Marketing Viability Study For Rotary Engineering UK Limited

By Kalhara Adikari
1. Overview of the UK power market
To fully understand the situation that Rotary Engineering UK is going
through, we have to research the context of the industry itself. We
are going to analyse the current market based on 2013 and 2014
data.
In 2014, the two main sources of energy in the UK were gas and
coal, each with a 30% share. Another 35.3% of energy sources were
the nuclear energy, wind power and Bioenergy. This leaves only
4.8% of shares to the Hydro energy, solar power and other
alternative sources of power. Even though gas and coal shares are
massive, compared to the other alternatives, we can see that in the
last years the electricity generation has been dropping; especially
the coal power generation, which decreased by 23% from 2013 to
2014. On the other side, renewable energy increased by 21%. This
is a great sign for Rotary Engineering, taking into account that solar
and wind power had an expansion of nearly 10%.
In terms of solar power, the UK has shown a great acceptance of this
source, which can be seen in the increasing power capacity in 2014
rising from 2,8GW to almost 5GW. Also, after August 2015, the
power capacity was already reaching 8GW with an expectation of
10GW by 2016.
2. Rotary engineering business environment analysis
Rotary Engineering UK Limited is one of the worlds leading
manufacturers for workshop equipment and electromagnets.
Formed in 2003 after a management buy-out bringing together
Rotary Engineering and Burnand Magnets. The company is based on
Sheffield, UK; and has presence in Madagascar, Azerbaijan, Saudi
Arabia, Qatar, China, Russia and the Czech Republic.
Four big products form the portfolio: coil manufacturing equipment,
motor repair and manufacturing equipment, traction workshop
equipment and industrial magnets. Within Rotary Engineering there
is a division established in 2007 dedicated only to renewables, it is
the subsidiary energy division. Rotary Renewables was an
alternative to diversify that was based on the passion that the
engineering team had. Also, the engineering skills developed for
more than 30 years by producing coils, equipment and spares for
the wind turbines were of great help to really get involved in the
renewables segment. Their goal is to provide a complete service
from enquiry to installation as well as ongoing maintenance and
repairs in Wind and Solar solutions.

In order to demonstrate the viability to enter a specific market, first

we have to make an analysis that includes all possible variables for
Rotary Engineering. To start, there are several factors that have an
influence on the company. The political and legal factor is one that
has quite a big impact on how things are done in the industry. An
example of this is the UK policy to cut FiT, which has a negative
impact in the renewables industry; in this case, it will low the
expected demand for products in the renewables category such as
wind turbines and solar panels. Moreover, the UK is to end the
assistance for Small and Medium-sized Enterprises focused on
renewable energy projects. This directly affects Rotary Engineering
because they fall under this category and they will no longer have
that support. However, even though it might seem like the
government is not supporting so much the industry, there are some
incentives under funds and grants towards giving tax exemptions to
projects focused on starting new installation for renewable energy
projects. This is the bright side taking into account that the
government is assuring stability and fair regulations for this type of
schemes.
In terms of technological and environment factors, Rotary
Engineering has a good possibility to excel in the industry because
there is still an energy efficiency gap yet to be fulfilled (at the
moment, solar energy is covering only 13% of the energy supply).
One of risks in the solar energy industry is related with the natural
supply of energy from the sun. Certainly the UK is not a country
where the sun shines everyday. Hence, the electricity output should
have a balance so there would not be an electricity shortage. On the
other side, this should be compensated by the expertise of the
engineers who can design and maintain products well positioned by
their own knowledge and materials. They should also find the way to
compensate the high cost in solar cell production and power storage
devices. In matters of human resources, the team is highly skilled
but the company is lacking of number of people.
It is always important to know what exactly are the strengths of a
firm in order to take advantage of the opportunities in the market.
Rotary Engineering has created a great environment internally,
which is very positive because the market already has a good
impression about it. To start, RE has a strong technical and
management team that is expert and passionate about
diversification with renewable products. Also, the relationship with
customers and employees is good (the improved facilities to
enhance the business embody these relationships). Furthermore,
quality is never let unattended: they are an accredited firm under
ISO 9001.

Sustainability is on the edge and firms that are environmentally

conscious have great opportunities to succeed. The expansion of
renewable energy businesses is an opportunity for Rotary
Engineering. Working with another company as a strategic venture
can be a chance to develop partnerships and create merges of
recognized brands. Awareness and advertising fairs for renewable
energy could also create a space for consumers to get to know
about RE, especially after the market stabilization and the
government focus on supporting renewable energy sources.
While there are opportunities for Rotary Engineering, there are also
some threats to pay attention to. The increasing number of
competitors might saturate the market and leave RE with a low
demand to fulfil. Furthermore, the competitors do not come only
from solar and wind system providers but also, there are new
technologies (hybrid technologies, thermal systems, inverted
technology, bio-gas) that create a substitute market. Direct
competitors are other companies offering solar systems, local
installers of imported solar systems and international installers with
imported solar systems. On the other hand, the indirect competitors
are wind turbines companies, Biomass power and tidal power firms
(based on hydropower). In terms of market domination, the UK solar
system firms signify 56% of the direct competition, international
installers are 32% and finally, the local installers with imported solar
systems represent up to 12% of the direct competition for Rotary
Engineering.
Mapping the competition:

As shown in the graph, we can see that Rotary Engineering falls

under the medium power generation at an average price. It is also
remarkable that there are some companies offering a significantly
lower power generation at a very high price. However, there are no
competitors offering high power production at a high price. Most of
the companies compete offering a medium or low power production.

Frequent legislative changes in Feed-in Tariffs also make the

environment somewhat unstable. Finally, as mentioned before, the
climatic conditions in the UK are not the ideal for a 100% sun-fed
system all year round so storage and management energy systems
should be considered too. In addition to these threats, Rotary
Engineering has weaknesses that should be addressed. For
example, the marketing budget is low and therefore, there is a lack
of sales and marketing employees. Also, even though the engineers
are very skilled and talented, they do not have as much experience
in the photovoltaic field as other companies that already have a
market position.
Rotary Engineering already has started to get a position in the
potential market. 37% of their products and services are
manufactured coil-based. 28%
of the range corresponds to
motor-manufacturing products.
Magnet manufacturing takes
about 14%. Finally, solar and
wind products are 13% and 8%
accordingly.
Although
their
participation in the renewables
market is quite low, they have
good chances to increase it
based on the forecasts for the
UK wind and solar energy to be
cheaper than gas by 2020. Also,
most of the UK authorized projects are wind and solar farms. This
trend is easy to anticipate if we consider that the solar power in UK
was almost doubled in 2014 compared with the 2000 year.
3. Rotary Engineering Marketing Mix

Product: As mentioned before, Rotary Engineering has five types of

products. Using the BCG matrix to classify them, it is possible to see
that Coil manufacturing products are classified as a Cash Cow
meaning that it is in a market with low growth but relative high
market share. The cash flow generated from this kind of product is
rather stable and it produces more cash than the consumed.
Magnet manufacturing and wind turbines count as Star products,
this means that RE has high market share in an environment of high
market growth. If Rotary Engineering can maintain or increase a
good portion of the market, those two products can become Cash
Cows when the market growth decreases, ensuring the future cash
generation. Finally, Motor manufacturing and Solar cell
manufacturing are products under the Question Mark category.
These two products are in a rapid growth market but Rotary

Engineering does not have the market share to drag these products
to the Star category. In this case, the ideal scenario would be for RE
to increase their participation in the market before the market
growth slows down. If that happens, those products would become
Dog products, which are not promising at all.
Price: Rotary Engineering offers a
product with a comparative low price
and a high quality. They are
outstanding when it comes to quality
because they know that is a factor
that makes the difference among the
competitors. Therefore, RE products
are classified under the Value for
Money category. This kind of strategy
helps
RE
to
have
a
better
penetration of the market because
they offer the best of both worlds: low price and high quality.
Place: to place RE products, it is a good strategy to focus in various
types of consumers. First, the existing foreign customer base; and
then, existing and new local customers (which can be or not final
customers of solar panel dealers). Also, there is the government as
a customer.
Promotion: even though the marketing team is quite small, the
efforts to place Rotary Engineering in the public eye are diverse. The
official website has a user-friendly interface and illustrates
effectively all the products and services offered by RE. In terms of
social media, there are over 24 videos on YouTube that show many
of their products with the explanation of how do they work. Also,
they have Facebook and Twitter fan page. The company has
appeared in articles on newspapers and magazines describing the
present market possibility of renewable energy sources. Blogs open
to discussions are also part of REs social media exposure. Finally,
appearances on International Renewable Energy Exhibitions are one
of the ways to be renown in maters of renewable projects.
4. Segmentation and Positioning
Within the company, it is clear that they already have two segments
for their business: renewable related products (wind turbines and
solar cells) and non-renewable related products (coil, motor and
magnet manufacturing).
On the one hand, Rotary Renewables design and install wind
turbines suitable for business, public buildings, farmers and
developers. This segment of market has clients onshore and

offshore. The products are divided depending on the energy

production: Bergey (up to 10Kw), Endurance (50 Kw), Northwind
(100 Kw) and Powerwind (500 Kw). On the other hand, the
commercial solar panels can be ground mounted or roof mounted
and they are also classified accordingly to the power capacity
(systems up to 4Kw, 10Kw, 50 Kw and more than 50Kw).
Rotary Renewables can focus in three different targets: consumers,
business and government. Within those categories, there are
specific segments to take into account. First, solar systems for car
parks, which would be roof mounted; the advantages in this case
are the value increase of the property, the protection against the
rising energy costs, protection of the environment and also, it is
possible to access the Feed-in tariff rates. Second, ground mounted
solar panels for industrial and agricultural farms; owners will be
benefitted with a reduction of the machinery cost, increasing of the
property value and naturally, a reduction of energy costs. Solar
panels for colleges, school and universities are also an alternative to
have a low maintenance cost while protecting the environment.
Hotels and restaurants could also be part of the commercial solar
panels target.

As seen in the graph, Rotary Renewables products are positioned

according to the type of consumer. Users that require an amount of
energy production less than 10Kw usually spend between 6 and 7
thousand Sterling Pounds. The second type of consumer are
businesses that require more energy and usually pay over 60
thousand Sterling pounds on the solar system. Finally, government
institutions have their budget over 225 thousand Pounds since their
energy requirements are over 50Kw.
5. Financial Analysis
a) Pricing and costing options.
Expected Sales

1st year
4 Nos. 50Kw

2nd year
10 Nos. 50Kw

3rd year
20 Nos. 50Kw

Per unit price

Per unit cost

75.000
68.875

76.500
70.253

76.500
70.253

For the financial forecast, we have created a scenario for the first
three years of operations. The standard 50Kw product would have a
rapid increase in the demand, allowing Rotary Renewables to sell
more units per year (annually expected to double the sales
quantity). The net present value, assuming a 1.5% deposit rate
(from the HSBC UK), is 207.552. This means that the projected
earnings exceed the anticipated costs.
b) Forecast of potential outcomes

The future for Rotary Renewables is bright, taking into account that
the expected sales will be double for the third year. Also, the cost of
sales will be proportionally less when compared with the second
year. There is a potential for sales to reach more than 1.5 million
Pounds.

c) Investment analysis

The total Net Present Value for the first three years is 207.552. The
total Gross Profit is 207.563. This reflects the favorable market
environment for Rotary Renewables, giving positive expectations for
the near future. According to the financial ratios, it is possible to say
that Rotary Engineering should go towards further investment into
this sector.
6. Value proposition and recommendations
In order to get the expected positive results described before, there
are some steps that Rotary Renewables should take:
a) Using adequate marketing tools to increase sales from
household and SME consumers. First step should be increasing
the marketing budget to get more sales personnel and train
them with the required information and with a focus on
excellent customer service.
b) Using marketing tools to increase sales from large businesses.
The starting point could be offering discounted prices to new
and existing customers.
c) Bundle with wind systems and sell to cover the potential loss
from discount schemes. This would be directed to business
and government.
d) Since Rotary Renewables is known for providing a complete
service (from enquiry to installation, maintenance and
repairs), a good strategy would be to increase the installation
charges as a trade-off for speeding up the installation process.
This strategy would only be applied for businesses and
government but not for households.
e) Similarly, RE can increase the maintenance charges, once
again; this only applies for businesses and government. The
maintenance can be done in a quarterly manner.

f) Provide financial leasing scheme to Solar systems with

franchising the MCS Certificate to end consumer (that is the
Microgeneration Certification Scheme which is a nationally
recognised quality assurance scheme supported by the
Department of Energy and Climate Change.
g) Develop a special B2G business scheme. Rotary Renewables
can rent solar panel systems in free spaces owned by the
government. Also, it would be fantastic to participate in huge
projects with numerous investors by renting solar systems to
special projects. The value will be a reduction of the Carbon
footprint by Collaborating with other solar manufacturers,
enhancing the Partnering Company CSR or Goodwill.
h) Collaborate with financial institutions and give loans and
leasing options to households and also to Small and Medium
Enterprises. The value in this proposition is based on the
increasing usage of renewable energy for everyone and at the
same time, the portion of energy created from renewable
resources will be larger.
In conclusion, Rotary Engineering has potential to be one of the
leading companies in the renewables market. Right now it is a good
time to go with further investment. The financial future shows the
great potential yet to be fulfilled. Rotary Renewables already has
great technical expertise and strong customer relationships, if the
recommendations are followed, the company will be profitable and
with long-term development in this area.

Individual reflection:
If I were Rotary Engineering, I would be happy with the market
viability study because it has a deep study of the market and it was
connected with the company. I like the way the strengths are
portrayed to achieve future expected results. I would be satisfied
with the recommendations because they are specific and realistic.
Something that might be missing is more financial ratios. Net
Present Value is a great tool but it is sensitive to discount rates and
this could have a considerable effect on the final result. Also, the
market viability could be done not only taking into account the 50Kw
products but also systems with less and more voltage so the
government institutions and households would also be represented
in the final outcome.

References
BRE National Solar Centre, 2015. BRE [Online]
Available
at:
http://www.bre.co.uk
[Accessed 20 11 2015].
Carbon
Brief,
2015.
Available
at:
[Accessed 20 11 2015].

Carbon
brief
[Online]
http://www.carbonbrief.org/

Rotary Renewables PVT LTD, 2015. Rotary renewables

[Online]
Available
at:
http://www.rotaryrenewables.co.uk
[Accessed 20 11 2015].
Solar
Energy
Alliance
Ltd.,
2015.
[Online]
Available at: http://www.solarenergyalliance.com
Solar Power Portal PVT LTD, 2015. Solar power portal
[Online]
Available
at:
http://www.solarpowerportal.co.uk
[Accessed 20 11 2015].