining power of Dyesol is considered low as it is a relatively smaller company compared to its joint-venture giants like TATA Steel and Pilkington. Dyesol increasing its bargaining power would have been a huge risk as TATA Steel and Pilkington with much deeper pockets would have eventually tried alternate technologies.

Bargaining Power of Buyers - LOW:

TATA Steel and Pilkington, though being bigger organizations, would have had less bargaining power due to very less alternative options as successful as Dyesol.

Threat of Substitutes - MEDIUM:

The continuous rise in popularity of substitute methodologies being used in producing DSCs, sluggish global economy, companies like G24innovations and Sony Corporation building Dye-sensitized Solar Cells (DSC) for commercial purposes are considered as future threats to Dyesol, though till 2012, they were the leading producer of DSCs.

Discussion Questions

1. What were the advantages and disadvantages of Dyesols venture with Tata Steel?

Ans: Tata Steel Europes collaboration with Dyesol started in 2006 with Corus, which was subsequently bought by Tata Steel Europe in 2009. The advantages and disadvantages are as described below:

Advantages:

Resource capabilities of Dyesol increased with Tata Steels partnership.

Dyesol could successfully utilize the capital provided by the Tata Steel and help the MNC in manufacturing the dye coated steel.

Successful completion of Welsh Assembly Government project which is worth 11 million pounds (profitable to both companies and possible only through collaboration)

Dyesol along with Tata Steel continued research and produced a 20 meter square dye solar enable steel roofing array with the output of power more than double that of its predecessor which provides an evidence for joint research.

Disadvantages:

Dyesol faces risk from the Tata Groups chemical business in the sense that the MNC could reverse engineer their product and bypass the patents.

Partnering with Tata Steel raised the level of dependency for Dyesol because the dye coating on steel depends on the production of steel and subsequent consent by the MNC to incorporate the dye coating.

Tata Steel has more leverage on the partnership than Dyesol.

Some managers in the company are against the partnership as they feel that the company should license their technology instead.

2. What were the advantages and disadvantages of Dyesols venture with Pilkington?

Ans: Dyesol commenced operations in the USA in mid-2009, establishing an American subsidiary called Dyesol Inc., and in early 2010 the subsidiary formed the joint venture Dyetec Solar with Pilkington North America. The advantages and disadvantages are as described below:

Advantages:

Partnership with Pilkington led Dyesol to enter in glass manufacturing with the subsidiary Dyetec Solar.

DSC enabled glass panels contribute to energy generation (environment friendly) increasing the reputation of Dyetec Solar.

Joint research with Pilkington enabled the company to produce the DSC enabled glass panels in typical manufacturing environment (which is a breakthrough)

The partnership enabled Dyetec Solar to win Ohio State Third Frontier Fund, a sum of one million U.S dollars for research and development.

Disadvantages:

Dyesol being a materials supplier is at a disadvantage in terms of bargaining power.

There is a risk regarding the market success, as it is a pioneer in dye coated glass sheet solar panels.

The power output from this glass sheets (collaborative effort) is low which may not entice the customers into buying the product.

Pilkington North America which is a part of Nippon Sheet Glass (one of worlds leading organizations in glass manufacturing) can withdraw partnership with very low losses, but jeopardizing Dyetech Solar in the process.

3. Should Dyesol look to aggressively form licensing agreements (or other types of alliances) with other firms?

Ans: Managers in Dyesol have different opinions regarding licensing agreements with other firms. Few managers thinks it is an advantage to form licensing agreements as it saves both money and time while other managers considers licensing agreements as a disadvantage. They think it is not a good idea to depend on licensees for commercialization of product as they may lack the determination to promote the technology and quality of the technology is also not guaranteed.

Following are some more advantages of licensing:

This agreements helps dyesol to acquire the technology with in less time.

Licensing a technology is much cheaper and less risky than developing a new technology in-house.

Licensees have good opportunity to gain knowledge and information on the technology which improves the chances of delivering the quality products.

Licensee also reduces the companys chance of gambling on big gain or big loss on technology.

As there are more advantage compared to disadvantages, dyesol should look to aggressively form licensing agreements with other firms.

There are also other types of alliances like outsourcing. The general form of out sourcing is Contract manufacturing. This helps the firms to meet the market demand with less cost, less time and greater flexibility.

Considering the previous experiences of Dyesol Company with its collaborative partners like Tata and Pilkington, Licensing agreements is more recommended than outsourcing.

4. What mechanisms do you believe should be in place to help ensure that dye sols objectives are met in collaborative relationships?

Ans: Considering the past experiences of Dyesol, Mechanisms to be adopted in collaboration relationship are:

Clear definition of rights and obligations have to be done.

Legal remedies to the violation of agreement, should also be defined.

Organizations on collaboration need to work with sense of ownership.

Good will and trust between the organizations have to be enhanced as it is the key factor in collaboration.

Collaboration needs flexible, monitoring and governing mechanisms to successfully meet the objectives.

There are three types of governing and mechanism reports:

1. Alliance Contracts:

These are the legally bonded contractual agreements which provides all the rights and obligations in a collaboration between the firms. It also provides the legal remedies to be followed if any partner in a collaboration violates the agreement. It also defines the contribution of each partner in collaboration and how much control does each partner have in arrangements.

2. Equity Ownership:

In this the partners in collaboration owns a share of equity by contributing the capital amount. It provides the partners a sense of ownership which enables the partners to work towards the project with more commitment and determination.

3. Relational governance:

It is a self-enforcing governance based on trust, good will and reputation of partners that is gained through past experiences over time. This reduces the contracting and monitoring costs and it also enables extensive cooperation, sharing and learning.

Recommendations

Before the commercialization of DSC technology:

Strategic Alliance

After the commercialization of DSC technology:

Outsourcing, &

Licensing

Short Term:

Continue with joint ventures (TATA, Pilkington)

Long Term:

Establish licensees to promote products.

Conclusion

Dyesol, an Australian-based company, is in a position to supply the market with clean power generation through DSC technology and joint ventures with TATA Steel and Pilkington.

Though the threat from new firms continues to increase, Dyesol being a Pioneer will have a competitive edge.

References

BOOKS:

Strategic Management of Technological Innovation (2012) By Melissa A. Schilling.

WEB:

Wikipedia, http://en.wikipedia.org/wiki/Dye-sensitized_solar_cell.

Prezi, https://prezi.com/c0ecght1pgch.

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