1. Do research on the Internet and use the Cultural, Administrative, Geographic, and Economic (CAGE) framework to discuss the distance between Japanese and United States automotive manufacturers.
The Japanese automotive industry is one of the most prominent and largest industries in the world. Japan has been in the top three of the countries with most cars manufactured since the 1960s, surpassing Germany. The automotive industry in Japan rapidly increased from the 1970s to the 1990s (when it was oriented both for domestic use and worldwide export) and in the 1980s and 1990s, overtook the U.S. as the production leader with up to 13 million cars per year manufactured and significant exports. After massive ramp-up by China in the 2000s and fluctuating U.S. output, Japan is now currently the third largest automotive producer in the world with an annual production of 9.9 million automobiles in 2012. Japanese investments helped grew the auto industry in many countries throughout the last few decades. Japanese zaibatsu (business conglomerates) began building their first automobiles in the middle to late 1910s. The companies went about this by either designing their own trucks (the market for passenger vehicles in Japan at the time was small), or partnering with a European brand to produce and sell their cars in Japan under license. Such examples of this are Isuzu partnering with Wolseley Motors (UK), and the Mitsubishi Model A, which was based upon the Fiat Tipo 3. The demand for domestic trucks was greatly increased by the Japanese military buildup before World War II, causing many Japanese manufacturers to break out of their shells and design their own vehicles. In 1970s Japan was the pioneer in robotics manufacturing of vehicles. The country is home to a number of companies that produce cars, construction vehicles, motorcycles, ATVs, and engines. Japanese automotive manufacturers include Toyota, Honda,Daihatsu, Nissan, Suzuki, Mazda, Mitsubishi, Subaru, Isuzu, Kawasaki, Yamaha, and Mitsuoka. Cars designed in Japan have won the European Car of the Year, International Car of the Year, and World Car of the Year awards many times.
CAGE Distance Framework
The CAGE Distance Framework identifies Cultural, Administrative, Geographic and Economic differences or distances between countries that companies should address when crafting international strategies. It may also be used to understand patterns of trade, capital, information, and people flows. The framework was developed by Pankaj Ghemawat, a professor at the IESE Business School in Barcelona, Spain. The impacts of CAGE distances and differences have been demonstrated quantitatively via gravity models. Such models "resemble Newton's law of gravitation in linking interactions between countries to the product of their sizes (usually their gross domestic products) divided by some composite measure of distance." Components
The table shown below provides more detail on each of the CAGE categories, and how they can manifest themselves depending on whether one is comparing a pair of countries or looking at one in isolation. One of the distinctions between the CAGE Framework and other country analysis frameworks is its inclusion of bilateral as well as unilateral factors. | Cultural Distance| Administrative Distance| Geographic Distance| Economic Distance| Country Pairs (Bilateral)| Different languagesDifferent ethnicities; lack of connective ethnic or social networksDifferent religionsLack of trustDifferent values, norms, and dispositions| Lack of colonial tiesLack of shared regional trading blocLack of common currencyPolitical hostility| Physical distanceLack of land borderDifferences in time zonesDifferences in climates / disease environments| Rich/poor differencesOther differences in cost or quality of natural resources, financial resources, human resources, infrastructure, information or knowledge| Countries (Unilateral / Multilateral)| InsularityTraditionalism| Nonmarket/closed economy (home bias vs. foreign bias)Lack of membership in international organizationsWeak institutions, corruption| LandlockednessLack of internal navigabilityGeographic sizeGeographic remotenessWeak transportation or communication links| Economic sizeLow per capita income|
1. As the manager of an SME (small-medium enterprise), which Ethnocentric, Polycentric, Region-centric and Geocentric (EPRG) orientation would you implement in going global?
Developing Global Marketing Strategies
In order for firms to successfully compete globally, as a manager I must achieve significant competitive advantage over their rivals. To do so, a firm must develop a global marketing strategy. There are three approaches to global marketing strategy: Standardization, Configuration/Coordination and Integration of the Firm’s Value Chain. Basically ‘global marketing’ consists of finding and satisfying global customer needs better than the competition, and of coordinating marketing activities within the con- straints of the global environment. The form of the firm’s response to global market opportunities depends greatly on the management’s assumptions or beliefs, both conscious and unconscious, about the nature of doing business around the world. This worldview of a firm’s business activities can be described as the EPRG frame- work (Perlmutter, 1969; Chakravarthy and Perlmutter, 1985): its four orientations are summarized as follows: Ethnocentric: the home country is superior and the needs of the home country are most relevant. Essentially headquarters extends ways of doing business to its foreign affiliates. Controls are highly centralized and the organization and technology imple- mented in foreign locations will essentially be the same as in the home country. Polycentric (multidomestic): each country is unique and therefore should be tar- geted in a different way. The polycentric enterprise recognizes that there are differ- ent conditions of production and marketing in different locations and tries to adapt to those different conditions in order to maximize profits in each location. The con- trol with affiliates is highly decentralized and communication between headquarters and affiliates is limited. Regiocentric: the world consists of region (e.g.Europe,Asia,theMiddleEast).The firm tries to integrate and coordinate its marketing programme within regions, but not across them. Geocentric (global): the world is getting smaller and smaller. The firm may offer global product concepts but with local adaptation (‘think global, act local’).
The regio- and geocentric firm (in contrast to the ethnocentric and polycentric) seeks to organize and integrate production and marketing on a regional or global scale. Each international unit is an essential part of the overall multinational network, and communications and controls between headquarters and affiliates are less top-down than in the case of the ethnocentric firm.
* Chapter 2 – Assessing the Global Marketing Environment – The Global Economy Through Value Chain and Product Line.
1. Select any country you wish (except your own) and apply the Political, Economic, Social, Technological, Environmental, and Legal (PESTEL) model for an analysis of the environment for solar water heaters.
General Political Overview of the Solar Industry at the Federal Level There are several pieces of legislature that are linked directly to renewable energy projects. For example, the Emergency Economic Stabilization Act of 2008. This act is extending the production tax credits granted by Congress, which passed the December 2008 deadline, to give tax credits in relation to investments made in renewable energy projects. Also, The American Recovery and Reinvestment Tax Act of 2009, which states that On-Site renewables (solar photovoltaic, and hot water systems, small wind systems, and geothermal heat pumps) are now eligible for a tax incentive worth 30% of the total cost, without a cap (“Tax,” n.d.). Tax credits allow companies to be successful; without these credits, the cost of generating solar power would prevent it from competing with other electricity producers that produce traditional fossil fuels with hefty tax incentives.
Juiced by government spending, such as the just-signed economic stimulus package, the solar-power market is expected to grow to $70 billion in annual investing by 2013 (Smith, 2009). This stimulus package calls for $20 billion of tax cuts for renewable-energy production and another $54 billion allotted to modernize the countries aging electricity grid, which will help home, vehicles, and buildings become more energy efficient (The Wall Street Journal, 2009). Support of the renewable energy industry through this new tax-incentive program is predicted to have a jump-start effect on renewable energy plant construction and promote job creation in this down economy (“Wind,” 2009). The solar and wind tax credits are structured slightly differently, but the House version of the stimulus bill would help both industries by providing more immediate tax incentives, alleviating some of [the industries] dependency on banks (Galbraith, 2009).
Besides legislature, there are also regulations that involve climate change. By all indications, the federal government is going to become active in climate change regulation proceeding forward. This might affect some of the trade programs and will probably entail some sort of regulation being developed for greenhouse gases and other pollutants. This would all be done under the Clean Air Act (Jones, 2008). Without the governments help implementing wellunderstood and targeted subsidies, it would not be as likely to build the confidence of potential investors and attract the needed capital to this industry. Similarly, the government policies encouraging the use of electric vehicles may also accelerate the demand for solar energy (“The Economics,” 2008).
Federal initiatives have been put into place to help prosper the solar energy industry. The U.S. Department of Energy (DOE) Solar America Initiative (SAI) was created in January 2006 as part of the President’s Advanced Energy Initiative. The Solar America Initiative’s primary goal is to ensure that solar energy technologies will play a growing role in U.S. energy supplies and the U.S. economy by making the technology cost competitive in the near future (“SAI: Goals,” n.d.).
General Economic Overview of the Solar Industry in Relation to the Current Economic Crisis The current economic crisis in United States is having a drastic effect on the solar energy industry. Manufacturers of solar cells and modules have ramped up capacity recently as highenergy prices have refocused attention on renewable energy. That has allowed some manufacturers to benefit from an economy of scale, which has also helped reduce prices (Smith, 2009). As prices reduced, it caused the industry to grow at an alarming rate, which many believed would continue under the Obama Administration, but because of the credit crisis and the broader economic downturn, the opposite is happening: installation of wind and solar power is plummeting. Factories which build parts for these industries have announced a wave of layoffs in recent weeks, and trade groups are projecting 30 to 50 percent declines this year in installation of new equipment, barring more help from the government. Much of the problem stems from the credit crisis that has left Wall Street banks reeling. Once, as many as 18 big banks and financial institutions were willing to help finance installation of wind turbines and solar arrays, taking advantage of generous federal tax incentives. But with the banks in so much trouble, that number has dropped to four, according to Keith Martin, a tax and project finance specialist with the law firm Chadbourne & Parke (Galbraith, 2009). In the solar industry, the ripple effects of the crisis extend all the way to the panels that homeowners put on their roofs. The price of the solar panels has fallen by 25 percent in six months, according to Rhone Resch, president of the Solar Energy Industries Association, who said he expected a further drop of 10 percent by midsummer. (For homeowners, however, the savings will not be substantial, partly because panels account for only about 60 percent of total installation costs) (Galbraith, 2009). An analysis by Lux Research, a New York-based energy research firm, titled “Finding the Solar Market’s Nadir,” concluded that cell and module prices have dropped by 25% lately and price cuts are radiating back up the supply chain due to excess inventory of finished goods. “Capacity additions among suppliers have created a version of mutually assured destruction for the solar industry,” said Ted Sullivan, an author of the report. Many expect consolidation among the numerous manufacturers of solar-powered equipment to have sprung up recently. Eventually, he expects demand to soak up excess capacity, a trend hastened by price-cutting (Smith, 2009).
General Social Overview of the Solar Industry
Solar energy provides many societal benefits: from environmental sustainability to energy security to the creation of high-valued jobs. Solar energy can also help utilities satisfy renewable energy obligations and can provide new sources of revenue (“SAI: Role,” n.d.). Sustainability and the security of having energy sources not reliant on fossil fuels from foreign sources will provide not just the American society but the world as a whole an entire new industry and source of income. This new industry will provide new careers for the next generation. President Barack Obama has estimated creating 5 million new jobs in renewable energy.
Social Overview of the Solar Energy Industry in Relation to Environmental Factors The use of solar energy has proven to offer many economic and environmental benefits, which will contribute to a healthy and secure future. It has been proven that sunlight is the best natural resource that can be converted into electricity. Consumers like solar power because it provides the opportunity to save a huge amount of money on electricity. As many reports show, no other energy can be as environmentally -friendly as solar energy. Solar energy is a natural resource that does not pollute the air when being converted into electricity. Unlike most industrial or electric power plants, which run on electricity that produces carbon emissions, solar power does not pose a hazard to the environment and all living creatures. Solar energy is seen as a savior when it comes to the fight against global warming, because it does not produce greenhouse gases, the major contributor to global warming. Solar energy can also reduce battery use, which greatly reduces toxins and waste that are released from batteries after they are thrown away. Solar energy can be found in abundance, wherever the sun is shining bright (Pennington, 2008). Some of the main environmental benefits that are reported about solar energy are: 1) The reduction of local air pollution
2) Offsetting greenhouse gases
3) Conserving energy
4) Reducing the need for dry-cell battery disposal (Solar Electric Light Fund, 2007). Concerns about the Solar Energy Industry in Relation to the Environment Although most reports indicate that the good outweighs the bad concerning solar energy and the environment, there are some concerns that have surfaced about how the solar industry might harm the environment. Concerns have been raised over issues such as: 1) Land Disturbance
2) Visual impacts
3) The use of potentially hazardous materials in some systems Land disturbance is a concern because all utility-scale solar energy facilities require a relatively large area for solar collectors, which could interfere with natural sunlight, rainfall, and drainage, which could in turn affect plants and animals. These facilities also take up a lot of room, which eliminates room for natural wildlife. Visual impacts of solar energy can also occur; this is because solar power buildings are generally large facilities with numerous and highly geometric and highly reflective surfaces. These effects might create an aesthetically unappealing visual impact or may interfere with the environment. Finally, hazardous material may be in some of the photovoltaic (PV) technologies, and, although handled very carefully in normal operating conditions, there is always the potential for environmental contamination due to spills or improper disposal (“Solar Energy Development,” 2008).
There are some other concerns about the toxicity of the materials used in the solar industry that could pose a risk to the workers, consumers, and the environment. These issues mainly pertain to the making of the solar equipment and how to properly dispose of the solar system materials from the consumer side of things. Our research indicates that the materials used in the solar industry have the potential to create electronic waste at the end of their useful lives, as well as, contain possibly toxic materials that could harm the environment, and cause unknown health risks (Silicon Valley Toxics Coalition, 2009). Companies have been conducting extensive research to deal with the inevitable risks and maintain that no materials used will be harmful to humans or the environment.
It is apparent from the information above that the solar industry can pose threats to the environment, but at the same time, it is obvious that, in this case, the good outweighs the bad. Solar energy offers too many benefits not to utilize its resources because of a few manageable threats. The solar energy industry is the future of electricity.
General Technology Overview for the Solar Industry
Every hour of every day somewhere, there is enough solar energy reaching the earth to meet human energy needs for an entire year (Silicon Valley Toxics Coalition, 2009). Most solar energy, in order to become usable electricity, needs to be converted to what is called base load power. In other words, any excess power that is produced during sunny days needs to be stored for use on darker days. However, most energy storage systems are expensive; either in actual capital or in energy losses occurring during the storing and retrieving process. This storing process allows solar energy to go from an intermittent resource to a 24 hour 365 day a year baseload technology resource (Fthenakis et al., 2008). As an example, new technologies are being developed to transmit the electricity that is generated from solar sources more efficiently over longer distances. This is because a lot of the solar electricity for the US is produced in the southwest. To enable a better mode of getting the energy where it is needed, the US will require the construction of a national transmission network. These new technologies have led to less energy loss in transmission. High-voltage direct current lines are currently showing only a 10% loss versus a 20% loss from the use of just plan high-voltage power lines (Fthenakis et al., 2008). The examples above point to the need for this industry to be constantly improving the processes currently in use. The solar photovoltaic (PV) industry is currently the main technology and is at the forefront of this $526 million dollar a year industry. It is also part of the multibillion-dollar technology sector aimed at seeking solutions to the critical environmental issues that are currently threatening our planet. The PV industry has seen remarkable growth in the past decade and is currently still expanding and developing new and improved technologies. The number of solar cells produced globally made to create solar technology has increased sevenfold in the past five years. During this same period, installation of these types of solar technologies has increased fivefold (Silicon Valley Toxics Coalition, 2009). Currently the amount of solar energy being used provides one tenth of one percent of the total U.S. energy consumption. However, the solar market share is rapidly expanding as the costs become more competitive due to all the current conventional energy sources and new and improved technology.
The industry is looking to continue improvement solar-cell design and materials in order to maintain and meet the predicted demand and capacity forecasts. Even though most of the solar energy industry is based on PV technology, other technologies are widely used in conjunction with PV technology, as well as, on their own, contributing to another part of the solar energy process. Currently, three technologies make up the basis of the solar industry. The three technologies that we are referring to are silicon-wafer base photovoltaic, thin-film photovoltaic, and concentrated solar thermal power (Lorenz et al, 2008). All these technologies have problems that need to be addressed in order to be more efficient and effective. Solar energy companies using any of these current technologies, which work on directly generating energy from light, are trying to improve on the technologies, reduce costs, and make the systems more efficient. For each unit of power generated using more efficient systems, the companies will improve and address current problems in relation to such things as: requiring fewer raw materials, developing a smaller solar-collection surface area, and improving on systems so they weigh less and are cheaper to transport and install. Constant technology research and development is needed because the manner in which companies manufacture solar cells has the largest impact on the cell’s overall efficiency and cost (Lorenz et al, 2008). The only way to remain competitive in this industry is to stimulate continued efficiency improvements, as well as maintain company costs by aiming at operational excellence. To accomplish these things, companies are doing such things as improving on technologies relating to the module area cost, optimizing processes, producing larger volumes, and making thinner layer processes. Companies are also striving to make technological improvements in the non-module components, by trying to reduce costs by 20% on manufacturing (Lorenz et al, 2008). Technological uncertainty at this time makes choices for this industry difficult, but the opportunities for companies are great. Companies can use this industry to generate a profit while at the same time allowing the world to become less dependent on domestic and foreign fossil fuel. At this moment, the future looks bright, because it appears that solar power and other renewable resources in combination with each other have the ability to eliminate the need for other fossil fuel resources. In addition to these benefits, renewable resources like solar power can help reduce CO2 admissions, which would aid in the realm of climate-change goals (Fthenakis et al., 2008).
General Environmental Factors Overview of the Solar Industry The weather, climate, and climate changes affecting the Solar Power Industry the most have to do directly with the sun. Different regions throughout the United States have different weather patterns and while some are more conducive to solar energy, others would be more difficult. The climate changes over the year provide some hurdles for the solar energy industry as well. For example, the large amounts of snow received during winter in the northeast make it more difficult to get the solar energy needed to power those cities, while midsummer they get plenty of sunlight. The following fact sheet provided by Solar America Initiative shows how the climates over the nation affect the market and demand for solar power. This map shows which areas of the country would be most likely to invest heavily in solar power and which ones might use it as a back-up to another alternative energy source such as wind or thermal power. Legal
General Legal Overview of the Solar Industry
There are many sectors that relate to the solar industry and, like any other industry, codes, standards, and laws must be upheld to make sure that each sector is run under certain guidelines to insure that no harm will be done. The governing body for the solar industry is the Solar America Board for Codes and Standards. This board consists of a collaborative group of experts who formally collect and prioritize input from the solar industries stakeholders resulting in coordinated recommendations to solar industry companies, and establishing codes and standards for all the existing solar technologies (Solar Energy Technologies Program, n.d.). It is essential that smart, well thought out, regulatory standards are put into place, which could include in some regions solar investments in the capital base used to set rates for consumers (“The Economics,” 2008). To help set some of these standards, in addition to, making sure the standards are followed is the National Photovoltaic Environmental Research Center; its duty to the industry is to:
1) Identify potential environmental, health, and safety (EHS) barriers for photovoltaic materials or applications and define strategies to overcome such barriers. 2) Assist the industry, the DOE and its contactors in maintaining safe and environmentally friendly facilities, trying to minimize any EHS risks and reduce any EHS related costs, this all to ensure the public support and economic viability of PV technologies.
3) Finally, they must aim at maintaining the center as the world’s best source on PVEHS; they do this by ensuring that they provide accurate information related to EHS issues and perceptions (Energy Sciences and Technology Department, 2008). Currently there are specific regulations that relate to solar PV such as: 1) Manufacturing chemicals and materials
2) PV product disposal and End-of-Life regulations
3) Regulation in the European Union and other countries
4) The toxic waste burden on US State and local governments
Some organizations are urging policy makers to adopt policies that pertain to such things as: 1) Reducing and eventually eliminating the use of toxic materials and developing environmentally sustainable practices
2) Ensure that solar PV manufactures are responsible for the lifecycle impacts of their products through Extended Producer Responsibility
3) Ensure proper testing of new and emerging materials and processes based on a precautionary approach
4) Expand recycling technology and design products for easy recycling 5) Promote high-quality “green jobs” that protect worker health and safety and provide a living wage throughout the global PV industry
6) Protect community health and safety throughout the global PV industry, including supply chains and end-of-life recycling (Silicon Valley Toxics Coalition, 2009). There are also individual state regulations like the ones found for the state of California that pertain to the solar rights law.
• One example is the solar easements law- civil code 801.5, which means that direct sunlight to a specified surface of a solar collector, device, or structure, may not be obstructed.
• Another code is the removal of municipal barriers to solar- government code 65850.5, this code pertains to local agencies and their ability to not adopt ordinances that may create unreasonable barriers to the installation of solar energy systems. • The solar shade control act- public resources code 25980, is an act that says no person owning or in control of a property shall allow a tree or shrub to be placed, or, if placed to grow on such property, that might cast a shadow greater than ten percent of the collector surface of on the property of another.
• A code that would apply to the entire solar industry would be the permit approvalhealth and safety code 17959.1, this code says that a city or county may not deny an application for a use permit to install a solar energy system unless there is substantial evidence that it will have an adverse impact on the public’s health and safety (Cooperative Community Energy, n.d.).
With so many state and government policies and regulations, there are lawyers that just deal with solar energy and other renewable resources. They help clients with such things as: permitting, community relations, land rights, equipment procurement, finance, power purchase arrangements, and project acquisitions and divestitures. They also specialize in federal tax credit and investment tax credit (Foley & Lardner LLP, n.d.). This is one example of an industry that can benefit from helping maintain, develop, and run the solar energy industry. If poor regulation takes place in this industry, it can affect solar energy prices (“The Economics,” 2008).
How would you differentiate an advertising campaign for the Alarmed market segment versus the Concerned segment? Answer:
Alarmed market segment for me is a market where there is serious competition amongst the segmented market. Concerned Market – There is only a target product of service to be sold given to the customers or clients.
* Chapter 3 – Evaluating Cultural and Social Environments
Do you agree with the statement “People do not buy products, they buy relationships”? Why or why not?
For me it’s true that people buy relationship because when they buy the quality for example, they are also building relationship to patronage the product and that also as good as buying relationship and most especially… trust.