Post on 16-Apr-2017
MARKET ENTRY CONCEPT OF SOLARCITYIN BRAZILChristoph Paul Forstner
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion2
Market Entry Strategy
STRUCTUREMarket Entry Concept: SolarCity in Brazil
I. Industry Analysis
1. PORTER´S 5 driving forces
2. Specific Internationalization drivers
II. SWOT Analysis: TOWS Matrix
III. Target Country Market Analysis
1. PESTEL analysis: Environmental influences
2. CAGE framework: Distance analysis
3. Benchmarking: Main Competitor´s profile
III. Market Entry Strategy
1. Market attractiveness / competitive strength matrix
2. Short list of entry options
3. Scoring model: Evaluation criteria
IV. Conclusion
1. Summary: Best Market Entry Concept
2. Future Options
INDUSTRY ANALYSIS
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion4
Market Entry Strategy
INDUSTRY ANALYSISSolarCity
founded in 2006, headquartered in San Mateo, California Founders: Peter Rive, Lyndon Rive and Elon Musk Designing, financing and installment of solar power systems number one residential solar installer in the U.S. (2013) Business partners: homeowners, businesses, NPOs, government Operates in 17 states in the U.S., more than 75 operations centers Revenue: 255,03 million; EBIT: 8,33 million; equity: 1.342.37 million (USD)
1SolarCity2finanzen.net
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion5
Market Entry Strategy
INDUSTRY ANALYSISPORTER´S 5 driving forces
Market Competitors
New Entrants
Buyers
Substitutes
Suppliers
New Entrants (LOW)- High entry barriers- Huge R&D investments- Economies of scale
necessary
Power of Suppliers (LOW)- High number of potential
suppliers- Backward integration
Buyers (MEDIUM)- No brand loyalty- Very price sensitive
Rivalry (MEDIUM)- Strong competition among few
competitors - Few companies that make profits
Substitutes (MEDIUM – HIGH)- Fossil fuels, wind power etc. - Other resources (nuclear power)
are still cheaper- Traditional energy sources do not
generate income
3WikiSolarCity
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion6
Market Entry Strategy
INDUSTRY ANALYSISPORTER´S 5 driving forces
Rivalry among existing competitors- Strong competition among few competitors due to high innovation pressure- Few companies that make profits
Threat of new entrants- High entry barriers- Huge R&D investments- Economies of scale necessary
3WikiSolarCity
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion7
Market Entry Strategy
INDUSTRY ANALYSISPORTER´S 5 driving forces
Power of Suppliers- High number of potential suppliers- Backward integration
Power of Buyers- No brand loyalty- Very price sensitive
3WikiSolarCity
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion8
Market Entry Strategy
INDUSTRY ANALYSISPORTER´S 5 driving forces
Substitutes- Fossil fuels, wind power etc. - Other resources (nuclear power)
are still cheaper- Traditional energy sources do not generate income
3WikiSolarCity
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion9
Market Entry Strategy
INDUSTRY ANALYSISSpecific Internationalization drivers
Market drivers
Competitive drivers
Government drivers
Cost drivers
Market drivers- Favorable conditions for the
production of energy- Market not saturated at all- Poor competition
Cost drivers- Competitive advantages
through potential cost leadership
- Labor market: Lower wages than in the US
Government drivers- Support from the
government- Possible reduction of
import taxes
Competitive drivers- Low threat through
strong competitors- Advantage through
economies of scale- Full service offering
4bridges-to-brazil.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion10
Market Entry Strategy
INDUSTRY ANALYSISSpecific internalization drivers
Market drivers- Favorable conditions for the production of energy- Market not saturated at all- Poor competition
Cost drivers- Competitive advantages through potential cost leadership- Lower wages than in the US
4bridges-to-brazil.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion11
Market Entry Strategy
INDUSTRY ANALYSISSpecific internalization drivers
Government drivers- Support from the government- Possible reduction of import taxes
Competitive drivers- Low threat through strong competitors- Advantage through economies of scale- Full service offering
4bridges-to-brazil.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis Conclusion12
Market Entry Strategy
INDUSTRY ANALYSISSpecific internalization drivers
Conclusion
We believe that Brazil is a very interesting market for foreign entrepreneurs to invest in photovoltaic energy. The time to build and strengthen business relationships in Brazil could not be better. Sun-kissed Brazil has one of the highest solar radiation factors in the world and plenty of land for solar farms, plus large reserves of silicon, used to make solar panels.
4bridges-to-brazil.com
SWOT ANALYSIS: TOWS MATRIX
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy14
SWOT ANALYSIS: TOWS MATRIXSWOT Analysis
Strenghts
- Large financial Resources- High Technology - Backward integration & Economies of scale- Integrated full value chain process- Large customers & strategic relationships
Weaknesses
- High dependence on government subsidies- Not yet profitable- High costs for acquiring customers- Customers may not pay - Limited knowledge of recycling
Opportunities
- Expand internationally- „Trend to be green“- World runs out of oil- Manufacturing costs of panels fall- Few competition in Brazil- Knowledge Spillovers through new markets
Threats
- Low-cost competitors from China- No brand loyalty- Improving technology of other renewable
energy sources- Shareholder might lose trust
5WikiSolarCity
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy15
SWOT ANALYSIS: TOWS MATRIXTOWS Matrix
S W
O
- Multiply cost savings through economies of scale and falling manufacturing costs
- Use large financial resources to expand internationally
- Economies of scale, a full service chain process and economies of scale enable competitive advantage in Brazil
- Use „Trend to be green“ to decrease customer acquiring costs
- International expansion reduces dependance on subsidies in the U.S.
- Knowledge spillover from international workers should help at recycling issue
T
- Use full service chain as USP- Large investors bring back trust to
shareholders- Integrate other renewable energy systems in
portfolio
- Recycling programms must be installed- Trying to be independent of subsidies- Care about existing customers to generate
brand loyalty (word of mouth advertising will then reduce costs for aquiring new customers)
TARGET COUNTRY MARKET ANALYSIS
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy17
TARGET COUNTRY MARKET ANALYSISPESTEL analysis: Environmental influences
SolarCity
P
E
S
T
E
L
Political- Stable government- Potential solarpower
support in future
Economical- High growth potential- Stable currency- Low labor costs (own
manufacturing facility?)
Social- Economic inequality- Growing middle class that
can afford solarsystems
Technological- Weak tech. infrastructure- Improving IT sector
Ecological- Numerous ecosystems- People are aware of their
environment (good reputation of green companies)
Legal- High taxes- Corruption
6pestleanalysis.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy18
TARGET COUNTRY MARKET ANALYSISPESTEL analysis: Environmental influences
Political- Stable government- Potential support through subsidies in the future
Economical
- High growth potential- Stable currency- Low labor costs
6pestleanalysis.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy19
TARGET COUNTRY MARKET ANALYSISPESTEL analysis: Environmental influences
Technological- Weak technological infrastructure- Improving IT sector
Social- Economic inequality- Growing middle class
6pestleanalysis.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy20
TARGET COUNTRY MARKET ANALYSISPESTEL analysis: Environmental influences
Ecological (http://www.iesabroad.org/study-abroad/courses/rio-de-janeiro/fall-2013/es-bl-303)- Richest biodiversity in the world- Numerous ecosystems- People are aware of their environmental richness and green companies have a good reputation
Legal- High import taxes - Potential subsidies and support from the government in the future- Corruption
6pestleanalysis.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy21
TARGET COUNTRY MARKET ANALYSISCAGE framework: Distance analysis
Cultural Distance
Brazil- They speak Portuguese- Etnicity: white (include Portuguese, German, Italian, Polish) 55%, mixed white and black 38%, and others- Religion: Roman Catholic 82%- Family is the foundation of social structure and forms basis of stability for most people (Nepotism)
USA- English is spoken by about 82% of the population- Ethnicity: white 81.7%, black 12.9%, Asian 4.2% and others- Religions: Protestant 52%, Roman Catholic 24%, Mormon 2%, and others- Individualsm is prized
7Pankaj Ghemawat: Distance Still Matters8kwintessential.co.uk
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy22
TARGET COUNTRY MARKET ANALYSISCAGE framework: Distance analysis
Administrative and political distance
Brazil- Corruption- Institutional weaknesses, high taxes and bureaucratic burdens- Corporate tax rate 27.5%, sales tax rate 19%
USA- Head of country: president Barack Obama (Democratic Party)- Corporate tax rate varies from 15% to 25%- No national general sales tax (California: highest tax rate at 7.5%)
7Pankaj Ghemawat: Distance Still Matters
8kwintessential.co.uk
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy23
TARGET COUNTRY MARKET ANALYSISCAGE framework: Distance analysis
Geographic distance
Brazil- Air transport infrastructure is relatively well developed- Highway system is one of the largest in the world but badly maintained- Wealthy agglomerated areas as well as lagging areas- Size of country: 9.511.965 square kilometres, 200.4 million habitants, capital city: brazilia- Climate: mostly tropical, but temperate in the south
USA- 318.9 million habitants- U.S. transportation infrastructure requires substantial capital investments- Border Countries: Canada, Mexico
7Pankaj Ghemawat: Distance Still Matters
8kwintessential.co.uk
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy24
TARGET COUNTRY MARKET ANALYSISCAGE framework: Distance analysis
Economic distance
Brazil- Brazilians prefer face-to-face meetings, the individual is more important than the company- GDP per capita: 11.208 USD- GDP: 2.2 billion USD
USA- “time is money”- GDP: 16.77 billion USD- Unemployment rate: 5.4%
7Pankaj Ghemawat: Distance Still Matters
9nationsencyclopedia.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy25
TARGET COUNTRY MARKET ANALYSISBenchmarking: Main Competitor´s profile
SolarWorld AG, headquartered in Bonn (Germany), was founded in 1988 German solar trading company with own manufacturing facilities One of the largest solar companies in the world with worldwide locations (e.g.
USA, UK, Spain, Singapore, Japan) Their main production facilities are located in Freiberg (Germany)
as well as in Hillsboro, Oregon (USA) The company employs 3.400 people worldwide SolarWorld AG offers integrated solar value chain process
10Solarworld
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy26
TARGET COUNTRY MARKET ANALYSISBenchmarking: Portfolio Comparison
SolarCity- Custom designs and installation of solarsystems- Free energy efficiency analysis (how to save energy?)- Offers 4 different financing solutions (from leasing to purchasing) - 24/7 system monitoring (up to 30 years) and repairs at no added cost- Own solar panel production facilities (backward integration)
SolarWorld- PV plant design and monitoring- Free system insurances- Full integrated service chain- Own solar panel and inverter production facilities 11greentechmedia.com
12marketwatch.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy27
TARGET COUNTRY MARKET ANALYSISBenchmarking: Key Company Figures)
SolarCity - Leading U.S. residential solar installer in 2014- 34% market share in USA (residential solarsystems)- Sales in 2014: 255,03 million USD- EBIT: 8,33 million USD- Equity: 1.342,37 million USD
SolarWorld- 5% market share in USA (residential solarsystems)- Sales in 2014: 573,38 million € (255,0 million € in the US)- EBIT: 64 million €- Equity: 238,67 million € 11greentechmedia.com
12marketwatch.com
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy28
TARGET COUNTRY MARKET ANALYSISBenchmarking: Key Company Figures
Criteria Weight SolarCity SolarWorld
Brand reputation 0.10 4 3
Product Quality 0.15 4 4
Technology Standards 0.10 5 5
Full service chain 0.10 5 4
Low Price 0.20 4 3
Product Variety Range 0.10 2 3
Advertising 0.10 2 2
Customer Service 0.10 4 3
CSR 0.05 3 1
Weighted overall competitive strength scores 1.00 3,75 3,1
11greentechmedia.com12marketwatch.com
MARKET ENTRY STRATEGY
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy30
MARKET ENTRY STRATEGYMarket attractiveness / competitive strength matrix
Attractiveness Measures Weight Attractiveness Rating
Weighted Score
Market size 0.20 4 0.80
Market growth 0.20 5 1.00
Buying structure 0.10 3 0.30
prices 0.10 2 0.20
Buying power 0.05 3 0.15
Market access 0.05 2 0.10
Competitive intensity 0.10 4 0.40
Political / economical risks 0.10 2 0.20
Tax burdens 0.10 1 0.10
Weighted overall competitive strength scores 3,25
ConclusionColombia is a very attractive market because there are no fine steak houses and the costs and the risks are relatively low
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy31
MARKET ENTRY STRATEGYMarket attractiveness / competitive strength matrix
Competitive strength measures Weight Attractiveness Rating
Weighted Score
Local experience 0.10 2 0.20
Market knowledge 0.10 4 0.40
Quality of local network 0.15 2 0.30
Products fit to market demands 0.25 5 1.25
Supply Chain Network 0.10 3 0.30
Economies of scale 0.05 5 0.25
Full Service Chain 0.10 5 0.50
Cost advantages 0.15 5 0.75
Weighted overall copetitive strength scores 3.95
ConclusionAlthough there is no real competition in columbia at the moment you should establish quickly the brand name and the image of your company because competitors will follow
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy32
MARKET ENTRY STRATEGYMarket attractiveness / competitive strength matrix
COMPETITIVE POSITION
MARKET ATTRACTIVENESS
BRAZIL
Invest
Selective strategies
Divest
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy33
MARKET ENTRY STRATEGYShort list of (top three) entry options
1. Franchising - Minimum risk and quick market entry- Only small profits through franchise fees- Quick geographical coverage in Brazil possible- Potential returns from marketing may be lost- Control over business and technology use is weakened
2. Subsidiaries- Control remains completely at SolarCity- No „sharing“ of profits necessary- Higher costs but potential utilization of economies of scale- Higher market entry burdens
3. Joint Venture- Fast market entry through strategic
networks of partner- Knowledge spillover possible- Brazil partner is aware of political and
legal risks- Existing client base of partner- Reduced costs of market entry through
venture capital of both sides- Less profits
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy34
MARKET ENTRY STRATEGYScoring model: Evaluation criteria
Criteria Importance of the criteria
Options
Franchising Sub-sidiaries
Joint Venture
Control over marketing 2 2 4 1
Control over after-sales service 2 2 4 2
Required financial resurces 3 4 2 4
Requires management resources 1 3 2 3
Production costs 3 4 1 3
Custom duties to be paid 2 4 1 3
Flexibility to switch entry modes 1 2 3 2
Access to distribution channels 2 4 2 4
Risk of knowledge dissemination 3 1 4 1
Overall evaluation 59 46 49
Scores: 4=very positive, 3=positive, 2=negative, 1=very negativeImportance of the criteria: 3=high, 2=medium, 1=low
CONCLUSION
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy36
CONCLUSIONSummary: Best Market Entry Concept
Factors- First high class steakhouse in columbia- Increase the geographical coverage
Strategy- Franchising
- 19 franchise restaurants allredy exist- Brings an income of $12.0 million for the
company- No developing of a business concept incl.
use of trademarks Risk
- Less customers because of a high price
ConclusionFranchising is on of the best options for rapid market expansion. It works well for Ruth´s because they have a repeatable business model that can be easily transferred into other markets. The business model of Ruth´s is very unique and has strong brand recognition that can be utilized internationally and secondly it worked out well already in 19 restaurants.
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy37
CONCLUSIONFuture Options
Expansion strategy nationwide or internationally
Focus on sales and profitability through marketing, cost control, monitoring of financial statements and quality control
Improvement of customer service and quality improvement through streamlined preparation and presentation
Creating and adding new services like private dining
Increasing the intensity of marketing and sales activities through websites and social media
Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy
Sources
1SolarCity: http://www.solarcity.com 2finanzen.net: http://www.finanzen.net/bilanz_guv/SolarCity 3WikiSolarCity: https://sites.google.com/site/wikisolarcity/home/chapter-3/the-five-forces-model 4bridges-to-brazil.com: http://www.bridges-to-brazil.com/en/solar-energy 5WikiSolarCity: https://sites.google.com/site/wikisolarcity/home/internal-analysis/the-swot-analysis 6pestleanalysis.com: http://pestleanalysis.com/pest-analysis-brazil-shows-high-potential-growth/ 7Pankaj Ghemawat: Distance Still Matters: the hard reality of global expansion 8kwintessential.co.uk: http://www.kwintessential.co.uk/resources/global-etiquette 9nationsencyclopedia.com: http://www.nationsencyclopedia.com/economies/Americas/Brazil.html 10Solarworld: http://www.solarworld.de/ 11greentechmedia.com: greentechmedia.com/articles/read/Here-Are-the-Top-Five-Residential-Solar-Installers-of-2014 12marketwatch.com: http://www.marketwatch.com/investing/stock/scty/financials
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