This presentation was a take home exame aimed to analyze the market and several strategic issues on Vestas

1. A CASE STUDY ABOUT…
WHERE THE WIND MEANS THE WORLD.
STRATEGIC MANAGEMENT FINAL REPORT
152112130 Paulo Alves
OCTOBER 2012

2. 2
INDEX
03 Company’s Overview
04 1. Industry Analysis
05 1.1. Environmental Analysis
06 1.1.1. Macro Environment
06 1.1.2. Micro Environment
06 1.1.2.1. Clients
07 1.1.2.2. Competitors
08 1.1.2.3. Suppliers
09 1.1.3. Industry Attractiveness
10 1.1.4. Industry Structure
11 1.2. Organizational Analysis
11 1.2.1. Resources
12 1.2.2. Access to Scale, Scope and Experience economies
13 1.2.3. Strengths and Core Competencies
13 1.2.4. Strategic Fit
14 1.2.5. new SWOT Analysis
15 2. Strategy Formulation
16 2.1. Vision, Mission, Values
16 2.2. Objectives
17 2.3. Strategy and Strategic Dimensions
18 2.4. Corporate Governance
19 2.5. Product-Markets
21 2.6. Vertical Integration
22 2.7. Internationalization
25 3. Recommendations
28 4. Appendixes
32 5. References

3. 3
COMPANY’S OVERVIEW
VESTAS
Vestas wind Systems S/A
YEAR FOUNDED Founded in 1898 but become known as Vestas only in 1945
INDUSTRY
Vestas sells wind turbines all over the world in the B2B segment. The company
competes in the energy industry which offers a large range of energy opportunities to a
large variety of costumers.
HEADQUARTERS Aarhus, Denmark
SALES VOLUME
(MILLION EUR) 5,836 in 2011
MARKET SHARE 12% - Market leader followed by Sinovel
CEO Ditlev Engel
STOCKS Public Held on the NASDAQ OMX Copenhagen
MARKET Sold in more than 30 countries into America, Europe and Asia Pacific. More than 50%
of the revenues come from Europe.
EMPLOYEES More than 22,000 employees

4. 1. INDUSTRY ANALYSIS
4

5. 5
1.1. ENVIRONMENTAL ANALYSIS
1.1.1. MACRO ANALYSIS
PEST Indicator Forecast Causes
1. INDUSTRY ANALYSIS
Impact on the Energy Industry
Supply Demand
Political
Policies
Improved macroeconomic policies. National
Governs more transparent. More initiatives
to leverage green thinking.
Vaster and freer flow of information, capital,
goods, services and people.
+ Easier components, products and
services exportation
Brand awareness increase
+ Potential for renewable sources of
energy
- Strait labor policies.
Living Standards Political pressures for higher living
standards.
Greater social and ecological responsibility.
Further countries becoming political
democracies.
- Higher production costs + New potential costumers/
consumers
Economic
Economies Growth The global economy is well positioned to
accomplish a continuous period of growth.
Economic crisis is expected to recur. Asia
will keep the fastest growing region, led by
China and India, whose economies already
comprise approximately one-sixth of global
GDP. USA are expected to avoid recession
already in 2012.
+
New potential markets for energy
companies. Asian market seems
very attractive.
+
The economic growth
increases the power purchase
of the population mainly from
merging economies.
Inflation
Disinflation is expected for the next few
years in a global context. Although the
changes will be minimal.
In one hand, in the developed countries it
was a measure imposed by the central
banks. This result was achieved by injecting
liquidity in the economy. On the other hand,
in the developing countries it is result of the
moderation in global commodity prices and
lower global growth.
+ Cheaper components and raw
materials +
Disinflation expectations lead
the costumer to delay the
purchase. However, this
impact is not expressive in the
energy segment because the
consumption is not really
affected by this trend.
Average Income
Overall GDP per capita will increase.
Forecasts tell developed countries will keep
the higher numbers. Although merging
economies are faced with an huge
expectation for middle class increasing.
Stagnant population growth in developed
countries. Emerging economies will keep
leading the economy growth worldwide.
- Higher production costs +
Increase on the need of supply
and consumption from
costumers.
Consumption In general it will increase. Oil demand and
natural gas demand will increase deeply
It is result of a vaster increase of population
mostly in Asia. Asia will drive the expansion
in the energy demand.
- Higher production costs
+
Rise of new consumers mainly
emerging Asian middle class
that want to acquire higher
class behaviors and goods
dependent from energy supply
+ Potential for the supply from
renewable sources of energy
Social
Population Distribution
By 2015 more than a half of the world's
population will be urban. India, China and
Japan will keep leading the population
growth
Population growth mostly seen in emerging
and Asian economies. + Easier distribution network
Shift of power consumption
from developed countries to
emerging economies
Society Behaviors
Increased Healthcare, Security and Time
Management concern. People will tend to
be attracted for simplicity and effective
performance goods.
Ageing Population. Healthy body and mind
is becoming a new form of lifestyle. People
search for comfortable and peaceful places.
Global warming has caused people to think
"green". Growing world complexity makes
people search for simple and effective
goods. Inflation, financial crisis and public/
private debt are leaving people much more
alert about opportunity costs.
- Higher production costs
Consumers become more
demanding and selective about
quality of goods. Altough it
doesn't affect directly the
energy industry.
+
Potential for the growth of
renewable sources of energy.
Today already a great amount of
investment also from government
are being made to develop this
technologies
Relationships
Multicultural environment growth
everywhere. Companies tend to have a
closer interaction with employees
Easier flow of people through different
countries. Greater social and ethic
responsibility.
+
Higher standardization of textil
trends which reduces the costs of
country adaptation
Consumer behaviors are more
homogenius
Technological
Communication Easier communication trough more
channels
Huge investment on developing "social
software" from a virtual network. + Cheaper and more effective
channels + Increased globalization of
brand awareness
Distribution More, effective and advanced distribution
channels
People tend to be more sedentary. Better
producing performance. + Cheaper and more effective
channels
Development Progress on several matters within logistics Resource scarcity. More information.
Increased ecological responsibility.
+ Lower production costs due to
more efficient technology
+ Potential for renewable sources
development

6. 1.1.2. MICRO ANALYSIS
1. INDUSTRY ANALYSIS
SEGMENTATION BY SOURCES (WHAT) SEGMENTATION BY SECTORS (WHO)
6
1.1.2.1. CLIENTS
Energy clients can be seen from different perspectives. Below through a eight-criteria
analysis it is shown a correct view of these clients and all the market segmentation options.
C O S T U M E R S
WHO Transportation companies, Industries, Residencies and Commercial businesses
WHAT Energy from renewable or fossil sources
FOR WHOM Worldwide population
WHEN Everyday
WHERE All over the world
WHY
Nowadays energy can be seen as a physiological need and this is because most of them depend on
the existence of controlled energy. For example if a consumer needs to eat he also needs most of the
times a source of energy to cook.
HOW MUCH Energy prices differ from each company and country’s energy price policy.
Regarding the goal of this report where the most important thing is to perceive the
positioning of Vestas from its direct competitors and since the company is engaged with the
business-to-business sector it would be more useful to segment the market by answering
the criteria what and the criteria who. The two tables below show the different market
segmentation for each criteria, which will be developed further more.
PETROLEUM
COAL
RENEWABLES
Hydroelectric Power
Wind Power
Solar Power
Biomass
Geothermal
NATURAL GAS
NUCLEAR ELECTRIC POWER
TRANSPORTATION
INDUSTRIAL
RESIDENTIAL
COMMERCIAL
More detailed information about
these segments is available on the
industry attractiveness analysis.
2010 2030

7. RENEWABLE SOURCES
7
1.1.2.2. COMPETITORS
1. INDUSTRY ANALYSIS
Overlooking an important competitive threat can be disastrous for the business. In this
report it is possible to study the competition through four different levels to make sure no
competitor is forgotten.
This study is represented by the product-industry hierarchy and it can be seen on the
picture below for the Vestas case.
ENERGY INDUSTRY
WIND POWER
BRANDS
INDUSTRY
PRODUCT CLASS
PRODUCT TYPE
PRODUCT
VARIANTS
In all this levels it is possible to assume direct and indirect competitors for Vestas.
Although for this report only competitors from the deepest level of this hierarchy will be
developed. It means a product form competition, which includes services of the same
product type.
The table below shows who are this competitors and their specific framework.
COMPETITORS SINOVEL GAMESA ENERCON GE ENERGY
COUNTRY CHINA SPAIN GERMANY USA
COMPETENCIES Entrepreneurship Price Expertise Diversification
STRATEGY
Long-term strategy of
technological innovation,
localization, scale production,
international expansion and
service integration.
Become a benchmark in the wind
power industry by offering the
lowest cost of energy, while
focusing on three vectors: Cost of
Energy, growth and efficiency.
Constant sophistication of existing
components, providing customers
with state-of-the-art products
Invest on innovative technologies that
help customers to meet their challenges
in sustainable ways
OBJECTIVES
• Open the first integrated
base for the
manufacturing, assembly,
testing, ocean
transportation and ocean
installation service for
large-size offshore wind
turbines;
• Open the National Energy
Offshore Wind Power
Technology and
Equipment R&D Center.
• Optimization of the Cost of
Energy, focusing on improving
turbine availability and
reliability;
• Strengthening its presence in
target markets and stepping
up sales efforts among utilities
in central and northern Europe
and in markets in Southeast
Asia, Australasia, South Africa
and the Middle East. To do so,
the company will leverage its
presence in China, India and
North Africa;
• Optimize support functions to
become more competitive.
Export share of more than 60 % in
2013, gradually increasing over the
years to come.
• Sustain operating excellence and
financial discipline
• Create a more valuable portfolio of
businesses
• Drive organic revenue growth at 2
to 3 times gross domestic product
• Retain an excellent team with a
strong culture
• Manage the company0s risk and
reputation
• Build an excellent investor base
• Lead the board activities
MARKET SHARE 9% 8% 7,8% 7,7%

8. 8
1.1.2.3. SUPPLIERS
1. INDUSTRY ANALYSIS
There are a large amount of possible supply chains for each industry segment. Although it
was taken the same approach as the one given in the competitors study. Only the wind
power segment analysis is crucial and the one analyzed.
Wind turbines have more than 8,000 components. Typically companies in the business
engineer their own design and contract with a variety of suppliers to manufacture the
components.
In this terms, there are three ways to operate in this field and they are represented by the
three boxes below.
BUY ALL COMPONENTS PRODUCE THE KEY COMPONENTS AND
OUTSOURCE THE REST PRODUCE ALL THE COMPONENTS
The increasing size of business is creating complex challenges on the supply chain.
Decisions are crucial and companies have to ensure the best effectiveness depending on
their value proposition.
In one hand companies can prefer to avoid bottlenecks by controlling all the components’
production but, on the other hand, they can prefer to focus on their core competencies by
outsourcing them.
The following graphic gives the possibility to have an overview in the standard of these
supply chains.
COMPANY
TIER 1 SUPPLIERS
Suppliers of large components such as towers, blades,
gearboxes and so on
TIER 2 SUPPLIERS
Suppliers of ladders, fiberglass, resin, machined parts,
motors, electrical parts and so on.
In the case of Vestas only the tier 2 suppliers of
the graphic (tier 1 for them) are applied to the
company’s strategy.
They keep domestic the production of the key
components and avoid bottlenecks by having a
supplier management team internally and always
two suppliers for each component. Nowadays
they have approximately 1,000 suppliers all over
the world.
The p i c t u r e on the r i g h t side shows t h e i r
strategic positioning. Strategic because Vestas
try to have all of their suppliers as close as
possible of their production factories.
• F a c t o r i e s
• S u p p l i e r s

9. SEGMENTATION BY SOURCES OF ENERGY
1. INDUSTRY ANALYSIS
The petroleum energy source is the market segment with more attractiveness. However it is
a very risky segment not only because the market is dominated by four big companies but
also because the initial investments are huge. This is also a very controlled market but
since it is the major source of energy, the players profitability’s margins are great.
In the case of Vestas, they are included in the wind power segment since they produce and
sell wind turbines. This segment is considered unpenetrated and the forecast growth is
promising. However this kind of energy have huge fixed costs and to make it a competitive
source of energy the profitability’s margins are lower when compared to other segments. In
terms of risk, in one hand it is low because of the promising changes in consumer behavior
and the increasing political initiatives but, on the other hand, it is high because of the high
risk of being substituted by other renewable sources of energy.
SEGMENTATION BY SECTORS
9
1.1.3. INDUSTRY ATTRACTIVENESS
The tables below show the attractiveness of each segment in the Energy Industry.
It was made two different tables depending on the segmentation criteria.
PETROLEUM COAL
RENEWABLES
NATURAL GAS NUCLEAR ENERGY
HYDROELECTRIC WIND SOLAR BIOMASS
VALUE (BILLION $)
616 991,183 48 003,263 7 511,869 2 768,071 49,767 15 130,144 192 554,353 4 523,493
GROWTH (2011-2035)
0,13% 0,17% -0,02% 2,28% 16,78% 3,48% 0,35% 0,52%
MARGIN
80% 70% 40% 40% 30% 50% 70% 40%
RISK
100% 83% 67% 47% 33% 50% 83% 87%
ATTRACTIVENESS (BILLION $)
508 921,984 42 007,169 4 480,948 4 072,658 1 854,424 34 355,630 175 819,411 2 366,431
TRANSPORTATION INDUSTRIAL RESIDENTIAL COMMERCIAL
VALUE (BILLION $)
5 693 100 2 860 704 2 600 640 1 822 480
GROWTH (2011-2035)
0,26% 0,54% 0,15% 0,72%
MARGIN
80% 70% 80% 70%
RISK
77% 50% 67% 75%
ATTRACTIVENESS (BILLION $)
6 319 013,910 4 562 039,841 3 233 714,400 2 020 216,723
Vestas sells its turbines not to the final costumer but to costumers who work as energy
suppliers. This costumer is included in the industrial segment of the table. An attractive
segment with an interesting forecast growth and a value that can be explored on the future
since it has great profitability margins and a medium risk. Medium risk mostly because of
the necessary expensive infrastructures to provide efficiently the energy.

10. 10
1.1.4. INDUSTRY STRUCTURE
It does not matter the segmentation
criteria, the energy industry is very
concentrated and matured. It is
possible to find key players for each
segment and the growth in average is
low. Only the solar energy power from
the sources segmentation is positioned
for growth in the future.
The right side graph provides a picture
of how concentrated is the industry in
the wind power segment.
1. INDUSTRY ANALYSIS
MARKET SHARE IN 2011 FOR THE WIND
vestas sinovel goldwind gamesa enercon Ge energy others
12%
9%
9%
8%
8% 8%
46%
SEGMENT
1.2.5. KEY SUCCESS FACTORS
Key Buying
factors Competition Factors Key Success
Factors
Wind Power Segment
Efficiency Production Costs Efficiency
Coverage Distribution network Production Costs
Credibility Suppliers network Coverage
Price Promotion Distribution network
Key Buying
factors
Competition
Factors
Key Success
Factors
Industrial Segment
Efficiency Production Costs Efficiency
Coverage Distribution
network Production Costs
Credibility Suppliers network Coverage
Price Promotion Distribution network
To analyze the previews tables it is important to remember that it was possible to give the
same key success factors to both segments because they result from different segmentation
variables, each one analyzed independently.
In other words it means that to be successful in the wind energy segment or in the energy
sale to industries the key factors that will leverage the companies are the same.

11. 11
1.2. ORGANIZATIONAL ANALYSIS
1.2.1. RESOURCES
Human
22,721 employees over 37 different countries in the end of
2011
By Region
Americas 3,493
Europe and Africa 14,118
Asia Pacific 5,110
By task
Production Units 11,000
Sales Units 7,681
R&D 2,037
Others 2,003
HR Policies
Diversity
The major goal is to attract and retain skilled and
committed employees. Regardless of nationality and
gender.
Safety
Vestas provide a continuous training under the program
"Safety Walks". The group is very committed to reduce
the number of labor accidents.
Rights
Vestas as global policies concerning to human rights,
freedom of association and the right to collective
bargaining.
FINANCIAL
2011
Revenues (M€) 5 836 Notes
EBIT (M€) -60 Mostly because of the
decrease on revenues
Net Income (M€) -166
Net Working Capital (M€) -71
Equity (M€) 2 576
Total Assest (M€) 7 689
An increase of 9%
comparing to 2010
result of the
investments in more
infrastructures
2012
Dividends per share (€) 0,00
Share Price (€) 4,16 Oct 26
Market Capitalization (M€) 847 Oct 26
ORGANIZATIONAL
Functional business Structure
Public held on the NASDAQ OMX Copenhagen
Headquarters in Denmark
All over the world
47 335 Turbines
28 Production factories
38 retail stores and after sale service
9 research centers
More than 1,000 suppliers
Three different committees to prepare
decisions and recommendations for
evaluation and approval by the entire
Board of Directors.
The audit Committee
The Nomination & Compensation Committee
The Technology & Manufacturing Committee
1. INDUSTRY ANALYSIS

12. 1. INDUSTRY ANALYSIS
1.2.2. ACCESS TO SCALE, SCOPE AND EXPERIENCE ECONOMIES
ECONOMIES OF SCALE
Vestas achieve economies of scale by producing more and more powerful wind turbines, in better locations and
more efficient.
How?
1st: By giving a great effort in R&D to manufacture more
and more powerful turbines and more efficient
distribution channels.
2nd: By investing in research to find the locations with
the best characteristics for the turbines performance.
Why?
Because if they do this they will have to spend the same amount of capital to build wind turbines but as result
they produce more energy since they have better strategic locations, more powerful turbines, and less energy
losses, which will sell for higher prices for sure.
SCOPE ECONOMIES
The good news about the manufacture of wind turbines is that some components and resources can be used
through all of the product lines even when updates are done on the technology. For example the tower
infrastructure is always made of the same components and raw materials or the team that build the wind farms
are always the same no matter the wind turbine line.
It means Vestas achieve Scope economies by sharing synergies and resources between the different product
lines.
EXPERIENCE ECONOMIES
12
It is easy to perceive that Vestas can easily
achieve experience economies. They work
always on the same market segment with
almost the same products so it is easy to
learn from past situations.
… to improve this matter, Vestas provide
three different opportunities for career
development:
However... Professional Vestas always provide the necessary
practical skills.
Technical
Vestas promote continuous training for the
latest technologies, either in workshops,
classrooms or on the factory floor.
Leadership
Vestas supports their high potential
candidate with leadership transition
programs

13. 1.2.3. STRENGTHS AND CORE COMPETENCIES
13
STRENGTHS REASON
1. INDUSTRY ANALYSIS
CORE COMPETENCIES
VALUE CREATION
FOR THE CLIENTS
DIFFICULTY TO
IMITATE BY
COMPETITORS
ACCESS TO NEW
MARKETS
STRONG BRAND • Recognized as the parents of the wind power technology;
• Seen as market drivers. x x x
STRONG MARKET
SHARE
• Market leader in the wind power segment with 12% market
share in 2011. - x -
UNIQUE KNOW HOW
• Vestas has a long experience in the field.
• Joined the market segment in the 70s
• They have learned how to leverage their core
competences and improve their efficiency.
x x x
EFFICIENT LOGISTICS
• Strategy focus on cost of energy production, reliability,
R&D and technology.
• Huge and complex supply chain with a policy of 2
suppliers for each component.
• Promotion of the "easy to work with" policy that searches
for simplicity on their manufacturing process
• Implementation of local production for local markets
strategy.
x x x
FOCUS ON COSTUMER
• Annual surveys to understand how satisfied are its
costumers.
• Costumers are positioned as the business focus.
x - x
FOCUS ON QUALITY • Promotion a six sigma approach to measure the quality in
the manufacturing process. x - -
TRANSPARENCY
APOLOGISTS
• Promotion of a transparent marketing policy.
• Launches of a range of initiatives that increase
transparency on both consumers’ and companies’ side
such as the launch in 2010 of the Global Consumer Wind
Study.
x - x
To be considered a Core Competency, the strength must fulfill all
the three characteristics above
1.2.4. STRATEGIC FIT
VESTAS WIND POWER AND INDUSTRIAL SEGMENTS
Core Competencies
Key Success Factors
Efficiency Production Costs Coverage Distribution
Network
Strong Brand - - 5 -
Unique Know How 5 5 3 4
Efficient Logistics 5 3 4 5
Average (1-5) 5 4 4 4,5
From the previous table it is perceptible that Vestas fits the market perfectly in terms of
efficiency. It was only possible because of the large and unique know how that the company
affords and all the complex and efficient logistics’ strategy.
Overall the numbers are close to the maximum but there still some potential to optimize the
production costs, the company’s worldwide coverage and the distribution network. For this
the company has three options: invest, create and develop new core competencies (a
complex and difficult process); invest in the present ones or come up with a partnership
where they could share them.

14. 14
1.2.5. NEW SWOT ANALYZES
IMPROVED
MACROECONOMIC
POLICIES.
• Growth in the wind sector is the first and foremost driven by political initiatives (climate laws as well
as international agreements to meet certain green energy);
• Vestas shall take this opportunity to leverage its strengths and develop its core business.
INCREASING OIL
AND NATURAL GAS
DEMAND
• This issue allows Vestas to promote its source of energy. The increasing demand is related with the
increasing living standards. People does not consume oil and natural gas because they like it but
because they need. Promoting Vestas strengths is a great opportunity to growth.
BRIC’S RISE
• Vestas as the opportunity to growth in new or markets where it is not so visible.
• The company is allowed to decrease the impact or actually delete some of its weaknesses. Such as
small market share in high growth markets.
INCREASED
HEALTHCARE,
SECURITY AND
TIME
MANAGEMENT.
• Growing concerns about climate change and energy supply;
• Strong levels of public acceptance for renewable sources of energy;
• Once again Vestas has here the opportunity to decrease its weaknesses such as the negative
results and the dependence on subsidy schemes.
HALF OF THE
POPULATION WILL
BE URBAN
• Vestas has the opportunity to optimize its logistics performance and effectiveness.
• Less channels will be necessary to provide energy for the same amount of costumers.
PROGRESS ON
SEVERAL MATTERS
WITHIN LOGISTICS
• It will be necessary less investments in R&D
• Dependence on suppliers will also decrease because this opportunity allows the company to
improve its logistics strength , capacity and the focus on quality.
1. INDUSTRY ANALYSIS

15. 2. STRATEGY FORMULATION
15

16. 16
2.1. VISION, MISSION AND VALUES
2. STRATEGY FORMULATION
COMMENT
VISION Wind, oil and gas
Renewable energy sources are becoming more important. Millions of people
recognize it as the key solution for a sustainable economic growth in the future.
Vestas has this vision, the vision that wind will be as important as fossil sources
of energy, in particular, oil and gas.
MISSION "Failure is not an
option"
The mission gives a plain idea of the commitment in the business. Although it
does not give any information about the business, the costumers, and the value
proposition. One outsider could not make a decision or perceive the goal of
Vestas without special information.
VALUES
Reliability
Common Sense
Trustworthiness
This three values are the cornerstone of all Vestas’ activities. Vestas believe in a
culture where initiatives, collaboration and responsibility are the keys for the
business success.
2.2. OBJECTIVES
Financial Objectives
Short Term (2012)
• Achieve an EBIT margin between 0 and 4%;
• Revenue between EUR 6,500-8,000 millions;
• Achieve warranty provisions about 3% of the
expected full-year revenue;
• Achieve shipments of 6.3GW;
• Drive EUR450 millions in new investments;
• Reduce fixed costs by more than EUR 250
millions.
Long Term
• Get benefit from their scale and develop a
more competitive cost structure;
Achieve a high single-digit EBIT margin in the
medium term, subject to a normalized US
market;
• Finance its own growth;
• Increase its market share;
• Increase the service business, which is more
profitable than the sale of turbines.
Non-Financial Objectives
Short Term
• Launch of new platforms such as the
V164-7.0 MW turbine;
• Remain self-sufficient in blades production;
• Reduce industrial to no more than 3 per 1
million working hours in 2012;
• Securing outstanding performance levels
for all wind turbines through six sigma
philosophy
Long Term • World class within safety, quality and
delivery precision;
• Secure World Class procurement;
• Expand global capacity on critical
components;
• Establish a global supply base;
• Reduce industrial to no more than 0.5 per 1
million working hours until 2015;
• Achieve a carbon footprint of 6 grams of
CO2 per kWh until 2015;
Vestas has its objectives very well scheduled. However it is impossible to have specific
information for how are they going to do it. Perhaps by developing its core competencies
and driving investments on new technology (It is possible to better understand how they are
going to achieve this objectives with the next subject, Strategy and Strategic Dimensions).
It is also important to inform that they restructured the organization and kept on investing in
R&D even with the negative results from the last year. This means the company is very
committed to develop itself to the maximum before thinking about going in other ways like a
future partnership with other components or energy supplier. It is a reality mostly because
despite the bad results they still the market leaders.

17. 2. STRATEGY FORMULATION
2.3. STRATEGY AND STRATEGIC DIMENSIONS
Vestas’ strategy can be summarized in three programs: “The willpower”, “No. 1 in modern
energy” and more recently “Wind it means the world to us”. Despite the top two are not
anymore the main focus of the company it stills possible to perceive some strategies that
are based on its values.
The table below shows which are this business and corporate strategies and how they fit on
the company’s dimension.
STRATEGY STRATEGIC DIMENSION DEVELOPMENT
1. Develop its aftermarket services in terms of company’s
share, response and quality. Product-markets Internal Development
2. Increase economies of scale Vertical Integration Internal Development
3. Take advantage of the industry supply chain Vertical Integration
17
External Development
Strategic Alliances
4. Deliver solutions and product upgrades faster and with
lower risk. Product-markets Internal Development
5. Drive the market with core technologies Product-markets Internal Development
6. Develop a leading offshore platform, V164 Product-markets Internal Development
7. Focus its business on wind advantages: financially
competitive, predictable, independent, clean and fast. Product-markets Internal Development
Keep up with this strategies together with the last organizational restructure allows the
Vestas’ path to be a big sustainable profitability promise. Vestas wants to reborn from the
last year results as fast as possible. They have huge responsibilities to its employees but
also to the market. They just can not afford one more year as 2011.
The Vestas strategy works mostly in two dimensions: the product-markets and the vertical
integration. This means the company knows or believes that by improving this two
dimensions it will be possible to control the market and consolidate its position as the
world’s leading manufacturer of wind power solutions.
PRODUCTS-MARKETS VERTICAL INTEGRATION INTERNATIONALIZATION
INTERNAL DEVELOPMENT
Vestas offers a range of
products that reach out to each
customer needs. Its portfolio
follow three different features:
capacity, conditions and
requirements they are supposed
to work in.
Vestas also offers a range of
services connected to planning,
transport, construction,
operation and service to power
optimization.
Vestas has a range number of
suppliers. Nowadays it accounts
for more than 1,000 thousand.
Mostly because of the two
suppliers for each component
policy. However the company
keeps internally the production
of key components such as
blades and generators.
Vestas is present in more than
70 countries with its technology.
They also have factories, sale
stores, and research centers all
over the world. However most of
them are in the European
market.

18. 2. STRATEGY FORMULATION
PRODUCTS-MARKETS VERTICAL INTEGRATION INTERNATIONALIZATION
18
EXTERNAL DEVELOPMENT
Strategic
alliances
Vestas has some partnerships
mostly for research and
transportation. Such as Boeing, MIT,
Bristol, Aalborg, Tsinghua, IIT
Chennai and NTU
Vestas has some and want to
develop long term contracts with
suppliers for components such as
ladders, motors, electrical parts and
so on.
It does not fit with the
company’s strategy.
Mergers & Acquisitions
In 2004 Vestas merged with NEG
Micon A/S , another Danish wind
turbine manufacture. It was an
important step for the portfolio
development.
The merge with NEG Micon A/S
allowed Vestas to share resources
and synergies between companies.
This move was important become a
more efficient company in terms of
logistics.
NEG Micon A/S was
represented all over the world
with its turbines. This means
that acquisition by Vestas
allowed the company to
penetrate in foreign markets.
No more merges/acquisitions are programmed by Vestas however Sinovel and Goodwill are planning to make
a bet to the company. This acquisition would have impact in the three dimensions such as NEG Micon A/S had
in 2004.
Transactions
Market
Not suitable with the company’s strategy. Moreover the company plans to decrease its dependence
on suppliers by increasing the internal production.
2.4. CORPORATE GOVERNANCE
Vestas is a limited liability company with two-tier management systems: the board of
directors and the management team.
The management team is responsible for presenting proposals for the overall company’s
objective, strategies and action plans as well as proposals for the overall operating,
investment, financing and liquidity budgets to the board of directors.
The management team also has the support of three board committees at Vestas:
THE AUDIT COMMITTEE THE NOMINATION & COMPENSATION
COMMITTEE
THE TECHNOLOGY & MANUFACTURING
COMMITTEE
The main goal of this
committee is to assist
the board of directors in
relation to internal and
external control of
financing, financial
goals and group’s risks.
This committee is
responsible to assist the
board in matters and
decisions concerning
earnings and
remuneration.
It assists the board in
assessing technological
issues, IPR strategy,
product development
plans, and production.

19. 19
2.5. PRODUCT-MARKETS
MARKET SEGMENTS
Wind power Industrial sale
PRODUCT LINES
Oil Barrels
Coal Bags
Solar Panels
Wind Turbines
Dams
Biofuel
Wood
Waste
Tanks of Gas
Nuclear reactors
2. STRATEGY FORMULATION
The aside table represent all the energy
industry product lines. As we can see
Vestas covers only one product line in
each of its segment. The sale of Wind
turbines. All the other segments have no
potential for the company because at the
moment it is not the focus of the business
and also because they do not meet the
r e s o u r c e s a n d c o r e c o m p e t e n c i e s
necessary to join the lines. Inside the wind
turbines’ product line it is also possible to
meet a range on p r o d u c t s t h a t a r e
differentiated by the capacity, as shown in
the table below.
MARKET SEGMENTS
Wind power Industrial sale
PRODUCT LINES
850 KW
1.5 MW
1.8 MW
2 MW
2.3 MW
2.5 MW
2.6 MW
3 MW
4.5 MW
6 MW
3 MW offshore
5 MW offshore
8MW offshore
Vestas offers the large range of turbines in
the market.
Despite the trend is to develop more powerful
turbines with large capacity, Vestas still with
some potential in the current product line.
This is the case of the 850KW capacity
turbines that can be very useful in special
location conditions and the 6MW turbine
since it is the current most powerful turbine
in the market without counting with offshore
turbines.
However Vestas covers with its product line
a l l t h e s e g m e n t s i n t e r m s o f n a t u r a l
conditions. It is possible to see this fact on
the table below.
TURBINE
WIND CLASS
High Wind Medium
Wind Low Wind
1.8 MW X X
2MW X
2.6 MW X X
3.0 MW X X X
3.0 MW offshore X X
8 MW offshore X X
To reach these different wind classes, the
company also has different models in
terms of potency (V80, V90, V100, V112,
V126 and V164).

20. 2. STRATEGY FORMULATION
Vestas focus its business on the energy industry as already have been said. They have a complementary
product line in terms of potency, capacity and natural conditions through an unbunding strategy (since it is
necessary to pay for each turbine).
SOURCE OF ENERGY SEGMENTATION: WIND POWER
20
PRODUCT
Present New
MARKET
Present
Market
Penetration
Product
Extension
New
Through the Ansoff model in the right side it is
perceptible that Vestas uses a market penetration and
extension in terms of evolution of the product-markets
matrix.
By developing its product lines Vestas desire is to
consolidate/gain market share and increase the wind
energy usage but also to increase its portfolio that is
already the larger in the market and drive the trends
by creating new products.
In the next graphs it is possible to understand how
strong is its competitive advantage in the wind energy
market.
PRODUCTION COSTS
Low High
EFFICIENCY
High
Low
DISTRIBUTION NETWORK
Low High
COVERAGE
High
Low
END OF USE SEGMENTATION: INDUSTRIAL
PRODUCTION COSTS
Low High
EFFICIENCY
High
Low
PRODUCTION COSTS
Low High
EFFICIENCY
High
Low
Once again it is necessary to remember the energy industry is very concentrated even in the wind energy
segment. Consequently it has a great impact for the companies positioning because it is easy to have
information about all of them and their strategies. This makes the company to have in several situations
problems has the prisoner dilemma from the games theory because the companies sometimes can not make
moves because other companies can get more profitable from that or if they do so they will be followed by the
rest of the competition. This is the main reason for the perceptual maps do not be so differentiated. Although
Vestas has a dominant competitive advantage in both segments. They are market leaders, they have the large
product line, the largest coverage, the better efficiency policy, they drive the market with technology and know
how, but they also have huge production costs as it is usual in this segment. However it is a more a threat for
the company when watching the full picture of competitors because we can not forget energy companies from
other sources of energy since at the end they all produce the same final product/service.

21. 2. STRATEGY FORMULATION
SOURCE OF ENERGY SEGMENTATION: WIND POWER END OF USE SEGMENTATION: INDUSTRIAL
Grow with the industry Grow with the industry
21
In terms of differentiation, Vestas products are
associated to a symbolic and technical differentiation.
In one hand they are aware its costumers associate
the company has the market leader and because of
this positioning its products will be always an option.
They are also associated to be market drivers with its
technology and new turbines, once again this is a
reason that confirms the symbolic differentiation of
the company. On the other hand, they know its
costumers give a huge importance to quality and
efficiency and that is why they have to assume a
technical differentiation to become competitive in the
market.
LEVEL OF CONFIDENCE
Low High
RISK PERCEPTION
High
Symbolic
Differentiation
Technical
Differentiation
Low
On the tables below, to sum up all this information it is possible to understand what is the future of Vestas
strategy.
PRODUCT LIFE-CYCLE
COMPETITIVE
ADVANTAGE Introduction Growth Maturity Decline
Dominant
Strong
Favorable
Sustainable
Weak
PRODUCT LIFE-CYCLE
COMPETITIVE
ADVANTAGE Introduction Growth Maturity Decline
Dominant
Strong
Favorable
Sustainable
Weak
The graph on the right side illustrates all this
activities and it also add the information about how
much vertical is each Vestas activity. The blue color
means the internal part and the white the
percentage of outsourcing. As we can see Vestas
has something to work in all the operational
activities and it means that the company does not
have any quasi-vertical integration.
In the next table it is possible to have more detailed
information about each activity.
Forward Integration Backward Integration
Production
Design
Human
Resources
management
Financing
Retail Stores
Product
Transportation
After sales
service
Raw
Materials
production
IT
services
Promotion
Storage
2.6. VERTICAL INTEGRATION
R&D

22. 2. STRATEGY FORMULATION
Transportation X They choose the channels but they have to make long term contracts with outside
companies to make the transportation.
After Sales
22
INTERNALLY
MANAGED
PARTIAL
VERTICAL
INTEGRATION
QUASI
VERTICAL
INTEGRATION
COMMENTS
BACKWARD Activities
Design X All the design is done by Vestas design department
Financing X Vestas receives some political incentives but they also finance themselves near
bank when it is necessary.
Raw Materials
production X In this case components supply. Vestas has more than 1,000 suppliers. Although
they also produce the key components for the turbines.
Human
Resources
Management
X
Vestas has their own human resources department to manage all the employees
and also make all the recruitment processes. The company also has an internal
academy to provide future employees with all the necessary knowledge of the
sector.
R&D X Vestas has its own research centers however they keep some partnership with
outside organizations such as MIT.
IT services X Vestas has its own IT services and they are developed in their research centers
worldwide.
PRODUCTION X Vestas keeps internal the turbines assembling
FORWARD ACTIVITIES
Retail Stores X Vestas has its own sale stores all over the world. It is the only way to buy its
products.
Product
service X After sales service is provided by the company
Storage X The storage is also made in Vestas infrastructures.
Promotion X All the promotion is done by internal employees which define and do all the
promotion processes.
2.7. INTERNATIONALIZATION
Nowadays Vestas is represented worldwide through its wind farms, production facilities, sale services and
research centers. Represented in more than 70 countries, Vestas aims to go further.
At this point it is important to understand why, how and where they apply this strategy.
INTERNATIONALIZATION GOALS
Decrease
Risk
Vestas seeks to decrease its market risk by exploring and joining new markets where natural conditions
are favorable and unserved by the business
Increase
Sales Through Internationalization Vestas expects to growth and increase its value by attracting new costumers.
Decrease
Costs
Internationalization also means increase economies of scale for Vestas and that is why they have
production factories all over the world. They look for special locations where it is possible to reduce the
production fixed costs. For example the production factory in China where for sure the company as less
costs with the human resources than one of the factories in denmark.
Increase
Synergies
By going in new places Vestas also look to attract some special resources such as know how. For example
the research center in Boston that is combined with the MIT partnership

23. 23
INTERNATIONALIZATION
CRITERIA REASON
Atractiveness
2. STRATEGY FORMULATION
Value The Company is motivated to internationalize mostly to reach more costumers and obtain more
Growth growth.
Margin
It is important to the company internationalize for countries where they can have less production
costs. However it is not a determinant factor. Because the main goal is to sale more and reach new
costumers.
Risk
When internationalizing Vestas looks to decrease its risk. They strategically choose locations also
with the best natural conditions and by having a worldwide coverage they can manage its
production because natural condtions are not the same everywhere.
Strategic Fit
Efficiency By internationalizing Vestas as it was said looks for special synergies and this happens because
they seek to improve its products and service efficiency
Coverage Also internationalize will fit better the key success factors of the industry. So if they want to be
successfull they have to internationalize
Production Costs
Despite Vestas take advantage of the production costs in each country where it is represented, it is
Distribution not the main goal to go further. The same happens with the distribution network.
Network
INTERNATIONALIZATION OPTIONS
Direct
Investment
• Direct investments are the main strategy in use by Vestas. They strategically find the place that fulfills their criteria and they reach
there with their own money.
• They invest in communication channels, they export some of their resources and start contracts with suppliers to build
infrastructures and supply future needs such as components.
Transactions
• Entrance in foreign countries through license agreements with third parties to produce. Such as political agreements and
initiatives.
CONDITIONS
Natural
favorable Places where the wind conditions are favorable for the technology's development
Underserved
demand Places where the demand stills underserved
High GDP Places with a large industrial sectors and consumption ratios
This three conditions are not always suitable and that is why they have a range of products that cover all the
wind classes and fields.
In the appendix 2 it is possible to take a view in a table with the places where they already are, fruit of this three
factors combination.

24. 2. STRATEGY FORMULATION
ADAPTATION AND STANDARDIZATION FACTORS
CULTURE/
HABITS DESIGN/TASTE LANGUAGE SIZE/PACKAGE TECHNICAL
SYSTEM
INTERNATIONAL INTEGRATION
24
CLIENT/
APPLICATION
Concept
Marketing
Technology
Product
As we can see through the Green boxes, Vestas has to adapt some issues of its business to join new countries.
This adaptation are mostly in marketing issue because each country has its own culture and behavior. It is
important to suit the marketing strategy with this reality because it is the major way to attract potential
costumers.
It is also necessary to adapt the size/package of the product because each country has its own resources and
needs. This issue is well covered by Vestas because they have a large range of product lines.
LOCAL ADAPTATION
Low High
GLOBAL
INTEGRATION
High Global Company
Low
Vestas is considered a Global Company. They have
invested and are present in many countries. They
market their products through the use of the same
coordinated image/brand in all markets. There is low
adaptation as it was already said before and
decisions come always from the headoffice in
Denmark.

25. 25