Nanosolar Solar Panel - Essay Example

 Nanosolar Solar Panel Executive Summary Nanosolar is the only solar panel in the world that is printed like a newspaper which makes it easy to transport and easy to install. It is also the most efficient with 17 percent efficiency in converting heat to energy. This poises the company to go global. However, it is also the newest players in the global market. It doesn’t have the reputation that other solar panel manufacturers have such as Sunpower and Samsung. Nanosolar will increase the value of its products for all its stakeholder by going global. For the same manufacturing and Research and Development expenses, it will be able to widen its market. The best strategy is to penetrate a country that is underexplored by solar panel manufacturers. By using export mode, Nanosolar will be able to maximize current investment. The mobility of its panels will make it easy to transport. Nanosolar may continue manufacturing its products in its current location and ship it to the country of choice. Introduction: Company Background Nanosolar is a revolutionary solar panel created by a startup company who got their initial funding from Sillicon Valley venture capitalists (VC). True to the reputation of young Silicon Valley technology developers, Nanosolar is radically different from other solar panels such as Sunpower and Evergreen. This solar panel is as thin as newspapers, foldable, flexible and very light. This makes it a non-intrusive technology. Other solar panels need to be incorporated in the construction of buildings or houses or would require major construction to be installed. Nanosolar’s size, lightness and flexibility make it easier to be installed. Any existing home owners can buy this solar panel and install it with very minor repairs (LaMonica 2008, 41). The company originated in Chicago but has expanded its operation in the United Kingdom. In fact, their first major contract was in Germany instead of the U.S. Nanosolar continues to develop its technology to improve the amount of heat it converts to energy and make solar electricity cost as affordable as conventional electricity. They are now officially the world’s most affordable solar panel and also the most profitable for the stakeholders of the company and efficient for the consumers of the product. Its superior technology and even more superior market positioning also gives it the potential to be a truly global product. It is the only solar panel in the market that is possible to be shipped through conventional consumer courier. It is the framework that makes Nanosolar’s entry to foreign market not only practical but logical. It will maximize the current investment by capturing a larger market. Main Report Motives for Internationalization The strongest reason for internationalization is the value it promises to its shareholder. The most obvious is the additional revenue it will generate using existing resources (Friedman 1970, 32). Nanosolar is the only one of its kind in the market that is easy to transport because of its flexibility. It renders the setting up of a manufacturing plant unnecessary. Companies who expand to foreign markets are forced to open a manufacturing plant in or near the market they want to penetrate. This equates to bigger investments which lengthens the returns to the stakeholder (Hollensen 2011, 231). Nanosolar is also benefitting from the growth of independent campaigns geared towards orienting the world about the benefit of harnessing solar power financially and environmentally (Johansson 2002, 199). As such, governments are offering breaks to companies who enter their country with products that promises to contribute to the preservation and rehabilitation of the environment. There are also external constraints in the market. The competition is getting stiff and many multinational companies are joining the industry (Mohamad 2002, 511). Samsung and Panasonic are now making their own solar panels. Given that these companies are able to manufacture in bulk, they are also able to pull the prices down (Carlson et al 1993, 37). This makes it more difficult for small players like Nanosolar to compete. Customers are naturally going to gravitate towards brands that have been around longer and have been established to come out with quality products (Muhlbacher 2006, 96). Meanwhile, the market is growing as fast (See figure 1 and Figure 2). Escalating competition for limited customers puts heavy pressure on margins, and bounds prospects for cost-effective variation (Birchall & Tovstiga 2005, 239). Such is the case of many technological products. The U.S. estimates a churn rate went from 20 percent in 1998 to 35 percent in 2001 (Doole & Lowe 2008, 251). This expanding competition may only be countered through a continuous innovation and that has always been the trust of Nanosolar (See Figure 2). When it was launched in 2009, each panel was only able to convert ten percent of the heat it gathers to energy but in the early 2011, they are now at 17 percent making it an efficient system to use even during night time (Lockwood 2010, 179). The continuous evolution strengthens Nanosolar’s revenue potential which is highly beneficial to all of its shareholder. A good 90 percent of innovations are incremental which means value is added on top of the current value (Wiedeman et al 2010, 59). Technology innovations do two things in the quest to make any venture profitable (Fuller 1999, 382). One, the upgrade of the products creates a new market need which drives purchase. This is, of course, a big risk because the need may not be immediate (Brown & Wahlers 1998, 43). This lowers the profit of the company. If the new innovation fails to get the support of the market right away, investments won’t be returned right away (Neely & Wynn 2010, 79). This, on the other hand, is an opportunity for new players to penetrate the market and this is the opportunity that Nanosolar is seizing. Innovation on solar panels has been one dimensional (Charter 1992, 90). It has always been about increasing the efficiency of energy conversion. Nanosolar is introducing a new material altogether. It is an existing technology and offering it to a new market will increase its value to shareholders (Davis 1993, 28). Barriers and Risks Production Capacity. Nanosolar first introduced its product in 2007 and it promised to start commercial production by the end of the same year. However, they didn’t really mass produce their product until two years later and they were producing a fraction of the demand. This caused many investors and customers to question the real capacity of Nanosolar (Coddington 1993, 253). Limitations in diffusion and distribution route. The International Energy Agency believes that the development of the solar power technology will not progress fast enough to provide at least 10 percent of the global energy demand. This makes the solar panel technology an unfamiliar concept to many consumers which will also serve as the biggest barrier to entry of Nanosolar. What is even more frustrating is the fragmented efforts of different solar panel providers. Many companies only educate the market to whom they are selling (Greenpeace 1994, 68; Abdul 2010, 93). High costs and insufficient budgetary resources. Many of the countries that are undexplored by solar panel suppliers are also not open to the concept. The cost to developing new solar technologies is still higher than the cost of developing technologies using traditional resources. Banks and other financial firms are unwilling to invest in a technology that is unfamiliar (Jeannet 2000, 138). Loans for solar technology development involve a 10 to 25 years of investment (IMF 2004). The only solution is to get the cooperation of the government of the country Nanosolar wishes to enter (Ongksvisit & Shaw 2008, 95). International Competitiveness Nanosolar has a competitive advantage, it does not work on parity, it actually has the one thing necessary that sets it apart from competition (Kandampully & Duddy 199, 53). Nanosolar is printed similar to how you will print a magazine or a newspaper. It is also foldable which makes transporting the panels easy. Installing it in any establishment, building or home is also easier than the traditional solar panel made of fiber glass. Early this year, Nanosolar also became the most efficient solar panel after proving that it converts 17.1 percent of heat to energy, the most efficient in the business. This was certified by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL). Nanosolar’s vision is to produce the most efficient and most affordable solar panel in the world and install a solar panel in every household in the world. In the strictest sense, only Nanosolar can do this because of its affordability, efficiency and mobility of its products. Market Entry Recommendation Evaluation of the International Environment The Renewable Energy Policy Network for the 21st Century stated that the growth of solar panel demand is highest in Europe. In fact, the demands have been increasing by 60 percent annually since 2004 to present. To date, solar panels provide for more than 16 percent of all new power installations. As awareness of the technology goes up, the demand will continue to climb in the next five years. Specifically, there are five countries that have achieved 1 gigawatt energy generated through solar panels: Germany, Spain, Japan, U.S. and Japan (See Figure 3). However, there are other countries that are now starting to open to solar technology, this includes Australia, China, Fance, Greece, India, Korea and Portugal (Pierer 2001, 71). The first five countries are so far ahead in terms of policies and programs (WEF 2008) but Asia presents the greatest need in terms of alternative power source (WTO 2007). Most of the countries in Asia remain third world and electricity costs a lot. Taking a chunk of their monthly power expenses so they can allocate their money to more important things may be a more attractive. This is also the market that is underexplored in terms of solar panel distribution. Analysis of the Foreign Market to Enter : Thailand Thailand has the balance of the three components that Nanosolar needs for a profitable expansion: government support for the industry (Anh & Sibanda 2011, 68), market maturity about the technology (Charter 1999, 74), and economic capacity to purchase the technology (Oelrich 2011, 13). The International Energy Agency (IEA) reported that 89 percent of the total solar panels installed in the world may be found on eight countries. The IEA said that for this to improve, the government of the different countries will have to support the growth of the technology (Ottman 2011, 97). National policies will have to be set up which includes tax breaks, tax cuts and even tax bonuses. Thailand is number 25 in the world in terms of GDP and they are number 23 in terms of the electricity they consume to sustain its country and they are number 20 in terms of population (Schonfeld 2010, 32). It is a big market, a big country and it offers a lot of opportunities (See Figure 5). The government is amplifying that opportunity by setting up a goal to relieve its country from the energy it produces to sustain all the products its produces and the country it operates (Rugman & Verbeke 2000, 86). Through its renewable energy plan, they plan to allow the entry of alternatives sources of energy to potentially power the whole country. More accurately, it wants to increase its capacity to produce energy from alternative sources, including solar panel, for 1,500 percent in 15 years. That is jumping from its current 35 megawatt back in 2007 to 550 megawatt in 2022. Entry Mode Recommendation The appropriate entry mode for a company usually changes as the company evolve and the market changes its temperaments. Naturally, when a company starts gaining some experience, it becomes more able and more willing take risks. Its disposition on a market entry mode also changes (Keegan & Green 2011, 157). That is where Nanosolar is right now. It is at a stage when it is evolving heavily. It has been two years since it started mass producing its products. It is a highly progressive two years as it gained traction it got enough funding and enough demands in Europe to open a German manufacturing plant. It also has been able retain its unique selling proposition, the only solar panel that is easily transported and light, as light as a newspaper. A USP is an essential factor in a business that’s going global (Black et al 1985, 15). Nanosolar didn’t’ use a clear cut strategy plan when it entered Germany, the only other country it is distributing in. Its entry was more “organic” but the experienced it brought to Nanosolar is valuable. The most important element in the export entry mode is that the product is made outside of the country where the product is going to be sold. Nanosolar will continue to manufacture its products in the U.S. which automatically takes out the necessity of putting up a manufacturing plant in Thailand. This won’t be a deterrent to the distribution of the product since the solar panels are easy to transport. The export mode has two kinds: direct export and indirect export. Nanosolar will use direct export. Direct Export Under direct export, the company will not set up a manufacturing plant in the country where it intends to sell its products. Instead, it will have to put up its own export group that is directly owned by the company but has direct connections with the country or countries where the company wants to be present (Wilk 1998, 323). Nanosolar should set up a global export department that will supervise all its ventures outside the U.S. instead of using intermediaries. Export agreements should be planned and finalized by the global export department. This department should be composed of people that have linguistics skills to make communication with Thailand smoother. There should also be people or access to people that have a wide knowledge about Thailand’s culture, politics and ecology to make sure that all business processes and marketing strategies fit the market. This will require hiring a person that may have been educated in Thailand but spent considerable years in the U.S. and has strong academic and professional backgrounds in the technology (Sanchez 2003, 69). Conclusion and Recommendation Nanosolar’s vision is to become the leader in solar technology. It extends its sights in wholesale and retail which means Business-to-Business and Business-to-Consumer. It has proven that it has the right strategy by its continuous to development of its own technology. A brand like this will have to establish its global identity which means upholding the quality of its product and the culture of its business (Praskah 2002, 338). This identity is just as important as its need to expand. To marry these interests, the export mode is the best entry strategy. The export mode gives the company total control over their product, its distribution, margins and even the marketing plan. For Nanosolar, it works perfectly because the product is portable. 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