TABLE OF CONTENTS
2.1 Political Environment
2.2 Market Analyses
2.2.1 Energy market in Germany
2.2.2 Solar Power for Hot Water and Heating
2.2.3 The market size analysis of solar panel industry in Germany
2.2.4 Solar frame industry analysis:
4. Five forces analysis
5.1 Customer segmentation:
5.1.1 Segmentation one: installation service companies:
5.1.2 Segmentation two: solar panel companies:
6. Internal Analyses
6.1 Joyance industry glances
6.2 Finance performance
6.3 Marketing performance
6.4 SWOT analysis :
6.4.1TOWS Matrix analysis
9. Conclusion and recommendation
Solar products have been used more often in people’s daily life with the development of technology. From year 2005, Chinese companies accelerated their development of solar panels. Even China government has started promoting companies to develop solar technology and use solar products. Many companies and factories are producing and selling the solar panels. But there are no more than 20 factories that produce solar panel frames, and less than 40 companies that sell solar frame only. In fact, the whole world is getting more interested in solar panel applications, thus the demand for solar panels is increasing as well.
As all we know each solar panel needs one solar frame, a higher demand for solar panel means a higher demand for solar frames, as a result, the current demand for solar frames exceeds of its supplies. Thus, Joyance, a Bedding company, wants to conduct some marketing research about German solar frame’s market to decide if it should enter into the German market. This dissertation aims to find out if Joyance should enter into solar frame market and how to enter by the external and internal analysis?
This thesis describes analyses and evaluates Joyance’s strategy to enter the German market for solar panel frames. Joyance originally is a manufacturer of bed-frames. On the basis of external and internal analysis this thesis focuses on the general decision to enter the German market by using five-force, SWOT, DOWS and marketing matrix analysis.
The external analysis shows that the demand of German market for solar panel frames is significant. Our research shows that the market size of solar panel frame is around 47 million Euros in 2010 and is still growing. It is mainly due to the stimulation by Germany government. The main suppliers for German market are Chinese solar frame manufactories and wholesalers due to its cheap price and relatively good quality. The five-force analysis shows German market is attractive due to its low threats for substitute products, low entry barriers, medium bargaining power for suppliers and buyers, and medium industry rivalry.
By using SWOT analysis, 4P marketing mix, Porter’s generic strategies, Ansoff”s marketing matrix and Kotler’s STP, we figure out Joyance should enter Germany market as a wholesaler by targeting the SME of retailers and installation companies. Its generic strategy should be a cost leadership. Based on Ansoff’s marketing matrix, Joyance should use a diversification strategy to enter German market because this is new products for a new market to Joyance. Currently, Joyance’s sales force should contact new customers intensively by email and telephone with a 2% discount for promotion.
Finally, the investment forecast shows that the annual sales could be €640,000 (€27*2000units/month*12month) and the expected profit €129,600 annually (20% of profit margin) and planned is to sell four types, generating an expected profit of around 500.000€
Joyance Industry Company was founded in 2000. From 2000 to 2005, it mainly engaged in bedding products wholesaling by purchasing from Haimen (bedding factories area, a small city near shanghai) and selling in Southern China. Chart 1 shows its organizational structure.
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(Chart 1 Joyance organization structure)
Being benefited from the economic growth and market expansion, Joyance decided to build its own factory in Suzhou in 2006, the reason they built its own factory is that Joyance wanted to produce its own brand bedding products and to manufacture for other famous brands. Joyance develops smoothly in recently years. There are 28 employees in the company and around 50 workers in the factory. The export volume is 3500 pieces per month, but the competition is getting stronger and profit is bit low, although its business is stable. Therefore, Joyance wanted to explore some business, not only in bedding industry. In 2008, the owner of Joyance has been invited and attended a solar exhibition in Germany. He was attracted by the solar industry and believes there must be a bright future. After some discussion with line managers, Joyance decided to sell solar frame, which is the frame to fix the solar panels on the roof or the ground. In 2009, they set up an export department for solar frame. It is directly under the management of marketing department. Due to some financial and operational concern, Joyance decided to outsource its solar frame manufacturing. It chose some reliable factories to produce its own designed products. In fact, till year 2010, Joyance only had a few transactions because of being a new entrant without any experience. Joyance decided to do some in depth research of solar frame in Germany market only, then to formulate a new marketing strategy for future development, and they also ask me to help them write the market report about German marketing only.
In the second chapter, an external analysis will be made, where are the market analysis about technology environment, market size, segments and demand situations, also the customers and competitors’ analysis will be demonstrated. And then the internal analysis will be given in the following chapter, where the financial performance, marketing performance, current 4P and altogether with SWOT analysis.
After the SWOT analysis, the third chapter will indicate the key weakness and problems that Joyance has met. The short-term and long-term goals will be set after the analysis.
In the end of the dissertation, there are some suggestions available for Joyance. The whole research and analysis are based on the methodology of desktop and field research.
1. Desk research: it is hard to get some detailed information about solar frames market, because this product is the accessory of solar products. There are very limited information and data available on the internet or some magazines and journals. Some report can be found online but they cost around 3000Euros, so in this dissertation, the market of solar frames is based on the available data of solar panels, because each panel has to be associated with one solar frame.
2. Field research: there are 20 interviews that have been conducted with the Joyance’s managers and other experts in the field, such as, officers in Chinese solar frame industry association situated in Suzhou. These interviews help us get some useful knowledge of Germany solar frame market.
An External and Internal Analysis play an essential role in understanding the environment of your business. The External analysis will be discussed in this chapter, and the main goal of this external analysis is to get a clear view of what happened in the market, and what is the trend in this market, and also what are the key elements that will influence the competitive position of the company in the market?
At the beginning, the energy industry in general will be introduced, and then the comparison of the advantages of solar energy industry with the others, and its competitive conditions will be analyzed in details. The external market analysis, competition analysis, customer analysis, environment analysis, technologic will be fully demonstrated as follows:
2.1 Political Environment
Germany is not known as a place full of sunshine in Europe. But you find a lot of their roofs installed solar panels. Since the introduction of the Renewable Energies Laws (EEG) in April of 2010, Germany has been experiencing a rapid increase in solar energy.
Meanwhile, there are also some policies are good for solar development in Germany, the German government has agreed to substantially raise the target installation rate of solar photovoltaic (PV) systems from 1,100 MW-1,700 MW per year in 2010 to 2,500 MW-3,500 MW per year (EEG Data). Parliament will reduce solar PV tariffs showed in chart 2. It shows you the tariff for PV users ranged from 0.165EU/kWh to 0.329EU/kWh, and the tariff depends on the type of the PV, and it will be provided for 20 years.
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Chart 2 PV tariffs in Germany (Euro zone) 2010
The EEG also regulates subsidy levels. If, for instance, new PV capacity exceeds a 1,500 megawatt-threshold, a reduction in subsidies for solar installations is automatically triggered. Such was the case at the end of September, when the Federal Network Agency (Bundesnetzagentur) confirmed the threshold had been exceeded. As a result, beginning January, the yearly scheduled decrease in feed-in-tariffs will be 9 percent for rooftop systems and 11 percent for ground-mounted systems, instead of 8 percent and 10 percent, respectively.
- The policies about Solar heating system in 2009:
Solar heating system is our target market because the frame will mainly be used for solar heating. From January 1st of 2009, all new homes built in Germany will be required to install renewable energy heating systems under a new law called the Renewable Energies Heating Law (Erneubare-Energien-Warmegesetz). Within the renewable solar energy systems, an estimation of 40% is accounted for solar heating systems. This law is to make sure the solar heating industry growing in Germany in 2010. There has been about 8% households installed solar heating systems already.
The German government is allocating 350 million Euros each year in grants for homeowners to install renewable energy systems, and there are about 170 million Euros are special for solar heating systems development. Mr. Thomas Hagbeck of the German Federal Environmental Agency said: "Using renewable energy for heating homes will not only significantly cut greenhouse emissions but also reduce heating bills as oil and gas prices surge" (Jane Burgermeister, 2009). Meanwhile, the existing houses will also have to be remodeled to incorporate solar-energy-based heating systems from year 2010.
It is estimated that renewable energy performance in buildings could save 50 billion Euros in solar heating costs in Germany up to 2020 alone. It is found in the research articles year 2009, in German, homeowners are expected to choose solar heating systems. Under the new regulations, the size of the solar heating required will depend on the size of the house: solar heating panels will need to have an area equal to 4% of the total area of a house. The important message that there will be more than 500,000 Euros fines for anyone who will not to switch their heating systems till year 2015.
The policy about solar energy market shows that solar heating energy will be a big potential market in Germany. In addition, German is also good at technology and engineering development. Therefore, the external environment is very in favor of solar energy industry.
2.2 Market Analyses
In this part, the focus is on the market analysis. It consists of energy market analysis, competition analysis and customer analysis. In the end, we use Porter’s Five Forces to illustrate the solar frame market attractiveness.
2.2.1 Energy market in Germany
As we all known, Germany is engaged in developing new energy technology. Its wind, ecological and solar energy technology is on the top in the world. The following research shows how these industries are and what characteristics they have.
- Wind energy
Germany’s wind energy development is always leading the world. The wind energy market is almost seizing half of the market share in the world market. German’s wind power is very strong, and its wind power generation equipment can generate 18000MW, which set a world record.
In Germany, the number of rotation of the windmill which occupied the total number of windmills installed all over the world is about 1 / 3, and the number of the rotation windmill is doubled from year 1998 to 2010, and apparently, the rotation windmill is good for the environment. In 2009, since Germany has used the rotation windmill, the 214 million tons of carbon dioxide emissions were decreased.
In 2010, the wind power generated 265 billion kilowatts electricity, it is a huge contribution to the renewable energy industry, its generated electricity energy is almost doubled the whole electricity amount in Berlin. It can be seen that wind energy occupied the main energy market; meanwhile, the market kept expanding. Moreover, Germany government promotes the usage and research of the wind power products. Investors can get 25% subsidy of their investment. However, the requirement of installation of wind energy is high because it needs a good geographic situation. Furthermore, the costs of equipment and installation are also high and it is only applicable for big companies or investors.
- Ecological biomass Energy
Ecological energy comes from solar energy conversion. The ecological energy will not end unless the sun no more exists. The process of the conversion is the photosynthesis of green plants converts carbon dioxide and water to the biomass synthesis, the process of using biomass will generate carbon dioxide and water, and this process of conversion is the cycle of forming the substance. In theories, the emissions of carbon dioxide is zero, the ecological energy is clean and renewable. The processes of using ecological energy needs high technology, and require the high investment in process, meanwhile, there will be high risks for ecological factories, because its working of the Carbon dioxide and biomass synthesis, all the process are quite important, so the technology requirements are quite high, not all the factories can do this energy business.
Ecological energy can be used for producing electricity, heating, and fuel-powered, it is non-concentrated when the power failures, it can provide protection in the large region. To develop and take advantage of the ecological energy is helping the sustainable and circular of economy. In Germany, the government also promotes the using of ecological energy, and now the ecological energy accounts for more than 25% of the market share in the renewable energy market.
Ecological energy market is attractive and promising with a significant potential, because its demand is growing based on a lower cost compared with the current electricity fee. The cost of the electricity generated by the ecological energy is about 60 to 90 euro cents per Kw, and it is 20 cents cheaper.
- Solar Energy
Germany solar power industry growth rate has exceeded 800% in last 11 years, because of its subsidiary and incentives offered by the government. Although in Germany, there is not much sunshine like tropic area, but its technology of solar power is going ahead of the world. In year 2008, the installation of solar panels is 1300 MW, and it accounted for almost half demand of the world. It is clearly, its incentive and stimulation policy is successful. Germany enacted the Renewable Energy Law (REL), which helped German occupy nearly 1/3 the world market share of renewable energy. Besides that, its local market demand is increasing as well, because the REL required that before the year 2015, all the householders should install the Renewable energy electricity systems, and there should be more than 40% of renewable energy used from solar energy. Now it is merely 13% householders who are using the solar system. The gap or the market potential is around 27% of total householders (around 37 million families). In the solar energy market, there are many choices for investors who want to enter into this market, such as the solar panels, solar frames, solar shadows, and solar heating systems, etc.
The advantages of solar energy compare with other green energies
Solar vs. Wind
Wind energy equipment makes some noise and also needs a large space to install. It is more applicable in rural area rather than in urban area.
Wind energy will depend on the place if there is enough wind, or the location is good for the wind generations. Solar energy doesn’t need to consider the location very much because the sun is always there. Compared with the maintenance fees, wind equipment needs high maintenance fees, but solar energy needs very limited maintenance fees. Solar energy equipment is easier install than wind energy’s. Installing a wind turbine is not easy because you have to fasten the tower into the ground. The turbine also needs to be fixed with the tower tightly. Safety is most important. In contrast, solar heating system only needs to fix the solar panels on the frame, which requires a few basic installations.
Solar vs. Ecological biomass
Although the market share of ecological biomass energy is getting bigger, but it is still not used for house owners yet. It is not convenient for the house owners to operate with the ecological energy equipment due to its completed operate steps.
The solar energy doesn’t require special land space, because it can be installed on the roof.
The solar energy can only produce the power but not generate the CO2 emissions, but ecological biomass will.
The efficiency of solar energy generation is much higher than the ecological energy, which is 18 percentages higher.
To summarize, there are four advantages of using solar energy compared to others. They are 1) Solar energy is definitely a clean energy, which means no CO2 emission, and better efficiency than other energies;
2) In a long term, solar energy saves much more money than other energies, because solar energies need no maintenance fees, and it can be used for more than 30 to 40 years;
3) The installation of solar energy for the house owners is quite convenient, only little spaces on the roof required;
4) It’s more applicable for householders. Above all, solar energy has comparably competitive advantages among green energy. It can be easily used for families, especially for family heating and warming.
According to the above marketing analysis and the encouraging policies, it can be seen the marketing of the solar heating energy is promising to invest, and the next part is about the introduction to solar heating market and the introduction of solar heating system.
2.2.2 Solar Power for Hot Water and Heating
Compared with the current coal or fuel energy, the solar energy does not have the limitation for locations and conditions, and it can generate energy for people every day. There is an incremental demand for solar heating, because using solar heating is economical compared to the others in a long run. Moreover, its initial investment is low and only costs 5000 Euros, and it can be used more than 30 years without maintenance fees.
Chart 3 shows the solar coverage in different month of the year in German. From May to August, its coverage is almost 100 percent due to the strong sunshine. In winter the coverage is much lower. Consumers worried about if the solar system can’t generate enough energy. Actually the solar heating system can store the energy saved in summer time and use it to complement the shortage of energy generated in winter time. This system assures people to have sufficient energy in the whole year.