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Christoph Forstner: Market Entry Concept of Solarcity

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Market Entry Concept of Solarcity in Brazil.
Industry Analysis, Country Market Analysis, SWAT & TOWS, PESTEL, and a Market Entry Strategy.

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Christoph Forstner: Market Entry Concept of Solarcity

  1. 1. MARKET ENTRY CONCEPT OF SOLARCITY IN BRAZILChristoph Paul Forstner
  2. 2. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy STRUCTURE Market Entry Concept: SolarCity in Brazil 2 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
  3. 3. INDUSTRY ANALYSIS
  4. 4. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS SolarCity  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) 4 1SolarCity 2finanzen.net
  5. 5. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS PORTER´S 5 driving forces Market Competitors New Entrants Buyers Substitutes Suppliers 5  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
  6. 6. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS PORTER´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 6 3WikiSolarCity
  7. 7. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS PORTER´S 5 driving forces  Power of Suppliers  High number of potential suppliers  Backward integration  Power of Buyers  No brand loyalty  Very price sensitive 7 3WikiSolarCity
  8. 8. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS PORTER´S 5 driving forces  Substitutes  Fossil fuels, wind power etc.  Other resources (nuclear power) are still cheaper  Traditional energy sources do not generate income 8 3WikiSolarCity
  9. 9. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS Specific Internationalization drivers 9 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
  10. 10. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS Specific 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 10 4bridges-to-brazil.com
  11. 11. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS Specific 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 11 4bridges-to-brazil.com
  12. 12. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy INDUSTRY ANALYSIS Specific 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. 12 4bridges-to-brazil.com
  13. 13. SWOT ANALYSIS: TOWS MATRIX
  14. 14. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy SWOT ANALYSIS: TOWS MATRIX SWOT Analysis 14 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
  15. 15. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy SWOT ANALYSIS: TOWS MATRIX TOWS 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) 15
  16. 16. TARGET COUNTRY MARKET ANALYSIS
  17. 17. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS PESTEL analysis: Environmental influences SolarCity P E S T E L 17  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
  18. 18. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS PESTEL analysis: Environmental influences  Political  Stable government  Potential support through subsidies in the future  Economical  High growth potential  Stable currency  Low labor costs 18 6pestleanalysis.com
  19. 19. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS PESTEL analysis: Environmental influences  Technological  Weak technological infrastructure  Improving IT sector  Social  Economic inequality  Growing middle class 19 6pestleanalysis.com
  20. 20. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS PESTEL 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 20 6pestleanalysis.com
  21. 21. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS CAGE 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 21 7Pankaj Ghemawat: Distance Still Matters 8kwintessential.co.uk
  22. 22. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS CAGE 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%) 22 7Pankaj Ghemawat: Distance Still Matters 8kwintessential.co.uk
  23. 23. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS CAGE 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 23 7Pankaj Ghemawat: Distance Still Matters 8kwintessential.co.uk
  24. 24. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS CAGE 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% 24 7Pankaj Ghemawat: Distance Still Matters 9nationsencyclopedia.com
  25. 25. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS Benchmarking: 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 25 10Solarworld
  26. 26. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS Benchmarking: 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 26 11greentechmedia.com 12marketwatch.com
  27. 27. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS Benchmarking: 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 € 27 11greentechmedia.com 12marketwatch.com
  28. 28. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy TARGET COUNTRY MARKET ANALYSIS Benchmarking: Key Company Figures 28 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.com 12marketwatch.com
  29. 29. MARKET ENTRY STRATEGY
  30. 30. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy MARKET ENTRY STRATEGY Market attractiveness / competitive strength matrix 30 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 Conclusion Colombia is a very attractive market because there are no fine steak houses and the costs and the risks are relatively low
  31. 31. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy MARKET ENTRY STRATEGY Market attractiveness / competitive strength matrix 31 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 Conclusion Although 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
  32. 32. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy MARKET ENTRY STRATEGY Market attractiveness / competitive strength matrix COMPETITIVE POSITION MARKET ATTRACTIVENESS 32 BRAZIL Invest Selective strategies Divest
  33. 33. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy MARKET ENTRY STRATEGY Short 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 33 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
  34. 34. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy MARKET ENTRY STRATEGY Scoring 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 34 Scores: 4=very positive, 3=positive, 2=negative, 1=very negative Importance of the criteria: 3=high, 2=medium, 1=low
  35. 35. CONCLUSION
  36. 36. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy CONCLUSION Summary: 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 36 Conclusion Franchising 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.
  37. 37. Industry Analysis SWOT Analysis: TOWS Matrix Target Country Market Analysis ConclusionMarket Entry Strategy CONCLUSION Future 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 37
  38. 38. 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 38

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