Marketing Strategy for Developing Solar Panels in Australia - Research Paper Example

Marketing Strategy Table of Contents Executive Summary 3 Introduction 4 Background 5 PEST Analysis 5 Industry Analysis 7 Market Trends and Forecast 10 Target Consumer 11 Marketing Strategy 13 Conclusion 14 Reference 15 Appendices 18 Executive Summary This paper showcases the marketing strategies for developing solar panels in Australia. In the attempt to do so, a detailed analysis of Australia including its overall market conditions have been carried out. This project has as its background the carbon emission plan, through which the Australian Government has endeavoured to reduce carbon emission by increasing renewable energy generation. In the light of this venture, it can be expected that the renewable energy industry and other allied industries like that of manufacturing devices like solar panel will grow at a high rate in the coming years. PEST analysis has been conducted on the Australian market to divulge the overall condition of the solar panel industry. The study has revealed that the political, economic and technological conditions are favourable for the growth of this industry. Political support coupled with advanced technology has made Australia a favourable ground for the development of solar energy industry. This industry has not yet been exploited and the profitability of the industry is still very low. Therefore, the nature of competition in this industry is yet to be deduced. However, this industry has the potential of stupendous growth as many foreign investors and manufacturers are entering the Australian market. The future trend of this market seems good as Australia promises a huge potential customer base. The demand for solar panels is expected to rise with the increase in population and the consequent awareness of its long term benefits. Australia abounds in high income households who will be able to afford the cost of installing solar panels. The marketing strategy for solar panel focuses on its product, promotion and pricing strategies. Introduction Global warming has caused various changes in the earth’s climate, the most prominent being the increase in the Earth’s temperature. The global warming has affected the sea level, rainfall pattern, wildlife and even the life of human beings. The negative effects of global warming on environment and lifestyle have become a serious concern for the civilized society. Environmentalists predict that global warning may lead to the worst weather events. However, the government does play a significant role in reducing the adverse effects of global warming. Global warming has led to the discovery of various devices on renewable energy that can be used for household as well as commercial purpose. The business world has found a new industry that is born out of the necessity to reduce the adverse effects of global warming. These industries provide solutions in the form of renewable & recycled products, ‘less energy consuming devices’, and renewable energy devices etc. These industries aim to provide the global warming solution for variety of purposes. This paper will attempt to deal with the marketing strategies of renewable energy devices chiefly meant for the households. Solar panel is one of the most convenient renewable energy devices that is used for household propose. This paper will particularly focus on the development of marketing strategies for solar panels in Australia. In order to formulate suitable strategies, a detailed market and industry analysis will be conducted in next sections that will include PEST analysis and industry analysis. The ‘market needs’ and ‘target consumers’ sections will analysis the nature and behaviour of consumers with special emphasis on their preferences. Finally, a set of strategies will be drafted that will help to develop the market for renewable energy devices for households. Finally, in the conclusion section, the overall analyses, findings and important recommendation will be provided. Background The use of these renewable devices has increased worldwide and the industry is supposed to grow at a very fast rate in future. However, consumers’ awareness and role of the government are the most important factors in this industry that determines its success. The governments of many countries are trying to encourage this industry by providing additional benefits like tax holidays, low interest loans etc. The growth of such industry in countries like Japan, Spain and Germany is quite noticeable and commendable as the government of these countries have successfully implemented the renewable energy consumptions. The Australian Government is also trying to follow this trend. According to Levitan, Australian Government is trying to achieve “100 Percent Renewable-Powered by 2020” (Levitan, 2010). Though it is not possible to produce 100 percent renewable energy yet the Australian Government can increase its use to a significant level. PEST Analysis In order to implement proper marketing strategies for renewable energy devices in the Australian market, it is very essential to analysis the macro-environmental factors of this country. “PEST analysis divides the overall environment into four areas and covers just about everything that affect an organisation” (Gregory, 2000, p.49). It include political, economic, social and technological factor of a country. The prevailing political condition of Australia needs to be analysed as it plays a very crucial role in the growth of industries. There are three influential political parties in Australia. These are ‘The Liberal Party’ (LP), ‘The Nationals’ and ‘The Australian Labour Party’ (ALP). ALP party was founded by the trade and a labour union of Australia is based on socialist policies. However, all the political groups of Australia are “tied by tradition to welfare programs” (U.S. Department of State, 2010). The policies of Australian Government related to the growth of business are very favourable. The foreign policies of Australia are designed to develop friendly relationship with four important nations: the United States, China, Japan, and Indonesia. The relationships with these countries have helped Australia to develop its technological and economic conditions. The Australian Government is concerned with global warming and the increasing energy consumptions. The Government is now trying to boost its renewable energy. On May 11, 2010 “Australia announced a $588 million fund for renewable energy” (United Press International, 2010). According to the carbon-trading plan, Australian Prime Minister Kevin Rudd aims to cut emission by 5%. Therefore, the leading political party will try to develop the market of renewable energy devices. Abundant availability of various useful natural resources has led to a very fast economic development in Australia. The important and valuable natural resources found in Australia include vast reserves of coal, iron ore, aluminium, copper, gold uranium and natural gas etc. Favourable foreign trade policies and availability of useful resources attract FDIs and FIIs in this country. The mining, agriculture and services industries are important contributors to its GDP. The purchasing power parity GDP and the real growth rate GDP of this country are $824.3 billion and 1% respectively. However, the availability of labour forces is quite nominal as compared to the requirements and most of the labour forces are engaged in services sector. Therefore, there is a scarcity of skilled labours in these industries. The industrial growth rate in Australia has been reduced by 4.1% in 2009 which gives a negative signal for Austrian Industries (CIA-World Fact Book, 2010). Nearly fifty decades ago the social condition of Australia was disturbed due to clashes between the native inhabitants and European settlers and this clash affected society, economic and political conditions. However, at present, the social conditions are favourable for the growth of business. Around 99 percent of the total population are literate and are aware of the adverse effects on global warming. The Australian people are ready to use renewable energy devices as they are eager to cooperate in reducing the carbon emission. Treaties with Japan, US and China have brought in advanced technologies in Australia. The Government has invested in various research and development activities of Australia. Australia has gained sufficient technological expertise to produce renewable energy. The renewable energy can be in the form of ocean energy, solar thermal, biomass, geothermal, wind etc. Australian scientists have gained expertise in solar photovoltaic, geothermal energy, wave power and solar thermal energy. Abundant resources and advance technologies have resulted in an industrial revolution in Australia. Figure 1 portrays the projected growth of renewable electricity supply in Australia. Industry Analysis According to the report, ‘Energy [R]evolution: A Sustainable Australia Energy Outlook’, the renewable energy industry of Australia has a promising future and the Government as well as society is expected to be benefited by it. Some of the important findings of this report are as follows. With the help of existing resources and technical support, coal-fired electricity can be phased out by 2030. By 2020, Australia will receive at least 40% of total energy from the generation of renewable energy. With time, the cost for renewable energy will be lower than coal-fired electricity. Renewable energy industry will provide employment opportunities to at least 57,000 people in Australia. In Australia, carbon emission will be cut by 40% in 2020. This industry will be helpful in contributing to the GDP of Australian economy (Greenpeace, n.d.). The above predictions indicate promising future for renewable energy industry in Australia. The primary concern of this paper is to provide a marketing strategy for the renewable energy devices for household use. In Australia, this industry is at its growth stage and is approaching the maturity stage. Hence, the industry is expected to be quite profitable. However, a brief analysis of Porter’s five forces on the renewable energy devices industry of Australia will provide a comprehensive scenario of the overall industry. As has been already discussed, the existence of local as well as national solar panel manufacturers makes this industry one of the fast growing industries in the Australian market. Most of the manufacturers are domestic and they manufacture solar panels with the available resources of Australia. The competition among the rivals is quite high as the number of consumers is increasing at a low rate. This situation is further aggravated by the threat that comes from the foreign manufactures of Germany, Spain and Japan. However, many foreign solar panel manufacturers complain about the lack of support from the Australian Government (MILLAR, 2009). They claim that the Australian Government is neglecting the foreign manufacturer in an attempt to save the domestic manufacturers. In the Australian solar panel industry, the German manufactures are the market leaders. Solon, ALEO Solar, Spark Solar etc are the prominent solar panel manufacturers in Australia. Promise of high profitability has lured many big companies into this sector. Since this industry is capital intensive and requires huge investments on plants, machineries, skilled laboured and research & development, it restricts the entry of small players. However, many foreign manufacturers are trying to enter the Australian solar panel industry. The market demand for solar panels is increasing among the Australian consumers. Since the numbers of consumers are less, their bargaining power is high. However, the Australian people are becoming increasingly aware of this device and in future consumer bargaining power is suppose to weaken. Solar panel is a one of the latest products for renewable energy and still it is in its growing stage. It is a unique product that can be easily used in the household. Therefore, the threat of substitute product is low. Other sources of renewable energy like biogas, windmill, geothermal are some of its substitutes. However, these renewable energies cannot be produced through a device that can be used in houses. In order to manufacture solar panels, a wide variety of raw materials are required. Most of these raw materials include chemical components like phosphorous, hydrofluoric acid, silicon nitride etc and metals like aluminium, silver, copper etc. In Australia, natural resources are easily available but in case of chemical components, it has to be imported from foreign countries like Japan, China, and Germany etc. The availability of suppliers for those chemical components is very low; hence, the bargaining powers of suppliers are very high in this industry. Market Trends and Forecast The favourable policies of the Australian government regarding the solar panel industry has added value to the profitability of this industry. However, in Australia most of the electricity is generated from fossil fired power and therefore the consumers are not left with much choice. This indicates that the market for solar panel is not much developed as compared to the needs of the market (Australian Broadcasting Corporation, 1998). Solar panels of different sizes specifically meant for household purposes, like 5W SX5M BP Solar Panel, 10W SX10M BP Solar Panel and 20W SX20U BP Solar Panel, are available in the market. Government funds are available for both household and commercial installation. This is an initiative through which the government is trying to motivate consumers in installing solar panels. Table 1 indicates the cost for solar panels including installation charges in NSW for household use. The future of renewable energy in Australia depends on three major factors. First of all, the increase in the number of the consumer who are consuming energy. The population of Australia is increasing at a steady rate. Currently, the population is around 21 million and it is expected to reach nearly 28 million by 2050. Figure 2 shows the projection of Australian population. Secondly, the economic development of Australia is instrumental in increasing the demand of solar energy. Since the installation charges and the cost for solar panel are high, the economic growth of Australian people will ensure that solar energy is accessible. Table 2 depicts the projection of important economic parameters. The third factor takes into account the development of solar panel industry of Australia. A report published by ‘The Sunday Morning Herald’ reveals some important facts regarding solar power market in Australia. According to the report, only 0.1 percent of total electricity is generated by using solar panels and only 40,000 houses out of 8 million houses are equipped with solar panel. The Government has offered up to $8000 for household use till June 30, 2009. Many experts have predicted that “grid parity, in which renewable energy becomes as cheap as fossil fuel power, is still a decade or more away” (Cubby, 2009). The report indicates weak market condition for solar panel though the market is yet to be exploited. Target Consumer The above analyses of renewable energy industry and solar panel market have provided a comprehensive overview of the scenario. The primary objective of this paper is to develop marketing strategy for solar panel primarily meant for household use. Therefore, the target consumer will include the households of Australia. In Australia, there are 8 million households that consume energy from different sources. However, it is important to segment the target consumer group. In order to segment the consumers, certain factors have to be taken into consideration like their income, their location, their preferences etc. Table 3 shows the household income trend of Australia. This table divides the household income group into three segments: high income, middle income and low income. Since the process of installing solar energy devices require high cost, it will be not possible for the low income group to afford them at this stage. However, the solar panel energy is expected to become cheaper in future than the conventional energy generated by fossil-fired. Table 4 depicts the house income of various states of Australia. This table helps to determine the major potential markets for solar panels. According to this figure; New South Wales, Victoria, Western Australia, Australian Capital Territory emerged as the potential market as these states have high disposable income. The residential consumption in Australia is higher as compared to the commercial and services usage. All the income groups are able to afford energy consumption and this sector “accounts for 12.5% of total energy demand” in Australia (Groot, n.d.). Table 5 shows the residential consumption of energy including other sectors. This table makes it evident that in near future it will rank third in terms of energy consumption. Another important factor is the location of households because solar panel requires bright sunshine. In Australia, the distribution of the sunshine varies according to geographical locations. Marketing Strategy The above analyses and discussions have eased the process of understanding the market trend and current scenario of solar panels. The above analyses make it clear that the solar panel market in Australia is not very developed yet it has many opportunities for improvement. Before implementing the relevant marketing strategies it is very important to understand why most of the households are unable to install the solar panel. Research has revealed that though the high cost is a major deterrent factor yet non familiarity with the benefits of solar panel is another factor that requires immediate attention. The product should be as simple as possible at the same time maintain the prescribed quality so that consumers feel it is worth the money. Sometimes, Australian consumers find it difficult to place it in the area where it will receive sufficient sunshine. Therefore, the product should be available in different sizes and shapes so that it is easier for them to place it according to their convenience. The price is the biggest problem that is hampering the growth of the solar panel market in Australia. Pricing strategy should include discounts and instalment system so that middle income group of people can also afford it. Promotional strategy is very helpful in spreading awareness regarding solar panels. In order to promote the product, effective awareness program should be framed to deliver the right message to the target consumers. The promotional strategies should well convey its technology, usage and long term benefits to the potential consumer groups. The distribution channel is also an important factor as it responsible for supplying the solar panels to the potential market. Different shapes of solar panels are available in the market; hence, the distribution of products should be done according the demand of the market. Conclusion The developed countries of the world have become increasingly concerned with global warming and are trying to develop renewable energies to reduce the carbon emission. The Australian Government has not been an exception to it. The issues related to global warming have helped to develop new industries like renewable energy industry and industry for renewable energy devices. The Australian Government encourages these kinds of industries by providing rebates and investments of various kinds. Solar panels are thus gaining increasing significance as people are becoming more concerned with environment. Favourable government policies and other industry conditions have further triggered the growth. However, at present, the profitability in this market is not very high as the market is in its growth stage. From the consumer’s perspective, the high cost of installation has proved to be a deterrent factor. However, consumer awareness through effective promotional strategies will go a long way in imbibing the inherent benefits of solar panel in the mind of the customers. Reference Australian Broadcasting Corporation. 1998. Green Energy: the Story. [Online]. Available at: http://www.abc.net.au/science/slab/grnpower/story.htm. [Accessed on August 07, 2010]. Australian Bureau of Statistic. December 2004. Household Income and Income Distribution Australia. [Pdf]. Available at: http://www.environment.gov.au/soe/2006/publications/drs/pubs/583/set/hs_77_65230_2002-03.pdf. [Accessed on August 07, 2010]. Australian Government, Department of Immigration and Citizenship. No date. Population Projections. [Pdf]. Available at: http://www.immi.gov.au/media/publications/statistics/popflows2001/chapter1_3.pdf. [Accessed on August 07, 2010]. Australian Government, The Treasury. No date. Chapter 1: Long-term demographic and economic projections. [Pdf]. Available at: http://treasury.gov.au/igr/igr2010/report/pdf/02_Chapter_1_Economic_and_demographic.pdf. [Accessed on August 07, 2010]. CIA-World Fact Book. June 29, 2010. Australia. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/as.html. [Accessed on August 06, 2010]. Cubby, B. March 16, 2009. Uni's solar panel captures more light. [Online]. Available at: http://www.smh.com.au/environment/energy-smart/unis-solar-panel-captures-more-light-20090315-8z1q.html. [Accessed on August 07, 2010]. Greenpeace. June 2008. Energy [r]evolution: A SUSTAINABLE AUSTRALIA ENERGY OUTLOOK. [Pdf]. Available at: http://www.greenpeace.org/raw/content/australia/resources/reports/climate-change/energy-revolution-scenario-full.pdf. [Accessed on August 06, 2010]. Greenpeace. No date. Climate change: Frequently asked questions. [Online]. Available at: http://www.greenpeace.org/australia/resources/faqs/climate-change#energy_1. [Accessed on August 06, 2010]. Gregory, A. 2000. Planning and managing public relations campaigns. 2nd edition. Kogan Page Publishers. Levitan, D. 2010. Australia Could be 100 Percent Renewable-Powered by 2020. [Online]. Available at: http://spectrum.ieee.org/energywise/energy/renewables/australia-could-be-100-percent-renewablepowered-by-2020. [Accessed on August 06, 2010]. Northern Territory Government. September 2009. Social Indicators. [Pdf]. Available at: http://www.nt.gov.au/ntt/economics/publications/social_briefs/soc_ind_sept09.pdf. [Accessed on August 07, 2010]. United Press International. 2010. Australia boosts renewable energy. [Online]. Available at: http://www.upi.com/Science_News/Resource-Wars/2010/05/11/Australia-boosts-renewable-energy/UPI-63551273605396/. [Accessed on August 06, 2010]. U.S. Department of State. 2010. Background Note: Australia. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/2698.htm#political. [Accessed on August 06, 2010]. Appendices Figure 1: Growth of renewable electricity supply (Source: Greenpeace, 2008) Table 1: Solar Panel Cost Charges in NWS Regions (in AU$) (Source: Solar Online, 2009) Figure 2: Australian Population Projection (Source: Australian Government, Department of Immigration and Citizenship, n.d.) Table 2: Economic Parameters in Projections. (Source: Australian Government, The Treasury, n.d.) Table 3: Household Details of Australia (Source: Australian Bureau of Statistic, 2004) Table 4: Household weekly income, states and territories (Source: Northern Territory Government, 2009) Table 5: Residential energy consumption (Source: Groot, n.d) Read More