SolarCity International Expansion

Executive Summary

SolarCity has grown from the initial startup business into the contemporary market leader in the provision of customized solar energy systems. The firm is involved in the installation of solar systems in the residential sector across the United States and has additionally developed partnerships with large companies, government and learning institutions towards the provision of solar energy as the innovative option that fits across all their dynamic demands. The solar energy increase is not restricted to the United States, but the company is gradually spreading to the global market. Based on the analysis of the possible SolarCity expansion opportunities in South Africa and Brazil, Brazil was found to be the most potential market with the most potential towards opportunities for the expansion of operations. Brazil presents a potential emerging market that is characterized by a prospering middle class with an increasing demand for environmentally friendly energy to cater for their increasing lifestyles demands.

Introduction

SolarCity is an energy firm that is based in California America with branches across more than fifteen states. The firm is involved in the sales, installation, production as well as maintenance of solar energy in the United States. The company is made up of a highly qualified management workforce with exceptional skills that have enabled it to lead in the technological sector. However, prior to the last financial crisis, the company has been encountering negative earnings which were furthered by the world economic crisis. The company is slowly rising despite the rapidly rising challenges in the market in general. The company is highly reputable in America based not only on its resources but also the ability to meet the ever-changing demands of the market. The company has specifically acquired the lead through the use of strategic positioning as an innovative firm and effective marketing. As a solar energy provider, the company will be targeting low to middle-income earners with a desirable perception towards green technology. However, in order to succeed in the new market, the company will require a skilled labor force and a focus on cost reduction to support the marketing needs. Intellectual property protection along with joint ventures are also essential in ensuring its successful adherence to the set standards. The solar energy market is a competitive one which is mainly driven by the growing technology and the need for environmentally friendly energy. Thus, to understand the state of the markets a comparative analysis in Brazil and South African is conducted through a detailed PESTEL analysis.

Opportunity factors and Trends.

 Economic Market Opportunity and potential growth

Solar Energy holds notable potential in the contemporary market as one of the environmentally friendly options for the increasing demand for energy. There has been an intensifying demand with reference to the solar energy ability to advance in the industry particularly in some of the unexploited and emerging markets across the globe such as Brazil and South Africa. The transformation of the industry particularly in the retailing has also been proven through research that even though the development is higher in the developed markets such as the United States and the United Kingdom there, the potential is higher in the developing market since they are less exploited. Based on the acquired success of the uprising markets it is evident that more possibilities lie in expansions (Pereira, Camacho, Freitas & Da Silva, 2012).

Solar energy has become a preference across the globe due to the need for environment conservation via green technology. To start with, the products are highly demanded based on their accessibility, affordability and environmental protection value. The GDP of the developing markets is low which implies that despite the economic potential the financial stability is low which has resulted in the increasing reluctance with regard to the penetration of most retailing companies. Besides, even though these countries have higher economic markets potential with respect to buyer’s willingness and increased demands for the products, there is a heavy presence of under-developed infrastructures beyond the major towns or city’s. In other words, the population that is exposed to the market is lower which means that the larger market is restricted to accessibility. On this ground, online sales are also affected by the lack of proper infrastructure which hinders the ability to create awareness and familiarity with the industry.

Opportunity Support Factors

Affordability and availability of the products have resulted in the higher ability to change the monetary state and the spending capabilities of the developing countries. The development is apparent mainly in the developing countries such as South Africa and Brazil. There has been a rise in the spending abilities among individuals due to the increased rate of middle-class persons. Due to the economic stability middle and low-income earners have the highest potential of spending for energy products due to their increased energy fuel needs. The stability of the economic wellness in the developing nations in addition to affordability has created more opportunities for enhancing and expanding the retailing industry (Timilsina, Kurdgelashvili & Narbel, 2012). In that more firms are being often created by the foreign and domestic companies. The aspect has been facilitated by the fact that most of the investors have established the attractive nature and suitability of such investments in the developing nations particularly in Brazil due to its stable political and socio-economic environment. The integration of these forces has been a major force is supporting the growth of the retailing industry and the rising customer demand and spending potential. Based on Timilsina, Kurdgelashvili & Narbel (2012) reports indicates that 90 percent of individuals mainly from the developing nations consumes close to 15 and 20 percent on energy. Thus this illustrates the economic potential of the solar energy market today in Brazil and South Africa.

Brazil has more economic potential than South Africa. In that technological advancement and infrastructure is higher in Brazil than in South Africa. In Brazil, the middle-class composition has been rising rather rapidly which means that their spending is also high. The political state is also stable with the country making more emphasis on environmental conservation and the use of green energy. Even though South Africa is less exploited, it is evident that its unstable socio-political state makes the environment unfavorable for development since it’s more open for domestic investment which makes Brazil more favorable. As per 2016, the GDP of Brazil was 1.796 trillion USD which has risen with over five percent. This clearly demonstrates that there are more opportunities for development. Currently, S.A has 19 PV solar systems that are listed within the first 50 systems (Dorothal, 2017).

            Threat Factors and Trends

SolarCity operates within the technology industry where much innovation is needed to keep up with the advancing changes. It means that the company will be requiring a highly technology equipped workforce. It is evident that Brazil has a stable economy based on the availability of resources and its general capability to adopt the technology. On the other hand, even though South Africa presents notable potential since it is not highly exploited the existence of restrictive policies makes the investment impossible. In that, the company needs to operate under open and favorable regulation where the taxation is minimal to support the need for increased revenue generation. The political state in Brazil is more favorable. Besides the low and middle-class individuals comprises more than 60 percent of the entire populace which will offer a significant market for the company (Pereira et al., 2012). The company will be targeting this populace as it offers the affordability value which is likely to attract them since these individuals are price conscious.

Some of the critical factors that make Brazil more favorable for the business investment include GDP, lifestyle, government support, lifestyle, technology, and population. The economic stability of both countries is favorable, and thus the performance of the business is likely to be high (SineTech, 2018). The physical and communication development are core in determining the general performance and stability of the business. Brazil is developed, and its location is strategic which will allow the company to access supply efficiently which will then be fostered by its economic state. The aspect is essential in creating accessibility and convenience of products. The income gain across the populace is slowly increasing in general.

In the retailing industry legal, environmental and ethical measures play a key role in determining the effectiveness of the business (Furtado & Perrot, 2015). For a country that has invested well in investment then this is very essential for the growth of the business. The spending rate tends to be higher with skilled, educated and high earnings. On the other hand, the regulatory changes will mainly take place driven by political, industrial and environmental forces. Thus, the taxing system might impact business either positively or negatively. For example, in Brazil, foreign investment taxation is favorable when equated to South Africa. The investment in South Africa is more potential for the foreign investor since the market is stable and the government supports foreign investments.

            The Opportunity and Threat factors

Threat factors and Trends	South Africa	Brazil	Rating
Political factors- government policies and regulations	-South Africa is a rich nation in terms of natural resources and business steadiness. -It is known for being one of the fastest in economic development in Africa -The political administration mainly favors domestic investment through its fiscal policies.	-Brazil is characterized by rapid growth due to its favorable regulation policies for both domestic and foreign investment -A stable socio-economic status that favors investment -Stable political state -The administration has been advocating for foreign investment to increase its presence in the global economy.	Brazil presents less political threats since south Africa has restrictive political ideologies and regulation which makes it more risky.
Economic factors- GDP, income and high spending trends	-As at 2016 the GDP was 294.8 billion USD which has been steady -The country is ranked 25th in terms of population with over 57 million people -Most of the low and middle class individuals utilize their funds on essential needs like education and healthcare. -Competition is high due to the domination of domestic firms	-Brazil expects a 3 percent GDP growth rate this year -As at 2016 the GDP was 1.796 trillion USD and has experienced a five percent rise over the last two years Ranked 6 in terms of population with over 200 million person -More than 50 percent of the lower and middle class individuals utilize more than 15 percent of their revenue on energy. .	Brazil has lesser investment threats when equated to South Africa based on the population and high earning and lesser competition.
Social Factors – Lifestyle and Education	Most individuals are lifestyle conscious particularly the uneducated. Traditions are highly utilized in decision making	Brazil has a high populace of educated and young persons which attributes to high purchasing power Lifestyle is modernized	Brazil holds less social related threats towards the potential of the market than South Africa.
Technological factors- infrastructure, technology growth	South African has substantial infrastructure with skilled and unskilled workers. Technology is highly adopted	Brazil is amongst the technological leaders with excellent telecommunication, internet access and advanced roads.	Both countries equates in terms of technological threats
Legal and environmental factors: Renewable resources and regulatory changes	South African mainly asserts on domestic investment while foreign ones are subjected to excessive taxations.	Brazil has legalized programs that are aimed at promoting investment at both local and foreign markets.	Brazil has lower legal risks while South Africa is very risky for a foreign investment.

 

            There is great economic opportunities for SolarCity in Brazil than in South Africa. Based on the analysis above it is evident that Brazil has a supportive government that supports foreign investments on the ground that the objective is to offer support to the industry to increase its global presence. South Africa offers higher economic threats based on the existence of restrictive policies and higher taxes that discourages foreign investment. The government mainly acquires its revenue from foreign taxation while those operating in Brazil are enjoying the same advantages as the domestic ones (Tomaschek, Haasz and Fahl, 2016). Even though South African has constantly advocated for foreign investment it has illustrated less support in creating favorable policies for the same (RECP, N.D). Both nations own the same level of technology in terms of infrastructure, communication and connections with businesses. While Brazil is a wealthy nation in terms of resources similar to South Africa. Despite the economic difficulties that both nations have experienced in the past they have made notable changes.

            With Brazil leading in terms of populace it offers a great market in general. The company can therefore take advantage of the market by exploiting it fully. Since the market is large that has not been exploited fully and there are fewer restrictions. This will also support its need to venture through the affordable approach. As the company that operates under rapid changes of technology and customers’ demands, it is essential for the company to expand and work in favorable markets that are linked with lower restrictions (Team, 2018). In that the success of the company can only be supported by the environment that allows flexibility, convenience as well as cost efficiency by reducing the expenses that are involved. In other words the company has more potential operating in Brazil given that the market supports all its needs. Besides, in Brazil the company will have access to well trained and competent individuals.

            Recommendations

            Based on the above comparative analysis of the external operating environment in Brazil and South Africa, it is recommended that SolarCity should focus on expanding its business to Brazil over South Africa. Both countries are similar and at the same time distinct with regard to their threats, opportunities and trends that they all own with regard to the solar energy industry.  Those are characterized by favorable socio-economic stability which particularly contribute to wellness of the economy. However some of their main differences are based on their political and ideologies which mainly favors the investments to be in Brazil. First, Brazil has been experiencing a GDP growth over the last few years, its education level is high and income rate is stable with an advanced infrastructure that supports the retailing industry. Brazil has an established retailing energy sector that is fully supported by favorable government policies due to the need to expand to the global sector. Thus, in Brazil the environment is favorable for foreign investment while in South Africa the environment must be harsh for profitability. The fact that it encourages domestic investment more accounts for the unfavorable foreign investments thus the company will face difficulties in their marketing effort while trying to create awareness and familiarity of their products. In addition the establishment of the domestic firms will create threats to SolarCity that will affect its ability to generate adequate revenue.

            Conclusion

            SolarCity is an American based solar energy provider that has acquired a leading position with regard to technological adaptation, innovation and competitive strategy. The objective of the company is ensuring that adequate revenue is created to stabilize the market while minimizing the costs. It is apparent that it is through innovative differentiation and affordability that the company has dominated the market. For the objectives to be met there is a necessity to exploit the market further. Thus, based on the stable external environment in Brazil the expansion is favorable as it has more economic potentials and minimal operating threats. In addition the presence of favorable policies and the less exploited market makes it even more favorable.

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Dorothal, M. (2017). Top 50 Solar PV Plants in Emerging Markets. Solar Plaza. Retrieved from: https://www.solarplaza.com/channels/top-10s/11756/top-50-solar-pv-plants-emerging-markets/

Pereira, M. G., Camacho, C. F., Freitas, M. A. V., & Da Silva, N. F. (2012). The renewable energy market in Brazil: Current status and potential. Renewable and Sustainable Energy Reviews, 16(6), 3786-3802.

RECP. (N.D). South Africa Energy Sector.  Retrieved from: https://www.africa-eu-renewables.org/market-information/south-africa/energy-sector/

SineTech. (2018). Solar in South Africa: major cost savings and shorter payback periods. Retrieved from: http://www.sinetech.co.za/news-solar-radiation-south-africa.html

Team, E. (2018). There is a long positive road ahead for solar in Brazil. Energy Transition. Retrieved from: https://energytransition.org/2018/04/there-is-a-long-positive-road-ahead-for-solar-in-brazil/

Timilsina, G. R., Kurdgelashvili, L., & Narbel, P. A. (2012). Solar energy: Markets, economics and policies. Renewable and sustainable energy reviews, 16(1), 449-465.

Tomaschek J., Haasz T., and Fahl, U. (2016). Concentrated solar power generation: Firm and dispatchable capacity for Brazil’s solar future? https://doi.org/10.1063/1.4949202

Tosi A. Furtado & Perrot R. (2015). Innovation dynamics of the wind energy industry in South Africa and Brazil: technological and institutional lock-ins. https://doi.org/10.1080/2157930X.2015.1057978