S
w
VESTAS WIND SYSTEMS A/S — EXPLOITING GLOBAL R&D
SYNERGIES
Professor Torben Pedersen and Research Assistant Marcus Møller Larsen wrote this case solely to provide material for class
discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may
have disguised certain names and other identifying information to protect confidentiality.
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Copyright © 2009, Ivey Management Services
Version: (A) 2009-11-26
Much had happened since the chief executive officer (CEO) of Vestas Wind Systems A/S, Ditlev Engel,
broadcast the company’s new corporate strategy — The Will to Win 2005-2008 — from headquarters in
Randers, Denmark, to all Vestas employees worldwide in 2005. Vestas was the market-leading producer of
high-tech wind turbines. A merger the year before with a Danish turbine producer had experienced
financial difficulties, and management was replaced with fresh leadership in order to bring the Danish
company to new heights. With the new management came a radical reorganization and the announcement
of several new strategic initiatives. As Engel stated, “These initiatives are aimed at increasing effectiveness
in all areas of Vestas’s business. We will professionalize our dialogue with the customers, we will improve
the quality of our products and we will be much more effective in all that we do.” The charismatic CEO
also argued that “by the implementation of The Will to Win, we create a new global Vestas. This work will,
no doubt, be exciting and very hard. At the same time, it will require the will to change in all of us and I
am confident that we at Vestas can meet this challenge.”1
Among the initiatives was the establishment of the Vestas Technology R&D business unit, headed by Finn
Strøm Madsen. Inexperienced in the field of wind energy, Madsen was determined to achieve global
leadership in all core technology areas and, consequently, strengthen a core competence for the company.
By 2008, Madsen had succeeded in setting up a global R&D network with R&D centres in Denmark, the
United Kingdom, Singapore and India, and in early 2009, a centre was opened in the United States. Vestas
Technology R&D accounted for €228 million in expenditures (3.7 per cent of the consolidated revenue) in
2008, which was 79.5 per cent higher than in 2007. That same year, Vestas announced a new corporate
strategy known as the No. 1 in Modern Energy strategy. With this strategy, the company — as market
leader — committed itself to promoting the wind industry as a whole and to putting wind energy on par
with oil and gas. In addition, the strategy highlighted Vestas as a high-tech company and put a greater
emphasis on its technological innovations.
1
Vestas’s website, press section, accessed October 28, 2009.
Authorized for use only by Kanwal Sakhi in INTB 6217 at Northeastern University from Feb 11, 2019 to Mar 29, 2019.
Use outside these parameters is a copyright violation.
9B09M079
9B09M079
Despite impressive growth in recent years — the amount of energy delivered by Vestas had increased by
75 per cent since 2005 and its revenue had grown by 68 per cent — Madsen faced a dilemma. The number
of employees in Technology R&D was at a record high, the R&D network already encompassed five
development facilities around the world, and further expansion was planned. On top of that, the network
had extensive links to external research centres and universities. The task of coordinating and,
consequently, capitalizing on the R&D network was growing more complex and complicated as the
network expanded. Identifying novel, profitable competences and innovations around the world, managing
the interfaces between different research units and resources, and exploiting synergies were challenges
Madsen faced. Even though Vestas had shown positive growth, competition from different types of
companies was growing considerably due to the attractiveness of the wind energy industry.
Madsen knew he had the full support of Engel, who had stated: “Investments in research and development
demand some financial resources, but we truly believe that the right framework also gives many rich
opportunities.”2 However, Madsen also knew that he would eventually have to present some tangible
results arising from the extensive R&D efforts that were launched under his leadership. He therefore had
mixed feelings as he prepared himself for the weekly Vestas Government meeting, where Vestas’s
management shared and discussed business information and progress.
INTRODUCING VESTAS WIND SYSTEMS A/S
Vestas Wind Systems A/S was a global, market-leading producer of high technology wind power
solutions. Its headquarters were located on the east coast of Jutland — the Danish mainland. By the end of
2008, the company had delivered 5,580 megawatts of electricity through its wind turbines, which were
installed around the world. It held 23 per cent of the wind energy market and employed approximately
21,000 workers all around the world. In 2008, the company had €6,035 million in revenues and gross
profits of €1,179 million (see Exhibits 1 and 2).
The company was founded in 1945 as Vestjysk Staal Teknik A/S (abbreviated to Vestas) by Peder Hansen,
the son of a successful blacksmith in western Jutland. During its first 30 years, the company’s activities
focused on a broad line of household appliances and agricultural products. However, in 1979, during the
turmoil of the second oil crisis, Vestas manufactured and delivered its first wind turbines to customers who
were increasingly demanding sustainable energy. Vestas has since grown to become a globally successful
wind energy company, with its core businesses centred on the development, manufacturing, sale,
marketing and maintenance of wind power systems that use wind to produce electricity. The name of the
company was changed to Vestas Wind Systems A/S in 1986, a change that marked the company’s
exclusive focus on wind power solutions.
In 2005, Ditlev Engel, then the newly appointed CEO and president of Vestas, announced the launch of a
new corporate strategy — The Will to Win 2005-2008 — which would eventually transform the company
from a mere Danish producer of wind power turbines into a global energy and technology corporation.
Engel described his view of the strategy, stating: “The initiatives presented today aim to ensure that Vestas
will still be the world’s leading manufacturer of wind power systems in three years time — both in terms
of technology and the market…. We must be prepared for the fact that the future customers for our wind
power systems are international energy companies. They have high demands for us and for our products.
Many people still regard wind power, and thereby Vestas, as a ‘romantic flirt’ with alternative energy
sources. It is not. Vestas and wind power are real, very competitive alternatives to oil and gas.”3 Even
2
3
Børsen, January 22, 2008.
Vestas’s website, press section, accessed October 28, 2009.
Authorized for use only by Kanwal Sakhi in INTB 6217 at Northeastern University from Feb 11, 2019 to Mar 29, 2019.
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9B09M079
In conjunction with the new strategy, the company presented a new vision of “Wind, oil and gas” and
revised its mission to “Failure is not an option.” The former was formulated to underpin wind as a source
of power at least as important as fossil fuels. The latter emphasized the company’s commitment to
continually optimize working processes, safety procedures and products. In addition, Vestas was proud to
possess an extensive portfolio of wind turbines based on more than 25 years of experience, insight and
knowledge of wind, ranging from the V52 turbine with a capacity of 850 kilowatts to the V90 with a
capacity of three megawatts (see Exhibits 3 and 4). On average, Vestas installed a new wind turbine every
three hours. Since 1979, the company had delivered approximately 38,000 turbines.
No. 1 in Modern Energy
Following significant success with the Will to Win strategy, Vestas commenced on a new corporate
strategy, namely the No. 1 in Modern Energy strategy, in 2008. While the focus of the Will to Win strategy
was internal improvements, the new strategy emphasized external positioning and Vestas’s commitment as
market leader to promoting the industry as a whole and to putting wind energy on par with oil and gas.
Vestas aimed to create the world’s strongest energy brand. To achieve that goal, the company focused on
consolidating its market leadership position in the high-growth wind energy industry, which was becoming
increasingly competitive. “Vestas will be one of the world’s top five energy brands,” marketing director
Tina Ebler argued with regard to the new strategy, “and wind will not be characterized as alternative
energy anymore. Politicians and decision makers should understand that wind works.”4 Also integral to the
new strategy were the financial goals set for 2009, which reflected the company’s ambition to be profitable
while remaining No. 1 in Modern Energy. The goals included an EBIT margin of 11 to 13 per cent, net
working capital of a maximum of 10 per cent of annual revenue, and revenue of €7,200 million.
Vestas’s structure consisted of the Executive Management and 14 separate business units focused on sales,
production or development. While the former consisted of Ditlev Engel and Henrik Nørremark, executive
vice-president and chief financial officer (CFO), each of the latter was represented by a separate unit
president. Corporate Functions was also a unit in the company structure, and dealt with aspects such as
contracts, forecasts, planning, IT, finance and operations (see Exhibit 5). The company introduced a core
concept coined “Vestas Government,” under which Executive Management and the presidents of the 14
business units — the “Ministries” — met on a weekly basis to share and discuss key business information
and to monitor the implementation of the company’s strategy. Accordingly, a Vestas Constitution was
formulated with the purpose of converting visionary thoughts into concrete action. “Constitution is a very
basic term. It is something people understand,” Engel explained. “In the same way [as with a national
constitution], it makes it clear that all of our business methods and systems, all of the laws that surround us
on a daily basis, derive from some very fundamental attitudes.”5
4
5
Børsen, April 16, 2008.
Berlingske Nyhedsmagasin, March 30, 2007.
Authorized for use only by Kanwal Sakhi in INTB 6217 at Northeastern University from Feb 11, 2019 to Mar 29, 2019.
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though Vestas was already the world’s largest player in the wind energy market, the new strategy
explicated the company’s global aspirations and professionalized the organization in accordance with a
global mindset. The alteration in management and strategy came one year after the company merged with
another Danish wind turbine maker, NEG Micon. The merger made Vestas the global leader in the wind
energy market, but the marriage also entailed some financial troubles, which eventually prompted the
changes.
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Vestas’s most important markets were in Europe, constituting 60 per cent of revenue in 2008, followed by
the Americas and Asia/Pacific, accounting for 26 per cent and 14 per cent, respectively. However, despite
the significance of the European markets, the company was well aware of industry analysts’ forecasts that
although Europe remained the absolute leading market for wind energy — representing 61 per cent, or
57,000 megawatts, of accumulated installed capacity in 2007 — the North American and Asian markets
(particularly the United States, China and India) were growing rapidly. Analysts expected these markets to
replace Europe in market importance in just a few years. It was therefore no surprise when Vestas
announced the establishment of R&D centres close to these markets (Singapore, Chennai and Houston).
Much of the industry’s growth potential was facilitated by the exceedingly supportive political and social
climate. Not only had the anti-nuclear power campaign sparked a general interest in the industry, but
favorable political resolutions and targets had also contributed to the remarkably optimistic forecasts.
Among the latter was the E.U. resolution that 20 per cent of all energy consumption must come from
renewable sources by 2020. Also, China set its renewable energy target at 15 per cent, while the newly
elected U.S. president publicly announced his intentions of creating a green economy.
A result of these developments was that Vestas found itself facing growing competition. Vestas was the
largest producer of wind energy at the end of 2007 in terms of market share, but the large conglomerates of
Siemens and GE Wind were using their strong financial bases to invest heavily in wind energy to capture
future market shares and were therefore considered to be serious challengers. In addition, a number of
listed companies (Suzlon, Gamesa, Nordex and Repower) and family-owned businesses (Enercon Gmbh)
represented strong rivalries for Vestas (see Exhibit 6). Lastly, there was an increasing number of low-cost
Chinese providers entering the wind energy scene, which were seen as posing a considerable threat to
Vestas’s market-leading position. In fact, Per Krogsgaard, the director of BTM Consult, a Danish
consultancy company specialized in renewable energy, stated that “the Chinese market is booming at the
moment, and you should not be surprised if Chinese producers like Goldwind become the world’s largest
in a short period due to the large sales on the Chinese market.”6 Peter Kruse, Vestas’s director for
Communication and Investor Relations, was, however, not overly concerned: “We are in a far more mature
market today, and the large customers in the energy sector always consider how long the different
producers have been in the market — they want to be fully reassured that the producer is safe before they
place large orders.”7
A GLOBAL R&D NETWORK
“For us, research and development is a global activity,” explained Finn Strøm Madsen, president of Vestas
Technology R&D. “It is through technology that we need to differentiate ourselves. Our goal is to have a
borderless, global setup with hubs in Europe, Asia and North America. Via this network, we are aiming for
an ongoing flow of ideas and technology for developing the best products and services.”8
Vestas Technology R&D was established in 2005 in conjunction with the reorganization of the company
under the vision “Global leadership in all core technology areas,” and had roughly 1,300 employees of 18
different nationalities scattered around the world in 2008. The formation of the business unit was a
manifestation of the company’s focus on technology, as well as a means of accessing technological
6
Børsen, March 31, 2008.
Ibid.
8
Vestas Magazine Win(d), February 2008.
7
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Markets and Competitors
9B09M079
hotspots around the world and fostering a global search for talent. With the new establishment came the
unification, professionalization and globalization of Vestas’s R&D, which had previously been implicitly
and tacitly carried out to a large extent. This change was evident in such aspects as R&D responsibility,
which was now centralized in Technology R&D, and the introduction of technical risk management as a
central concept. Prior to the Will to Win strategy, Vestas’s research and development was characterized by
decentralized R&D responsibility, the mixed use of new products and unproven technologies, and limited
risk management (see Exhibit 7). In addition, until the network was centrally organized, each R&D activity
was undertaken by individual engineering branches, such as Mechanical, Blades, Electrical and Plant IT.
As time passed, it became apparent that this silo structure was exceedingly time consuming, as the process
of creating compatible components required intense dialogue with the other branches. Such a process was,
consequently, highly resource-demanding.
In 2008, Vestas used €228 million on research and development, compared to €127 million in 2007.
Technology R&D consisted of three sub-units: Global Research (“Develop breakthrough innovation”),
Engineering and Products (“Deliver products to production”), and Operations (“Enhance service business”)
(see Exhibit 8). The objectives of the business unit were accordingly three-fold: to secure effective product
development in Engineering and Products, to strengthen Global Research project execution and innovation,
and to leverage synergies in the supply chain. Four cornerstones of supporting the R&D activities were
identified: the creation of a global network (considered the most significant), research programs with
internal and external partners and top universities around the world, a strategic focus on intellectual
property rights, and new ventures and acquisitions. “Global Research must contribute to driving down the
cost of energy by maturing new technologies to create breakthroughs that can be deployed into products,”
Jan Kristiansen, senior vice-president of Global Research, commented. “We must be a network-based
organization, both because of our own globalization but also because a global presence is essential to
gaining access to key competences.”9 Vestas’s Technology R&D consisted of many pieces of knowledge
and could not, therefore, rely solely on one location. Instead, it had to tap into knowledge from a global
network of R&D centres.
Development Facilities
Inaugurated in 2008, Vestas Technology R&D’s head office in Aarhus, Denmark, was the industry’s
largest, most modern R&D centre. As stated in Vestas’s annual report, “the centre unites a number of test
and development facilities in a unique innovation environment, which produces optimum conditions for
integrated product development and cross-disciplinary collaboration with customers and suppliers.
Following an extension of the facilities, the centre will house more than 900 people in 2010.” With a large,
symbolic wing crossing through the triangular infrastructure, the flagship centre carried out research and
development across the entire value chain, and possessed excellence status in most of the functional
competences for research. “That a Danish company has, in relatively few years, taken a global role as the
world’s undefeated market leader is, in itself, an achievement,” Ditlev Engel said in relation to the new
development facility in Aarhus. “…but we cannot allow ourselves to rest on our laurels — the competition
is extremely tough. Therefore, it is essential for us to remember that our leading position is not all about
the number of wind turbines we sell and install. It is equally about the technological development.”10
In contrast, the R&D centre on the Isle of Wight in the United Kingdom — a sailing Mecca and marine
centre — was originally a production site for Vestas blades. A separate, highly specialized R&D centre
was not established at this location until the autumn of 2008. The Isle of Wight location housed a world9
Vestas Magazine Win(d), November 2008.
Børsen, January 22, 2008.
10
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In Singapore, three key aspects justified Vestas’s presence. First, the country was intensely focused on its
energy supply, which, when combined with its strong economy, created a particularly conducive
environment for Vestas’s research and development profile. Second, the number of highly qualified
engineers in Singapore was favorable. Third, the R&D presence in Singapore created a gateway into the
increasingly important Chinese market. As the intellectual property rights regulations in China were still
too ambiguous and risky for conducting research and development, Vestas relied on Singapore as a
regional hub for this task. However, Madsen recognized the longer-term need to establish an R&D centre
in China in order to gain access to one of the fastest-growing markets in the world.
The office in Chennai, India, was established in late 2007 as an R&D back office due to the high local
concentration of mechanical and IT engineers. Since its establishment, the competences and talents
identified in India proved strong, and the office proved its worthiness as a regional technology centre.
Higher levels of responsibility were therefore transferred from the global headquarters in Denmark to
Chennai (see Exhibit 9). For instance, product support R&D for the V82 wind turbine, which was
produced only in India, was assigned exclusively to Chennai. Moreover, while aeromechanical structural
design and analysis were among the major competences identified, the centre was also expected to
demonstrate competences in composites, advanced loads modeling, and gear and drive trains, as well as in
power electronics and power control. Accordingly, the number of employees in India, which was 125 in
2008, was expected to reach 600 in 2012.
The latest addition to the network was the R&D centre in Houston, Texas, established in early 2009.
Regarded as the energy capital of the world and seen as the centre of a massive amount of energy
knowledge, Houston was pivotal to Vestas’s establishment of a regional platform in the area. The company
also expected the Houston R&D centre to create closeness to one of the most prominent markets in the
world. “Houston provides access to a highly qualified workforce in an international and extremely energyfocused research and development environment,” said Madsen. “In addition, Houston will allow Vestas to
establish and strengthen relations within the North American and global energy industry. Tapping into and
contributing to the tremendous pool of knowledge and know-how offered by Houston’s energy
environment is invaluable in our quest to develop wind turbines that also in the future can meet the
technological and cost-efficiency demands of our customers.”11 The company intended the U.S. centre to
provide aeromechanical, electrical and power plant competences.
Managing the Organizational Dynamics
The idea behind the global R&D network was to create a network-driven set of complementary
competences, each identified at a different technological hotspot, which would fit into one integrated
product. In this respect, a Global Operation Model was designed as a stage-gate model in which 14
competences were categorized into four groups — aeromechanical, electrical, control and system architect,
and power plant. They were then plotted in a matrix together with the capabilities of the five R&D centres.
This meant that, for instance, Vestas’s R&D centre in Singapore did not design wind turbines only for
Singapore, but for the whole world. The set of competences identified in Singapore was therefore
11
Windfair, February 2, 2008.
Authorized for use only by Kanwal Sakhi in INTB 6217 at Northeastern University from Feb 11, 2019 to Mar 29, 2019.
Use outside these parameters is a copyright violation.
class expertise centred on design materials and aerodynamics, and it was therefore an obvious place for
Vestas to pursue competences. More specifically, the Isle of Wight R&D facility was considered to be a
Centre of Excellence with respect to aeromechanical composites, and it was seen as a competence centre
for aeromechanical structural design and analysis. It employed approximately 60 mechanical engineers in
2008.
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Another essential facet of the Global Operation Model was the emphasis on the respective centres’
constant development of competences. As the business unit aimed to develop the best products and
services, internal learning and development were vital. The Global Operation Model divided the respective
centres into “competence centres” and “Centres of Excellence” according to the level of research
undertaken in each competence. Vestas naturally aimed to elevate as many research areas into Centres of
Excellence as possible. This process could, for instance, be seen in the Chennai centre, where it was
originally expected that the lower ends of the R&D value chain (e.g. mechanical and IT-related R&D)
would become a stronghold. As the centre gradually contributed more and more to the overall learning
process in Technology R&D, it gained responsibility and earned a higher status. Therefore, the original
intention of accessing talent for an R&D back office grew into a vision of an R&D Centre of Excellence
where the responsibilities increasingly covered the higher ends of the value chain. According to Madsen,
having a dynamic, developing environment within the network was also essential to securing the critical
mass required for developing the business unit. “We’re devoted to acquiring the best employees — and the
best employees are in a constant search for a professional environment,” Madsen argued. “We need to
ensure that we give them this environment, that they have constant challenges, and that they draw on each
others’ competences — simply put, that we have critical mass.”12
Optimizing the interfaces between the R&D centres in the network was another central focus for the
Technology R&D unit. Vestas devoted many of its resources to establishing tools, procedures, training and
education to achieve this goal. When, for instance, Technology R&D ran a project across the network, the
individual processes were determined in advance so that each site was comfortable with what to do and
what to deliver. Furthermore, as each site completed its part of the project, the product or service could be
gathered centrally. Vestas had also invested in a video conference system that allowed employees from
different regional hubs to have real-time, face-to-face meetings and conferences. “It is actually a virtual
meeting room where you have six chairs on one side and three large screens on the other side with two
chairs each,” explained Michael Høgedal, vice-president and MD in Technology R&D Chennai, India.
“When you are calling a similar office, it looks like you are attending a physical meeting with faces and
sounds from the right places.”13 In addition, Vestas’s focus on one particular product, in contrast to
competitors such as General Electric or Siemens, gave the company the possibility of coordinating the
widespread set of R&D centres and competences.
Collaborations with external research institutions and universities, i.e., open innovation, were also seen as
important for Vestas Technology R&D’s strategy, as it was too costly and complex for Vestas to pursue
leadership in all areas on its own (see Exhibit 11). In 2008, Vestas initiated a Global University Program
through which a large number of professors, PhD students, and master’s students from leading universities
received sponsorships. The partners were generally selected from a geographical perspective in relation to
Vestas’s R&D centres around the world. For instance, in Chennai collaborations with Centre for Wind
Energy Technology (C-WET) and the Indian Institute of Technology in Madras (IIT-Madras) were
established. According to Madsen, “. . . Increased cooperation with universities is a natural consequence of
our growth. We are highly interested in working closely with leading researchers worldwide in order to
ensure that we maintain our position as the leading supplier of wind energy solutions and to reinforce the
12
13
Interview with Finn Strøm Madsen, January 2009.
Interview with Michael Høgedal, December 2008.
Authorized for use only by Kanwal Sakhi in INTB 6217 at Northeastern University from Feb 11, 2019 to Mar 29, 2019.
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compared with the competences identified in the other R&D centres in the Global Operation Model, which
ensured optimal collaboration. This was also evident in relation to the business unit’s separate,
disaggregated R&D value chain, which covered seven activities from the initial ideas in the “Blue Sky” to
the final stages of development of the “Product” and “Product support,” with the respective R&D centres
simultaneously engaged in multiple activities (see Exhibit 10).
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EPILOGUE
Pondering over how he would approach the Vestas Government, Finn Strøm Madsen knew that, on the one
hand, the establishment of Vestas Technology R&D as a separate function gave Vestas a unique
opportunity to create sustainable competitive advantages. In that respect, he was comfortable with the
stated goals for the business unit under his domain. On the other hand, the increasingly complex, resourcedemanding task of coordinating an R&D network encompassing internal and external units — and
eventually capitalizing on it — concerned Madsen. Indeed, it was not a secret that Vestas emphasized its
R&D efforts to meet the escalating competition in the wind energy market, particularly the competition
arising from Siemens and GE Wind. These companies had a completely different point of departure from
which to undertake their businesses due to their remarkably strong resources and financial situations. If
Technology R&D wanted to pursue its vision of “Global leadership in all core technology areas,” it was
undeniably forced to chase and tap into knowledge and know-how on a global basis. In the end, Madsen
and his business unit had to undertake a balancing act between the synergies deriving from the global R&D
network and the costs associated with it. Therefore, the remaining members of the Vestas Government
looked forward to hearing how Madsen would handle the complex progress and structures of Vestas
Technology R&D, and how he would take the business unit forward to deliver tangible outcomes that
would benefit Vestas Wind Systems A/S as a whole.
14
Vestas’s website, press section, accessed October 28, 2009.
Authorized for use only by Kanwal Sakhi in INTB 6217 at Northeastern University from Feb 11, 2019 to Mar 29, 2019.
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recruitment of the brightest students from these universities.”14 Accelerating Vestas’s innovative wind
power research through collaborations and partnerships provided the company with access to the most
recent knowledge and the most qualified human resources, which would serve as a competitive advantage
in a highly attractive market in which the rivalry for market share and profit was growing increasingly
fierce. What was perhaps regarded as a network of five R&D centres was, in fact, a complex, extensive
arrangement of Vestas’s own R&D facilities and external research centres and universities.
Page 9
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Exhibit 1
mEUR
2008
2007
2006
2005 2004
HIGHLIGHTS
Income statement
Revenue
R&D expenditures
Gross profit
EBITDA
EBIT
Profit of financial items
Profit before tax
Profit for the year
6,035
228
1,179
803
668
46
714
511
4,861
127
852
579
443
0
443
291
3,854
125
461
328
201
-40
161
111
3,583 2,363
97
67
84 120
9
64
-116
-49
-42
-41
-158
-89
-192
-61
Balance sheet
Balance sheet total
Equity
Provisions
Average interest-bearing position (net)
Net working capital
Investment in property, plant and equipment
5,308
1,955
274
395
299
509
4,296
1,516
305
179
-68
265
3,654
1,262
265
-299
122
153
3,085 2,881
962 1,162
239 181
-560 -625
498 686
95
89
277
-680
-91
701
-317
-54
598
-144
-101
148
-137
-46
-30
-201
458
-494
330
353
-35
227
Cash flow statement
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Change in cash at bank and in hand less current portion
of bank debt
Employees
Average number of employees
Number of employees at the end of the year
RATIO
Financial ratios
Gross margin (%)
EBITDA margin (%)
EBIT margin (%)
ROIC (%)
Solvency ratio (%)
Return on equity (%)
Gearing (%)
Source: Vestas Annual Report 2008.
17,924 13,82 11,334
10,3 9,449
20,829 15,305 12,309 10,618 9,594
19.5
13.3
11.1
34.1
36.8
29.4
6.3
17.0
11.9
9.1
30.9
35.3
21.0
9.9
12.0
8.5
5.2
11.9
34.5
10.0
13.8
2.4
0.3
-3.2
-13.2
31.2
-18.1
51.2
5.1
5.0
-2.1
-3.8
40.3
-6.9
50.1
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FINANCIAL FIGURES
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Exhibit 2
2008
2007
2006
2005
2004
534
0
534
0
525
1
472
0
319
2
5,580
4,502
4,239
3,185
2,784
187,478
129,207
458,296
172,800
167,311
479,958
103,066
170,505
111,541
372,037
139,983
138,035
554,516
14,809
164,413
93,983
330,106
124,841
124,841
343,084
14,954
Waste disposal
Volume of waste (tons)
- of which collected for recycle (tons)
96,632
30,254
89,643
28,422
82,739
27,593
67,313
17,266
16,407
9,279
Emissions
Emission of CO2 (tonnes)
41,832
32,798
28,693
17,266
9,279
16
5
15
5
7
6
4
5
5
1
KEY FIGURES
Occupational health & safety
Industrial injuries (number)
- of which fatal injuries (number)
Products
MW delivered
Utilization of resources
Consumption of metals (tons)
Consumption of other raw materials, etc. (tons)
Consumption of energy (MWh)
- of which renewable energy (MWh)
- of which renewable electricity (MWh)
Consumption of water (m3)
- of which water of non-drinking quality (m3)
Local community
Environmental accidents (number)
Breaches of internal inspection conditions (number)
Source: Vestas Annual Report 2008.
143,170 90,732
82,592 20,080
227,907 121,212
118,603 35,805
118,603 35,805
226,410 96,911
0
0
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Use outside these parameters is a copyright violation.
NON-FINANCIAL FIGURES
Source: www.vestas.com.
Page 11
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WIND TURBINE FAMILY
Exhibit 3
9B09M079
Source: www.vestas.com.
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Page 12
9B09M079
Exhibit 4
THE WIND TURBINE
Page 13
9B09M079
Exhibit 5
COMPANY STRUCTURE15
Vestas Americas A/S
Henrik Nørremark, President
Corporate Functions
Vestas Asia Pacific A/S
Denis Koh, President
Vestas People and Culture
Roald S. Jakobsen, President
Vestas Central Europe A/S
Hans Jørn Rieks, President
Vestas Technology R&D
Finn Strøm Madsen, President
Vestas China A/S
Lars A. Andersen, President
Vestas Blades A/S
Ole Borup Jakobsen, President
Vestas Mediterranean A/S
Juan Araluce, President
Vestas Control Systems A/S
Bjarne Ravn, President
Vestas Northern Europe A/S
Klaus S. Mortensen, President
Vestas Nacelles A/S
Søren Husted, President
Vestas Offshore A/S
Anders Søe-Jensen, President
Vestas Spare Parts A/S
Phil Jones, President
Vestas Towers A/S
Knud Bjarne Hansen, President
Source: www.vestas.com.
15
Corporate functions included Contract Review, Forecasting and Planning, Group Communication, Group Finance &
Operations, Group Government Relations, Group Marketing and Customer Insight, Group IT, Treasury, and Vestas
Excellence.
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Vestas Wind Systems A/S
Ditlev Engel, President and CEO
Page 14
9B09M079
Exhibit 6
Source: BTM Consult press release, “International Wind Energy Development — World Market Update 2007,” March 27,
2008.
Exhibit 7
VESTAS’S R&D BEFORE AND AFTER THE WILL TO WIN
•
•
•
•
•
•
•
•
•
Before
Responsibility decentralized
Mostly prototypes
Limited test and verification
Mix new products and unproven
technology
Limited use of project model stage gate
No centralized overview of Wind
Turbine Generators (WTG) under
warranty
Lack of process overview
Premature launch of products
Limited risk management
Source: Authors’ assessment.
•
•
•
•
•
•
•
•
After
Responsibility centralized in Technology
R&D
Test, verification and prototypes
Only use of proven technology
Disciplined use of project model
Database providing global overview
Systematic Continuous Improvement
Management (CIM) process
Controlled release of products
Technical risk management
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COMPETITORS’ MARKET SHARE, 2007
Loads & Control
Aerodynamics, Mat. & Mec.
Source: www.vestas.com.
Turbine Software
Blades
Power Plant
Engineering & Products
Project Management
Engineering
Plant IT
LAC/Sys. Archi.
Research Centers
Operations
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Mechanical
Technology R&D
President
CFO
Product Support
VESTAS TECHNOLOGY R&D STRUCTURE
Electrical
Global Research
Electrical Drivers & Ctrl.
Exhibit 8
Implementation
Page 15
Performance & Diagnostics
Special Tools
9B09M079
Page 16
9B09M079
Exhibit 9
Vestas Technology R&D’s center in Chennai, India, proclaimed itself as “a regional
research centre leveraging all activities in Technology R&D by drawing on the
competences readily available in India and here recruiting outstanding engineers for
attractive global R&D positions providing challenging jobs, attractive training and career
opportunities at an international scale in the most exciting technology company within
the business.” Headed by Michael Høgedal, the R&D center should balance global needs
in Technology R&D and leverage the entire organization by: 1) offering attractive
positions across Technology R&D, 2) recruiting talented and experienced Indian
engineers, and 3) boosting efficiency and innovation in Technology R&D’s value chain.
However, what had grown to become an R&D Center of Excellence in Vestas’s global
R&D network was purposely established in August 2007 as an R&D back office. It
originally attracted engineers who primarily should supplement the existing functions in
Vestas’s development department (i.e. no specialized technical focus), such as IT and
R&D documentation. Yet, after Michael Høgedal presented the prospects of the newly
established Indian division to the existing organization in Denmark in order to map out
potential areas of supplementation, full management teams were sent to Chennai to
interview the candidates. As a result, it was decided that, given the identified
qualifications, independent specialist teams in aeromechanical structural design and
analysis, composites, advanced loads modeling, and gear and drive trains should be
created, and that the level of responsibilities should be expanded towards higher levels of
the R&D value chain (see Exhibit 11). By 2008, the Chennai center had 11 R&D
departments with respective managers or team leaders in different areas of the general
Technology R&D structure.
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VESTAS TECHNOLOGY R&D, CHENNAI, INDIA
Page 17
9B09M079
Exhibit 10
VESTAS TECHNOLOGY R&D VALUE CHAIN
Blue Sky
Basic
research
Applied
research
Technologies
Components
Product
support
Products
Technology R&D Singapore
Technology R&D Chennai
Technology R&D Houston
Source: www.vestas.com.
Exhibit 11
VESTAS KEY PARTNERS
The United States
Europe
Asia
Boeing
Riso
Tsingua
UoWisconsin
Semcon Caran
IIT Chennai
Texas A&M
Bristol
NTU
MIT
AMRC
NUS
DTU
A*
Aalborg
Source: www.vestas.com.
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Technology R&D Global
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