Please see attached for assignment details and papers written earlier in the course regarding Germany/business
Requirements: no more than 10 pages
Your plan should be logically derived from the country analysis using the format below:
· Executive Summary including the purpose of the report, the opportunity you are proposing (where the opportunity is defined as starting a business in a country outside of the United States) and recommendations.
· Business Model Proposal (derived logically from the country analysis) with details of the proposal (business model, how you are going to make money, value proposition of your product offering, quantitative and qualitative benefits of the project, entry mode, trade barriers, financing decisions, etc.).
· SWOT Analysis based on your country analysis and the business you are planning to start.
· Strategic Plan with a 3-5 year sequential implementation plan.
· Projected 10-Year Cash Flow Analysis including investment and Return on Investment (ROI) target with cash flows brought back to present dollars. Use a discount rate of 10%. Also pick at least 1 parameter (e.g., volume, price, etc.) and show a sensitivity analysis.
· Issues, Risks, Contingency Plans and Metrics Identify and describe what issues and associated business risks may arise from starting this business in your chosen country. Briefly describe contingency plans to address these. Also include what metrics should be assessed to understand whether the business is achieving plan and how often they should be assessed.
This plan will be in a Word document. The document should be no more than 10 pages. The paper does not have to be in APA format. But it must follow APA guidelines for spacing, font, font size and reference formatting and citations The title page, reference pages and charts/graphs/tables pages are not included (counted) in the 10-page count.
Please prepare this report as if it will be given to your CEO or a Venture Capitalist for consideration. Good grammar, no misspellings, and logical flow are all very important!
How do I estimate sales?
Answer: Use market estimates, market growth rates and assume your market share for each year.
How do I do 10-year discounted cash flows and ROI?
What is a Value Proposition? What is a SWOT analysis?
September 22, 2021
Germany Renewable Energy Industry: Porter’s Five Forces Analysis
The world faces enormous energy resources due to the rapidly increasing population, implying that there is an urgent need to devise means that will ensure a stable and sustainable energy system is developed to account for the growth and subsequent shortages. The introduction of renewable energy sources promises the future and the ability to address the highlighted limitation being experienced worldwide (Blazejczak et al., 2014). Germany, one of the best economies in Europe, futures a plethora of renewable energy resources that are environmentally friendly and reusable. Nonetheless, most of its sources are notably under-utilized, especially solar, nuclear, and wind power. The country’s government comprehends the significance of and potential that the sector boosts and realizes sustainable energy resources nationally (Bechberger & Reiche, 2004). As a result, the government launched a renewable energy program and green technology policy in encouraging the citizens to incorporate sources that emit low carbon and minimize the overall dependence on fossil fuels.
Nevertheless, there are significant factors that impact the energy sector in the country and consequently the requirements for entry by firms. The factors can be assessed through Porter Five Forces, which include the threat of entry, threat of substitutes, bargaining power of consumers and suppliers, and ultimately, industrial rivalry. The factors are essential for a firm entering a specific industry as they aid in developing effective marketing, competitive strategies, and the feasibility of the business in the long run. As such, the investors will incorporate the five forces in analyzing the energy sector in Germany.
As aforementioned, Germany’s political position and geographical location allow the country to lead and manage the European market due to its diverse internal economy. It features a petite, medium, and large corporations making the economy exceedingly competitive. According to Porter (1998), rivalry among existing competitors has a significant impact on the overall functioning of the sector. Whenever the rivalry is present among the competitors in a certain sector, the results are low prices yielding low profitability levels for the organizations in the industry. The renewable energy sector in Germany is a highly competitive industry implying that the competition takes a toll on the overall profitability of the organizations in the long term.
Germany’s top renewable energy organizations include Siemen energy, which is responsible for most of the electricity generations especially in other parts of the world; Solstice, a data-driven organization based on power plants; Crop-Energies, which is a member of Sudzucker group; and ABO Wind responsible for renewable energy innovations projects, among others. Each of the highlighted organizations specializes in one of the renewable energy sources except ABO, which specializes in wind, solar, and biomass (Wehrmann, 2020). This implies that the industry has diverse competitors whose strategies and relationships are diverse.
The government initiatives and incentives are incorporated in the sector to facilitate the easier expansion of small and medium enterprises. As the sector continues to incorporate research and development implies that organizations will likely explore diverse energy resources leading to diverse market share resulting in elevated competition and hence desirable prices that gives the consumers value for their money. The level of competition is largely defined by increased research and innovation. Some organizations embrace new innovative projects and fund them to meet the energy level required for the grid connection (Wehrmann, 2020). In a nutshell, the sector in the country features a tremendous industrial rivalry since the competitors are many, although industrial growth is high. Products are primarily differentiated, and the competitors are strategically diverse.
Bargaining power of buyers
In Germany, the cost of power is significantly higher compared to other parts of the world, such as the United States. This is because the government has constantly been investing in renewable energy sources to achieve cheaper energy in the long term. This implies that all households are continuously supporting the government in the energy transition through the inclusion of surcharges, taxes, and grid fees (Lehr et al., 2012). According to Porter (1998), the buyers are known for demanding a lot. As such, they want to buy the best available offerings at their disposal while paying the least amount possible. This puts pressure on all organizations in the energy sector and their profitability in the future. An organization that features a powerful consumer base features a higher bargaining power of consumers as they will seek discounts and offers.
Organizations that invest in renewable energy production targets enterprises, either small, medium, or large corporations. Most households are embracing renewable energy sources such as solar power even though the initial cost may be high. With the possibility of breaking even within a short time, the consumers, especially business owners, are opting for the system (Hansen et al., 2019). The organizations that derivers the full services, including installation, have been attracting a plethora of consumers, while prices are largely even. The organizations have been heavily investing in the research and development of sustainable systems, especially the inclusion of efficient batteries for solar power storage. Large corporations in the sector focus on large power plants and installation, while the small and medium enterprises deal with domestic and small household installation (Hansen et al., 2019).
Bargaining power of suppliers
In Germany, the suppliers in the renewable sector are numerous. The country boasts significant natural resources that are primarily under-utilized, especially for the generation of energy. The presence of raw materials implies the cost of production is significantly reduced. Due to investment in research and development, large corporations can produce sufficient products based on the market demand (Statista, 2021). The rising demand for products that facilitate the generation of energy from renewable sources ensures that the suppliers ought to rise to the occasion to satisfy the demand. In this case, they have price control, and consequently, the bargaining power is strong. As previously mentioned, the large corporations in Germany have significantly invested in innovation, implying that the suppliers supply fairly standardized materials that are less differentiated while featuring low switching costs (Porter, 1998). This makes the buyers in the sector switch suppliers at will, making the supplier’s bargaining power significantly weak.
Organizations work with others that operate within the sector to complement their services and products. As such, they source their raw materials from various suppliers to meet their production capabilities. They are responsible for the profitability of the manufacturing organizations in the sector. All the firms in the renewable energy sector in Germany are significant consumers of the materials that the suppliers provide. This means that the profitability of organizations, especially the ones that source their products from other suppliers, largely determines reasonable pricing. Some of the corporations are driven by innovation through research and development collaboration with the suppliers for easier separation based on the products they are integrating for profitability (Bechberger & Reiche, 2004). Collaborations with other organizations in the sector invoked a wave of control where the largest organizations bought the smaller organizations for ease of operations.
Threat of substitutes
In Germany, the renewable energy sector features a few substitutes. Significantly, the low-end enterprises produce the substitutes implying that there are no limits to the firm’s profitability in the sector. According to Porter (1998), whenever a new product or a service is able to address the needs of a consumer in diverse ways, the profitability of the industry is significantly affected. A substitute product or service that offers significantly high value by being unique from the existing products, hence offering a higher threat in the sector. An effective substitute in the sector is non-renewables that consequently increase carbon emissions and are largely expensive in the long term (Kreuz & Müsgens, 2018). Renewable sources of energy are primarily naturally occurring, like solar. Incorporating appropriate technology to tap the potential provides the consumers with adequate quality of energy that is cheaper and environmentally friendly, among other advantages.
As such, an organization aiming to invest in the sector needs to focus on providing quality products for its consumers. As a result, the clients will opt for their products as they provide a higher value for the clients’ money as compared to the value provided by the substitute products. Furthermore, the German government has been phasing out sources of energy such as coal implies that the organization will invade only the environmentally friendly and cheaper energy sources (Kreuz & Müsgens, 2018). As such, organizations ought to differentiate their product significantly to ensure the clients value the uniqueness of the product and consequently not to opt for substitute products for its advantages. Usually, providing such products that give the consumers value for their money helps in understanding the needs of the consumers and consequently evaluate them through research and provision of products that meet their needs.
Barriers to entry
The renewable energy sector in Germany is dominated by an organization that has heavily invested in research and development. This leads to innovation which is integral to the advancement of the sector. As such, it is reasonably futile for new organizations to enter the industry. This implies that the large corporations specializing in production at high capacity have a cost advantage and ensure that the new business’s production cost is costlier, making their threats a weaker force (Porter, 1998). A new organization in the sector ought to incorporate innovation and integrate new ways of doing things to pressure existing organizations. They can equally integrate low prices, minimized costs, and new value to the consumers.
The product differentiation is strong in the sector where the sector sells differentiated products instead of standardized products. Starting big requires enormous capital, making it futile for new entrants to set up their operations due to the high expenditure required. Furthermore, there is a need for increased research and development, making new entrants a weaker force in the sector. Government policies are crucial in Germany concerning the energy sector. An entrant ought to meet strict and legal requirements to begin their operations (Blazejczak et al., 2014). Besides, the government offers the renewable energy sector incentives and while incorporating policies to ensure new entrants succeed, making it a strong force. Nonetheless, the access to the distribution network is largely welcoming for the new entrants as they can easily set up a distribution network and begin their operations, making the threat a strong force in the sector.
Conclusion & Recommendation
A new business in the sector can incorporate the five forces developed by porter to determine the feasibility of their investment. This is because the strategic planners can understand various factors and how they can impact the sector’s profitability. A stronger force implies minimal profitability, while a weaker force implies greater revenue. For example, the German government has invested significantly in efforts focusing on programs aimed at renewable energy promotion and the green technology market in the country (Hansen et al., 2019).
The forces inform the new entrants on the various avenues to emphasize when developing a new business. The country is primarily focused on achieving a green economy, and this promises an opportunity for investors. The forces allow an investor to exploit the opportunities as they can shape the forces to suit their mission. The country has been at the forefront of adopting solar energy. As such, this is an opportunity that can be exploited by setting up a business that provides solar products and installation for residential centers, small and medium businesses.
Bechberger, M., & Reiche, D. (2004). Renewable energy policy in Germany: pioneering and exemplary regulations. Energy for Sustainable Development, 8(1), 47-57.
Blazejczak, J., Braun, F. G., Edler, D., & Schill, W. P. (2014). Economic effects of renewable energy expansion: A model-based analysis for Germany. Renewable and sustainable energy reviews, 40, 1070-1080.
Hansen, K., Mathiesen, B. V., & Skov, I. R. (2019). Full energy system transition towards 100% renewable energy in Germany in 2050. Renewable and Sustainable Energy Reviews, 102, 1-13.
Kreuz, S., & Müsgens, F. (2018). Measuring the cost of renewable energy in Germany. The Electricity Journal, 31(4), 29-33.
Lehr, U., Lutz, C., & Edler, D. (2012). Green jobs? Economic impacts of renewable energy in Germany. Energy Policy, 47, 358-364.
Porter, M. (1998). Competitive Strategy, New York Free Press. Porter Competitive Strategy 1980.
Wehrmann, B. (2020, April 17). Solar power in Germany – output, business & perspectives. Clean Energy Wire. https://www.cleanenergywire.org/factsheets/solar-power-germany-output-business-perspectives.
Germany presents itself as a critical target for entrepreneurship, although a thorough assessment is essential to establish the preferable niche. The history of entrepreneurship in Germany dates back to 1815, as the entrepreneurs faced the consequences of political challenges, shifting borders, and extensive institutional rearrangements. After 1815, Germany was a taxing environment, and since its unification in 1871, during World War I and post-World War II, innovativeness became a salient characteristic of the German enterprise (Landes et al., 2012). Based on its Geography, Germany is situated in the European continent, comprised of 16 states that are independent regarding their internal governance or law-making procedures. Additionally, Germany is a member of the European Union, embedded on universal goals to enhance peace, provide liberty without borders, enhance economic cohesion and solidarity and steer sustainable development for balanced economic growth. Based on the July 2021 statistics, the population of Germany is estimated to be 79,903,481 characterized by a median age of 47.8 years and a ratio of 0.96 male(s)/female (Index Mundi, 2021).
Based on the general evaluation of the background information regarding Germany’s attractiveness for entrepreneurship, it presents a potential opportunity to embrace innovation and creativity, especially in the changing business environment. The potential and huge economic size define the overall attractiveness of Germany’s business environment. The vast size of the economy by being a member of the European Union provides an opportunity for extensive exploration through the free entry and exits within the borderless market. Studies confirm that Germany is the biggest winner or beneficiary of the European Union from the single market membership providing access to free transit of capital, goods, and services, and labor across the EU member states (Reuters Staff, 2019). Therefore, establishing a business in Germany provides an opportunity to compete in a free market where every organization has access to labor at the same rate, making the competition a healthy aspect across the region. Additionally, with the highly diversified population classified by gender, age, and race, Germany is a top choice for business, providing an important opportunity for diversification into diverse market segments.
Organization, perfectionism, and effective planning characterize the German business culture, holding strict adherence to vertical hierarchy in decision-making processes in the organization. Formality and following outlined protocols are essential factors for effective relationship establishment and management in Germany (Santander Trade, 2021). German business culture emphasizes the need for teamwork, communication, and women in business, which serve as a critical aspect for the defining moment in establishing an organization. Additionally, the official language is German, with almost 95% of the people speaking it as their first language. The minority groups are highly underrepresented in Germany, with the Turkish, Polish, Syrian, Romanian, and the unspecified representing 1.8%, 1%. 1%, 1%, and 8.9%, respectively, of the entire population (Index Mundi, 2021).
Thus, doing business in Germany presents a significant opportunity to establish a collaborative organization guided by the principles of teamwork and collaboration to soar higher heights in the corporate world. Tripathy (2018) confirm that teamwork or collaboration in business is a salient approach to achieving goals faster and easier by increasing innovation and diversity of ideas. Germany’s team-based culture emphasizes collectivism rather than individualism to establish a perfect business environment characterized by creativity, trust in the organization, effective conflict resolution, and healthy risk-taking. Therefore, establishing a team-oriented business in Germany is a practical approach to thrive the collective culture.
Besides being a collective-oriented culture, establishing a business in Germany is easy due to its effectiveness in communicating mutual vision and aligning teams into joint goals. However, a critical challenge with establishing a business in Germany is the lack of ethnic diversity. Curtis (2019) confirms that when an organization fails to factor in ethnic diversity, dealing with injustices and inequality and incorporates the multiplicity of values and ideas. Therefore, it is likely that the entrepreneur will have a significant challenge implementing change due to possible unanimous resistance from the teams, contributed by a lack of ethnic diversities that steer multiplicity in values. Change management risk will be an imminent danger for the investor, specifically in sectors requiring local recruitment.
Germany has one of the most stable political systems marked by higher transparency and limited corruption. Germany has a robust legal anti-corruption framework, which criminalizes bribing across sectors, including in commercial practice, public service sectors, among other many (Global Legal Insights (GLI), 2021). The German government provides significant supports inform of grants for investment, research, and development to enhance investment in Germany. Besides, there is a peaceful coexistence in Germany characterized by a non-violent environment and significant political relations with the external business environment among the European Union’s member states. Procedures related to foreign investment is that foreign investors are subject to standard conditions similar to the German investors with no administrative controls over foreign direct investment (FDI) except for the regulated industries such as military products, and pharmaceuticals, etc., which are subject to specific controls (Santander Trade, 2021a).
German political system is favorable for foreign direct investment, especially if the choices lie outside the regulated sectors’ bracket. The practical guidelines against corruption are significant factors for a start-up to ensure compliance and cost-effective operation of the business. A stable legal framework in support of entrepreneurship is a salient approach to ensure sustainability. Thus, choosing entrepreneurship in Germany is a salient choice to alleviate legal costs for establishment. Ethical business practice steers sustainability in business through reduced cost of operations and increased organizational resilience (Bannerman & Roberts, 2012). A business operating in Germany is safe from corruption-related costs due to practical legal restrictions compelling to ethical practices. Therefore, operating in Germany, the business is likely to experience legal risks, mostly related to attempts at corruption or to gain unfair competition.
Germany is the largest economy in Europe and the Fourth largest world economy after the United States, China, and Japan. The German economic system is the 29th freest economy globally and 16th among the 45 European countries, with economic freedom on 72.5 above the regional and global averages (The Heritage Foundation, 2021). The German economic system is defined by a vast contribution of the service sector, followed by production industry, construction, and agriculture rating at 70.4%, 22.9%, 6%, and 0.7%, respectively (Statista, 2021). The federal corporate tax rate stands at 15.8%, with the government upholding higher-level business freedom, characterized by a skilled labor force (The Heritage Foundation, 2021). Germany remains an open economy, being a member of the European Union with 45 preferential trade contracts. The government targets to support investment through subsidies for up to 1% of the GDP for the renewable energy sector.
The openness and vastness of the German economy present a potential competitive risk due to the free entry and exit in the market. Therefore, with the opportunity available equally to all entrepreneurs, the business faces a risk of declining business revenue due to a competitor’s action. This element is a salient indicator for the investor to focus on the less ventured sector and strategize to differentiate his venture from other businesses. A salient approach to ensuring competitive advantage is embracing differentiation that guides the business to a government-subsidized and less competitive model. Additionally, the investor will gain an economy of scale due to the anticipated economic growth and already-existing colossal economy.
The Judiciary branch of the government heads the legal system of Germany. The businesses are recognizable under the German statutes and regulations focus on inhibiting abuse. In Germany, corruption in business is listed as a criminal act and punishable by the law (Global Legal Insights (GLI), 2021). Under the German legal system, the laws are made to protect the welfare of the businesses; there are no restrictions to foreign direct investment, but the government can review and restrict specific businesses for public order. Analytically, Germany provides a conducive environment for business, marked by protection by the law and limited government restrictions. Under the General Equal Treatment Act of the EU and German law, prohibit bias or discrimination of employees based on religion, race, sex, and identities. To ensure diversity in the organizational hiring process, the investor may encounter compliance risk where a proportion of the applicants are eliminated to factor in diversity issues in employment. As a result, the venture may be subject to legal costs for noncompliance with the regulations.
Summary and Recommendations
Germany is a highly attractive place for business, considering the vast opportunities available for new and existing ventures. Therefore, numerous ventures would ideally thrive in Germany based on the analysis of the facts of the business environment. A necessary form of business to establish in Germany is the renewable energy business. Renewable energy business receives vast government incentives equivalent to 1% of the total GDP. Besides, it would be crucial to initiate a finance consultancy firm, considering that the service industry contributes the largest to the German GDP rating at 70.4%. Besides, with Germany being a member of the EU, investing in a service sector would be a salient approach to acquire labor across the EU member countries for diversity and expansion purposes. The renewable energy and financial service business are preferable for the distinctions mentioned above even though other sectors present adequate opportunities due to the openness of the market.
Bannerman, D., & Roberts, D. (2012, January 17). Why eliminating corruption is crucial to sustainability. The Guardian. https://www.theguardian.com/sustainable-business/blog/eliminating-corruption-crucial-sustainablity
Curtis, L. (2019, November 23). Why Your Lack of Diversity Is Hurting Your Business. Forbes. https://www.forbes.com/sites/lisacurtis/2019/11/23/why-your-lack-of-diversity-is-hurting-your-business/?sh=705da3162782
Global Legal Insights (GLI). (2021). Bribery & corruption laws and regulations 2021. GLI. https://www.globallegalinsights.com/practice-areas/bribery-and-corruption-laws-and-regulations/germany
The Heritage Foundation. (2021). German economy: Facts, population, GDP, inflation, unemployment, business. https://www.heritage.org/index/country/germany
Index Mundi. (2021, September 11). Germany demographics profile. IndexMundi – Country Facts. https://www.indexmundi.com/germany/demographics_profile.html
Landes, D. S., Mokyr, J., & Baumol, W. J. (2012). History of Entrepreneurship: Germany after 1815. In The invention of enterprise: Entrepreneurship from ancient Mesopotamia to modern times. Princeton University Press. net/common/the-invention-of-enterprise/13.php”>https://erenow.net/common/the-invention-of-enterprise/13.php
Reuters Staff. (2019, May 8). Germany, wealthy regions are biggest winners of EU single market: Report. U.S. https://www.reuters.com/article/us-europe-single-market-study-idUSKCN1SE07Z
Santander Trade. (2021, September). Business practices in Germany. https://santandertrade.com/en/portal/establish-overseas/germany/business-practices?url_de_la_page=%2Fen%2Fportal%2Festablish-overseas%2Fgermany%2Fbusiness-practices&&actualiser_id_banque=oui&id_banque=0&memoriser_choix=memoriser
Santander Trade. (2021, September). Foreign investment in Germany. https://santandertrade.com/en/portal/establish-overseas/germany/foreign-investment
Statista. (2021, January 14). Germany – Share of economic sectors in gross domestic product (GDP) 2020. https://www.statista.com/statistics/295519/germany-share-of-economic-sectors-in-gross-domestic-product/
Tripathy, M. (2018). Building quality teamwork to achieve excellence in business organizations. International Research Journal of Management, IT and Social Sciences. https://doi.org/10.21744/irjmis.v5i3.662