BUSINESS OPPORTUNITIES OF SOLAR PHOTOVOLTAIC HOME SYSTEMS IN VIETNAM

BUSINESS OPPORTUNITIES OF
SOLAR PHOTOVOLTAIC HOME
SYSTEMS IN VIETNAM
CASE STUDY: FOSERA Co., Ltd.
LAHTI UNIVERSITY OF APPLIED
SCIENCES
Degree program in International
Business
Thesis
Spring 2013
Thuy Tien Nguyen Phan
Lahti University of Applied Sciences
Degree Programme in International Business
NGUYEN PHAN, THUY TIEN:
Business opportunities of solar photovoltaic
home systems in Vietnam
Case: FOSERA Co., Ltd.
Bachelor’s Thesis in International Business, 93 pages, 24 pages of appendices
Spring 2013
ABSTRACT
Vietnam has a high potential of solar energy, especially in central and south
regions of the country. Together with solar water heating systems, solar
photovoltaic models have become increasingly popular in Vietnam recently.
Among various solar photovoltaic technologies, solar photovoltaic off-grid home
systems have demonstrated to be one of the most feasible and favorable options to
electrify rural areas in Vietnam.
The purpose of this study was to examine the market potential, market needs and
favorable external environment with focus on rural areas in Vietnam for the case
company to enter the market.
Qualitative research method was applied in this study. Data collection methods
were earlier studies, books, online sources, questionnaires and semi-structured
interviews with governmental authorities and experts in renewable energy to have
an insight into the market and the potential of rural electrification through solar
photovoltaic stand-alone home systems.
A timeline of three market entry modes was suggested for the case company to
enter the Vietnamese market. Suggestions included cooperation with the
Vietnamese government through national rural electrification projects in the first
period, establishing distribution channels in Vietnam in the second period and a
joint-venture with the purpose of establishing a manufacturing facility in Vietnam
in the third period. Besides, the presence of a sales representative or intermediary
who works as a coordinator and assistant between the headquarters of the
company in Germany and the distribution channel in Vietnam would assist
operating activities.
Key words: solar photovoltaic household systems, solar photovoltaic off-grid
household systems, solar PV stand-alone household systems, rural electrification,
solar photovoltaic technologies, market entry modes, rural areas
LIST OF FIGURES
FIGURE 1. The process of deduction (modified from Business Research Methods,
2007, 11) ........................................................................................................... 11
FIGURE 2. Theoretical Framework ................................................................... 13
FIGURE 3. Thesis structure ............................................................................... 14
FIGURE 4. Porter’s Five Forces (modified from Porter, 2008) .......................... 19
FIGURE 5. SWOT analysis (modified from iGrad 2012) ................................... 22
FIGURE 6. Market entry modes ( modified from Stuart Wall & Bronwen Rees,
2001) ................................................................................................................. 24
FIGURE 7. Top 10 Emerging Markets after BRICs (2012-2017) (adapted from
Global Intelligence Alliance 2012)..................................................................... 31
FIGURE 8. Location of Vietnam in South East Asia (The World Factbook 2012)
.......................................................................................................................... 33
FIGURE 9. Targeted power capacity proportion of different sources of energy in
Vietnam by 2020 (Brown 2011) ......................................................................... 36
FIGURE 10. Renewable energy share of global final energy consumption in 2010
(REN21 2012, 21).............................................................................................. 41
FIGURE 11. Solar PV Total World Capacity 1995-2011 (REN21 2012)............ 42
FIGURE 12. Solar PV Operating capacity in a number of countries all over the
world (REN 21 2012) ........................................................................................ 43
FIGURE 13. Different types of renewable energy in Vietnam during 2011-2030
(Nguyen D. C. 2012).......................................................................................... 44
FIGURE 14. Sub-zones of solar energy in Vietnam (Dang 2012) ....................... 45
FIGURE 15. Diagram of solar PV stand-alone system (adapted from Dang 2012)
.......................................................................................................................... 51
FIGURE 16. Model of FOSERA PSHS (FOSERA 2012) .................................. 53
FIGURE 17. FOSERA Lamp (FOSERA 2012) .................................................. 54
FIGURE 18. FOSERA Phone Charger (FOSERA 2012) .................................... 55
FIGURE 19. FOSERA SCANDLE (FOSERA 2012) ......................................... 56
FIGURE 20. FOSERA BOP (FOSERA 2012) ................................................... 56
FIGURE 21. SWOT’s analysis of FOSERA....................................................... 59
FIGURE 22. Porter's Five Forces for FOSERA .................................................. 66
FIGURE 24. Timeline of FOSERA’s market entry modes to Vietnam ............... 73
LIST OF TABLES
TABLE 1. Data collection methods.................................................................... 12
TABLE 2. Annual average solar energy density and number of sun-shining hours
in various sub-zones (modified from Institute of Energy) ................................... 46
TABLE 3. Performance capacity of SHS system with small TV, 3 lamps and radio
(modified from Adelmann P. 2012).................................................................... 52
TABLE 4. Performance capacity of a PSHS System with lamp, cell phone and
radio (modified from Adelmann P. 2012)........................................................... 53
TABLE 5. End-user Price list of FOSERA products in USD, EUR and VND
(modified from FOSERA Price List 2012) ......................................................... 57
TABLE 6. Main findings ................................................................................... 77
LIST OF ABBREVIATIONS & ACRONYM
ADB
Asian Development Bank
ASEAN
Association of South East Asian Nations
BOP
Bottom of Pyramid
BOO
Build-Own-Operate
BOT
Build-Operate-Transfer
BRIC
Acronym for Brazil, Russia, India and China
ECC
Energy Conservation Center
EPIA
European Photovoltaic Industry Association
EU
European Union
EVN
Electricity Vietnam
FDI
Foreign Direct Investment
GDP
Gross Domestic Product
GIA
Global Intelligence Alliance
GIZ
Deutsch Gesellschaft für Internationale Zusammenarbeit GmbH
GNP
Gross National Product
IE
Institute of Energy (Vietnam)
MARD
Ministry of Agriculture and Rural Development (Vietnam)
MoIT
Ministry of Industry and Trade (Vietnam)
NAFTA
North American Free Trade Agreement
NGO
Non-governmental organization
ODA
Official development assistance
OECD
Organization for Economic Cooperation and Development
PPP
Public-Private-Partnership
PSHS
Pico Solar Home System
PV
Photovoltaic
RE
Rural electrification
REN21
Renewable Energy for the 21st Century
SBV
State Bank of Vietnam
SHP
Solar Hydro Power
SHS
Solar Home System
SME
Small and medium enterprise
SNV
Netherlands Development Organization
Solar lab
Solar Laboratory of Vietnam Science Institute
UNIDO
United Nations Industrial Development Organization
VBARD
Vietnam Bank of Agriculture and Rural Development
VEPF
Vietnam Environmental Protection Fund
VND
Vietnam Dong, the Vietnamese currency
VWU
Vietnam’s Women Union
WB
World Bank
WTO
World Trade Organization
CONTENTS
1
2
3
4
INTRODUCTION
8
1.1
Background for thesis
8
1.2
Thesis objectives, research questions and limitations
9
1.3
Research methodology & Data collection
11
1.4
Theoretical framework
13
1.5
Thesis structure
14
ANALYSING DIFFERENT RESEARCH METHODS AND TOOLS
16
2.1
PESTEL method for market analysis
16
2.2
Porter’s Five Forces
18
2.3
SWOT method
22
2.4
Modes of market entry
24
2.4.1
Direct export
25
2.4.2
Indirect export
25
2.4.3
Licensing
25
2.4.4
Franchising
26
2.4.5
Other contractual modes
26
2.4.6
Green field investment
27
2.4.7
Acquisition
27
2.4.8
Joint-Venture
27
2.4.9
Strategic alliances
28
2.4.10
Foreign Direct Investment
28
VIETNAM AS A TARGET MARKET
30
3.1
Vietnam in a nutshell
30
3.2
PESTEL analysis
32
3.2.1
Political factors
32
3.2.2
Economic factors
33
3.2.3
Social factors
34
3.2.4
Technological factors
35
3.2.5
Environmental factors
37
3.2.6
Legal factors
38
INDUSTRY ANALYSIS: SOLAR PHOTOVOLTAIC BUSINESS IN
VIETNAM
40
4.1
40
Solar energy industry in the world
5
6
4.1.1
Outlook of renewable energy in the world
40
4.1.2
Solar energy and solar technologies in the world
41
4.2
Solar energy industry in Vietnam
44
4.2.1
Energy demand and potential of solar energy in Vietnam
44
4.2.2
Rural electrification in Vietnam
47
4.2.3
Disadvantages of electricity shortage
48
4.2.4
Rural electrification potential of solar PV off-grid household
systems
49
CASE COMPANY: FOSERA CO., LTD.
50
5.1
Overview of the company
50
5.2
Product analysis
51
5.3
SWOT analysis
59
5.4
Porter’s Five Forces Analysis for FOSERA
66
BUSINESS OPPORTUNITIES FOR THE CASE COMPANY
72
6.1
6.2
6.3
7
8
Period 1: Direct Export Model + Cooperation with the
government and NGOs in Vietnam
73
Period 2: Direct Export Model + Distribution Channels in
Vietnam
75
Period 3: Joint-Venture model
76
CONCLUSION AND SUGGESTIONS FOR FURTHER RESEARCH
77
7.1
Main findings
77
7.2
Proposals for further research
80
7.3
Validity and Reliability
80
SUMMARY
81
REFERENCES
82
APPENDICES
94
8
1
INTRODUCTION
The introduction chapter includes five parts. The first part provides background
information for the thesis topic. The second part gives an overview of thesis goal,
its objectives as well as research questions which are going to be answered during
the research process. Research and data collection methods are described in detail
in the following part. Limitation is also shortly mentioned in this section. The
next part explains the theoretical framework of the thesis. Thesis structure is
drawn and illustrated in the end.
1.1
Background for thesis
There has been a global increase in the usage of renewable energy over the past
decades. The Global Status Report on Renewable Energy in 2012 has indicated
that renewable energy accounted for approximately 16.7% of global energy
consumption in 2010 (REN 21). With the potential shortage of conventional
energy sources such as coals, oil and other non-renewable sources in the future,
many companies have taken into more consideration the capability of renewable
energies to replace conventional energy sources in order to provide energy for the
nations. As in the case of Vietnam, recognizing the significant losses caused by
electricity shortage to the national economy and society development, the
Vietnamese authorities have been putting more effort on exploiting the potential
benefits of renewable energy sources to generate electricity in Vietnam. Among
versatile forms of renewable energy, solar energy has been considered to be one
of the main and most suitable due to geographical location of the country (Le
2009). Of various solar technologies, solar photovoltaic has become more popular
in Vietnam recently. There have been so far a number of solar photovoltaic
projects and new investments done through cooperation between the Vietnamese
government and different organizations in this field. In rural areas, solar
photovoltaic off-grid system is considered to be one of the most feasible options
to bring electricity to citizens there.
Inspired by the “Market Entry to Africa” seminar course organized by Neu-Ulm
University of Applied Sciences and the case company with focus on analyzing the
9
potential of solar energy to electrify rural areas in Mozambique using the
company’s products, the author has desired to write a thesis focusing on the
Vietnamese market with the same case company but with different objectives. The
study’s objectives aim at exploring the potential of solar energy in Vietnam,
figuring out the competition level of solar energy market and finding more
information on rural electrification by solar photovoltaic stand-alone household
systems in Vietnam. By understanding the situation of the Vietnamese market, the
author would like to draw suitable market entry modes and proposals for the case
company FOSERA to enter the market. Recognizing the significant effect of
lacking electricity on the living standards and well-being of the people living in
remote areas, the author hopes to find a feasible solution to the problem through
solar photovoltaic off-grid systems in her research. Moreover, the study is also a
small contribution to previous studies on solar energy market in Vietnam.
1.2
Thesis objectives, research questions and limitations
The thesis objectives are:
Analyzing external environment factors of the Vietnamese market and
internal competitive factors of the case company
Providing the case company with updated relevant information of solar
energy industry in order to understand the current developing situation of
the industry in Vietnam
Proposing different market entry options for the case company to enter the
market
The main research question is:
What kinds of market entry modes are suitable for the case company to enter the
Vietnamese rural market?
10
Other sub-questions are:
How do legislation and law on power and energy affect the solar energy
industry in Vietnam?
What are the challenges facing foreign companies in doing business in
Vietnam/In rural areas in Vietnam?
Are there any foreign companies which are currently working in solar
energy sector in Vietnam?
What should be improved to enhance growth of the renewable energy
sector in Vietnam?
What is the best option among renewable energy technologies for rural
electrification in Vietnam?
Besides solar energy, which types of renewable energy are also suitable
for rural electrification?
Limitations
The research focuses only on solar photovoltaic sector and its activities in
Vietnam. The development of solar energy in other countries is studied in order to
provide foundation for understanding better the Vietnamese market. Other forms
of renewable energy are discussed only to clarify the common development trend
of renewable energy or relate to the development of solar energy in Vietnam. As
the case company FOSERA manufactures stand-alone (off-grid) solar home
systems as main products, the study consequently focused less on the activities of
solar energy technologies at on-grid level. Focus of market segment is people who
live in remote areas of Vietnam. Still, the market segment of people living in
urban regions is discussed in order to provide the case company with potential
market expansion in the future. Only market entry modes were proposed;
financial, sales and marketing strategies were not explored.
11
1.3
Research methodology & Data collection
Research methodology
Qualitative research was applied because it allowed the author to study the solar
energy market in Vietnam and the relevant issues in depth and data collection is
not limited to predetermined categories as in quantitative research. Furthermore,
as the research was conducted under a case study, qualitative research was
essentially to enhance the ease of the study. Deductive approach was used. The
deductive process was conducted as followed:
1.Theory
2.Hypothesis
3.Date collection
4.Findings
5.Hypotheses confirmed or rejected
6.Revision of theory
FIGURE 1. The process of deduction (modified from Business Research Methods,
2007, 11)
Data collection
Data collection methods were extracted from primary and secondary sources.
Primary sources for this research included questionnaires and semi-structured
interviews with governmental authorities, experts and companies in solar energy
sector in Vietnam as well as the case company. Secondary sources for the research
12
utilized books, journals, articles, reports and early studies. This table below gives
an overview of data collection methods:
TABLE 1. Data collection methods
Sources
Types of data collection
Unit of analysis
methods
Primary
Case study
FOSERA Co., Ltd.
Questionnaires, semi-
Government authorities, experts
structured interviews
and companies in solar energy
sector in Vietnam
Secondary
Books, journals, articles,
Development of renewable and
earlier reports & studies
solar energy sector, solar
photovoltaic household systems,
rural electrification, Vietnamese
market, etc.
Data analysis methods were non-quantifying methods. As a consequence, main
qualitative data analysis methods applied into the research were data reduction
and data restructuring.
13
1.4
Theoretical framework
Theoretical framework of the study is conducted as illustrated below:
PESTEL analysis
of Vietnam
Solar energy
industry in the
world and in
Vietnam
Porter's Five
Forces SWOT
analysis for
FOSERA +
results from
interview &
questionnaires
Market
entry
proposals
for
FOSERA
FIGURE 2. Theoretical Framework
The basis of theoretical research tools and methods are PESTEL analysis, Porter’s
Five Forces, SWOT method and Market Entry Modes. PESTEL analysis tool is
used to analyses Vietnam’s external environment factors. PESTEL is an acronym
for Political, Economic, Social, Technological, Environmental and Legal. Porter’s
Five Forces is adopted to examine the external factors that affect the company’s
business activities upon entering the market. Porter Five Forces involves Rivalry
among Existing Competitors, Threat of New Entrants, Power of Suppliers, Power
of Customers and Threat of Substitutes. SWOT represents for Strengths,
Weaknesses, Opportunities and Threats that have an impact on the company’s
market entry decision. Market Entry Modes classifies different types of entry
strategies and the risks facing the company depending on each option. Situations
of solar energy in the world and in Vietnam are examined to evaluate the potential
and feasibility of solar photovoltaic stand-alone household systems to electrify
14
rural areas. Based on the questionnaire and semi-structured interviews, the author
can exploit more thoroughly the reality of current law and legislation concerning
renewable energy projects and investments in Vietnam. Furthermore, the author
can observe and withdraw suggested options of market entry from interviewing
different stakeholders in order to draw a set of suitable market entry modes for the
case company.
1.5
Thesis structure
The thesis structure is conducted as below:
•
5.Hy5.Hypotheses confirmed or rejected
1. Introduction
2. Analysing potential market areas
3. Vietnam as a target market
4. Industry analysis: solar photovoltaic business in Vietnam
5. Case study: FOSERA
6. Business opportunities
7.Conclusion & suggestions for further research
8. Summary
FIGURE 3. Thesis structure
15
The thesis is divided into eight chapters. Chapter 1 gives introduction to the thesis
including background for the thesis, research methodology, data analysis methods,
theoretical framework and structure of the thesis. Chapter 2 provides research
tools and methods for analyzing the target market Vietnam and the case company.
Research tools used in the study are PESTEL method, Porter’s Five Forces,
SWOT and Modes of Market Entry. Chapter 3 provides specific information of
the Vietnamese market using PESTEL analysis. Chapter 4 observes solar
photovoltaic industry in the world and in Vietnam. The empirical parts of the
study are in chapter 5 and 6. In Chapter 5 the author collected information and
analyzed the situation of the case company. Several proposals of market entry
modes for the case company to enter the Vietnamese market are explained in
chapter 6. Chapter 7 brings up main findings from the research, conclusion and
suggestions for further research. Chapter 8 summarizes the whole content of the
thesis and the author’s final words upon the study.
16
2
ANALYSING DIFFERENT RESEARCH METHODS AND TOOLS
The purpose of this chapter is to provide a number of research methods and tools
which will be applied in the empirical part of the thesis. Research methods that are
going to be examined are PESTEL method, Porter’s Five Forces, SWOT method
and Modes of Market Entry Modes. The explanation for each method and tools is
examined thoroughly in the following parts.
2.1
PESTEL method for market analysis
PESTEL is an acronym that represents for Political, Economic, Social,
Technological, Environmental and Legal. It is widely used to analyze and to
determine the risks and opportunities of a new market. Other names for PESTEL
are PEST or PESTLE analysis. PESTEL analysis provides a framework for
companies to understand a new unfamiliar environment and set specific tactics to
mitigate the risks and exploit opportunities before establishing its business (Pestel
Analysis 2012).
Political factors
Political factor refers to both politics in the traditional understanding, with rules
and laws imposed by the government, and the political influences of various trade
associations, trade unions, etc. on the companies (Capon 2009, 6). There are a
variety of political factors to consider such as bureaucracy, environmental law,
government type, freedom of the press, labor law, political change and stability,
social/employment legislation, tariffs, tax policy, trade restriction, etc. (Pestel
Analysis 2012). Political external environment can comprise of local, national as
well as global external environment (Capon 2009, 18). At local level, influencing
factors are local government, local offices of national government, local
associations such as chamber of commerce, business community, etc. At national
level, political factors are national government, national bodies for employers and
employees. Global political factors are alliances, mutual agreements, internatinal
bodies, etc. (Capon 2009, 18-27).
17
Economic factors
Economic refers to the influences of economic organizations and situations on
companies such as banks, stock markets, currency markets, trading blocs and so
on (Capon 2009, 6). There are various economic indicators such as GDP, GNP,
interest rate, currency exchange rate, economic growth, inflation rate, labor costs
and labor supply, unemployment rate, consumer’s disposable income, etc. (Pestel
Analysis 2012). Similarly with political factors, economic factors can be also
divided into local, national and global level. Local factor can be local bank
branches, local economy of a region or state. Economic factor also has banks, its
branches and stock market at national level. Globally, economic factors are
trading blocs and bodies such as EU, ASEAN, OECD, NAFTA, WTO, etc.
(Capon 2009, 38-47).
Social factors
Social or sociocultural factors include the demographic and cultural aspects of an
external macro environment which enable firms to understand and communicate
more efficiently with the natives that enable successful management across
different cultures. Social factors can be health issues, population growth rate, age
distribution, changes in the age and structure of the population, manners in which
population react, way in which the culture of a country changes or develops, etc.
(Quick MBA 2012; Capon 2009, 6). Local social factors are influences of local
community and social capital such as social groups or clubs. At national level,
they are demographic change and social change such as level of income, family
and household structure. Global sociocultural factors are demographic of
countries and cross-cultural issues such as language, behavior, culture shock, etc.
(Capon 2009, 48-56).
Technological factors
Companies do research on the technological aspect of a new region or country in
order to catch the opportunities available for the business. The level of
technological advancement can influence a firm’s business in a positive or
negative way as it affects the level of change that a company should make and the
18
capacity it should increase in order to meet its customers’ demand (Pestel
Analysis 2012; Capon 2009, 6). Technological factors can be R &D activity,
technology incentives, technological changes, access to electricity, transportation
network, etc. (Quick MBA 2012). Besides, technological factors can be the use of
the Internet and world wide web, communication technology such as mobile
phones, video conferencing, manufacturing technology, etc. (Capon 2009, 58-59).
Environmental factors
Environmental factors consider “green issues” such as climate change, pollution,
waste, etc. As climate change has become a rising issue in recent years,
environmental aspects are taken more into consideration in business strategies and
operations, especially for companies doing business in the renewable energy field.
Environmental factors can refer to environmental protection laws and regulations,
laws concerning waste disposal, legislation on energy consumption, citizens’
attitude and act towards the environment (Business Mate 2010).
Legal factors
Regulation and legislation of a country or region have a strong effect on the ease
of doing business of a company. Legal factors can be antitrust law, consumer law,
discrimination law, employment law, health and safety laws, etc. (Pestel Analysis
2012). Besides, they can be also product regulation, competitive regulation and
other forms of law that affect directly or indirectly to company business activities
( Business Mate 2010).
2.2
Porter’s Five Forces
Porter’s Five Forces tool is simple, but powerful in understanding where power
lies in a business situation. It helps companies to be able to analyze its current
competitive strengths and identify whether new products or business have the
potential to enter the new market and make profits (Mind Tools 2012). Five
Forces that were analyzed by Michael Porters are illustrated below.
19
Threat of
New
Entrants
Bargaining
Power of
Suppliers
Rivalry
Among
Existing
Competitors
Bargaining
Power of
Buyers
Threat of
Substitute
Products or
Services
FIGURE 4. Porter’s Five Forces (modified from Porter, 2008)
Threat of New Entrants and Entry Barriers
New entrants to an industry are a threat to companies as they have capacity and
desire to gain market share that put pressure on product price, costs, investment
rate, etc. to compete on the market. If the threat is high, companies must lower
their product prices or make more investment in order to compete with new
competitors. If the threat of new entrants is low, existing companies have more
opportunities to gain profitability from the market (Porter 2008, 8).
Industries that protect high profitability level of existing firms and prevent
additional rivals entering the market are called barriers to entry. Barriers can be
from government, patents that restrict new entry, cost advantages, technology
protection, economies of scale, time and cost of entry, etc. (Quick MBA 2012). If
entry barriers are low, the threat of new entrants is high and market profitablity is
moderated (Porter 2008, 8). Therefore, entry barriers are advantages that existing
20
companies have over new entrants. On the other hand, high entry barriers are
disadvantages for new comers who want to step into the new market.
The Power of Suppliers
Suppliers can capture more power and value for themselves by driving up prices,
limiting quality or service, or switching cost to other participants in the industry
(Porter 2008, 13). As the companies need raw materials for manufacturing
process, the buyer-supplier relationship between the industry and the firms is
significant. The power of suppliers can lie in the number and the size of suppliers,
suppliers’ ability to deliver differentiated products, the cost of changing suppliers,
ability of companies to switch to other suppliers, unique of suppliers on the
market, little effect of industry on suppliers’ revenue, etc. (Mind Tools 2012;
Porter 2008, 14).
The Power of Buyers
Powerful customers can put pressure on companies to lower product prices, to
demand better product or service quality (Porter 2008, 14). There are different
groups of customers who have bargaining power. They can be customer group
who has bargaining power in negotiation or in the price of products. Customer
group has negotiating advantage can be buyers who purchase products in large
volume, who has little difficulties in changing vendors or who is able to produce
the products by themselves if industry is too profitable. If the products are
standardized or undifferentiated, this customer group also has bargaining power
over the companies. The other customer group is group of those who are sensitive
over product prices. It can be because of cost structure or procurement budget of
the buyers, little effect of product quality on purchasing decision or little effect of
products on buyers’ other cost, etc. (Porter 2008, 16). Therefore, it is vital for the
company to evaluate the position of its products on the market in order to set
appropriate strategies towards its purchasers.
21
Threat of Substitutes
Threat of Substitutes refers to the ability of customers to find an alternative
product to a firm’s product. When threat of substitute is high, there is little
profitability for companies as customers have more options to choose or switch to
other alternative available products. High threat of substitutes can be because of
substitutes’ ability to offer attractive products with lower price, lower cost of
switching to other substitutes. Therefore, it is vital for companies to differentiate
itself from other substitutes through better product performance, lower price, more
effective marketing strategies, etc. Besides, companies should be able to alert to
changes in industries, the coming of new substitutes, changes of new
technologies, etc. in order to deal with the threat in an effective and profitable way
(Porter 2008, 17-18).
Rivalry among Existing Competitors
There are many forms of rivalry among existing competitors such as price
discounting, marketing and advertising campaigns, introduction of new products,
new innovation, product or service improvement, etc. (Porter 2008, 18). High
level of rivalry is a disadvantage for companies in terms of profitability. Porter
(2008, 18) has indicated two degrees of rivalry based on intensity or basis of
competition. Intensity degree can be seen in the number of competitors, their size
and capability on the market, level of industry growth, high level of exit entry that
prevents companies from withdrawing from the market even when they are
earning low or negative revenue, customer loyalty level, cost of leaving the
market, etc. (Mind Tools 2012; Porter 2008, 18-19). The other degree of rivalry
refers to the dimension of competition which is usually occurred as price
competition. The reasons for price competition can be because of undifferentiated
product or service, lower cost of switching to alternative products, characteristics
of production such as high fixed costs and low marginal costs, perishable
products, etc. Other forms of competition on dimensions are product features,
brand reputation and image, delivery time, support services such as after-sales and
so on. Competition can be positive in a way that each competitor strives for better
service or products in order to meet customer demand and compete with others on
22
the market. On the other hand, a market with high competitive rivalry brings more
disadvantages and challenges for a new entrant (Porter 2008, 20-21). However,
with a clear understanding and competitive strategy, a company can turn the
challenge of competition into its competitive advantages.
2.3
SWOT method
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.
SWOT analysis is a useful tool for analyzing companies’ environmental situations
because it enables companies to focus on strengths, to mitigate threats and to
make the most of opportunities available (Mind Tools 2012). While Strengths and
Weaknesses refer to the internal environment or the situation inside the companies
such as factors relating to products, pricing, costs, profitability, performance,
quality, people, etc., Opportunities and Threats refers to the external environment
or situation that is outside the companies such as factors relating to markets,
customers, seasons, trends, competition, etc. Therefore, SWOT analysis is
sometimes called Internal-External Analysis and the SWOT Matrix is called an IE
External
Internal
Matrix (Mind Tools 2012). SWOT Matrix can be illustrated as follow:
Helpful
Harmful
Strengths
Weaknesses
S
W
Opportunities
Threats
O
T
FIGURE 5. SWOT analysis (modified from iGrad 2012)
23
Strengths
Companies evaluate their own strengths from an internal point of view, from
customers and the existing market to develop its competitive advantage (Mind
Tools 2012). Strengths of a company can be strong brand names, reputation, cost
advantages, favorable accessibility to distribution locations, etc. (Quick MBA
2012). Besides, company’s strengths can be also in having competent employees
and board members, modern high-tech equipment or manufacturing facilities,
available grants and source of income, international experiences, etc. (Community
Tool Box 2013).
Weaknesses
Weakness is considered a flipside of strength. Therefore, weakness of a company
is the lack of strength in certain areas such as product reputation, high cost, lack of
patent protection, etc. (Quick MBA 2012). Besides, weaknesses can lay in lack of
international experiences, lack of competent human resources or resources, long
physical distance to the market, ineffective operation systems or programs, etc.
Opportunities
By analyzing external environment, companies can discover new opportunities for
growth and profitability. Opportunities can be new technologies, improvement of
regulations and legislation, absence of international trade barriers, demographic
changes, economic climate, etc. (Quick MBA 2012). Opportunities are also
positive future trends, awareness of potential customers, support of the local
governmentsc, availability of funding sources and distribution channel, increase in
customer demand and so on.
Threats
Together with opportunities, companies can encounter threats from external
environment such as new legislation, presence of substitute products, competitive
activity, demographic changes, channel pressure, changes in customer
24
preferences, etc. (Quick MBA 2012). Threats are also unavailability of funding
sources or supplying chain or equipments, rising cost, increase in govermental
protective mechanism, unacceptance of customers, threat to the environment, new
changes in modern technology leading to slowliness of adaption, obsolete
thinking or outdated manufacturing facilities, etc.
2.4
Modes of market entry
A company is triggered by different motives to go abroad through an
internationalization process. There are many ways for a firm to enter or expand its
business to a new unfamiliar market. Different market entry strategies are
exporting directly or indirectly, licensing, franchising, strategic alliances, foreign
direct investment, etc. A short summary of market entry modes is illustrated as
followed:
Export-based
modes
Non-equity
modes
Equity modes
Direct export
Franchising
Acquisition &
Greenfield
investment
Indirect
export
Licensing
Joint-Venture
Other
contractual
modes
Strategic
alliances
FIGURE 6. Market entry modes ( modified from Stuart Wall & Bronwen Rees,
2001)
25
2.4.1 Direct export
Direct export are “overseas sales in which a producer or supplier controls all
activities and collects all drawbacks” (Business Dictionary 2013). In export
activities, products are carried from factories and stored in a center warehouse
from which they will be moved to other distribution locations and finally reach
the end-customers in different regions (Pelle, 2007, 107). Direct export is often
used to test the country’s potential market before investing more in that country as
direct export is a less expensive market entry strategy in comparison to others.
One of the advantages of direct export is that a firm can directly integrate with
foreign markets to develop relationships and once it has already familiarized itself
with the foreign markets, it can quickly develop its competitive advantages and
expand the business. One of the disadvantages of direct export can be difficulties
in identifying right foreign customer segments which may be very timeconsuming or costly. (Czinkota et al., 2009, 223.)
2.4.2 Indirect export
In contrast to direct export, indirect export means that a firm enters a foreign
market through an intermediary; the company, therefore, does not deal with
foreign customers or firms directly. Intermediaries are export agents or freight
forwarders who participate in international transaction. Indirect export reduces
the risk of entering the new market when companies have no previous experiences
or knowledge about the foreign market. However, a firm may finally grow
without being engaged to the international markets nor increase their serving
capabilities. (Czinkota et al., 2009, 223.)
2.4.3 Licensing
Licensing refers to the entry strategy in which one firm under a licensing
agreement gives permission to another company to use its intellectual property for
royalty as compensation (Czinkota et al., 2009, 228). The licensed company is the
licensee and the company which gives permission to intellectual property is
licensor. There are a variety of licensed properties including trademarks,
26
copyrights, technology, technical know-how, patents, and so on. The advantages
of licensing are its non-requirement of capital investment or non- involvement
with foreign customers, risk reduction in lacking knowledge of foreign markets
and local legislations. On the other hands, the disadvantages of licensing are the
possibility of creating company’s own competitors in the markets and certain
limitations for future market expansion. (Czinkota et al., 2009, 229.)
2.4.4 Franchising
Franchising is defined as “the granting of the right by a parent company (the
franchisor) to another, independent company (the franchisee) to do business in a
prescribed manner” (Czinkota et al., 2009, 230). Franchising forms can include
the sales of the franchisor’s products, usage of its brand or production and
marketing techniques for approaching the markets. In order to succeed on the
franchising business, franchisor must be able to develop and offer unique and
highly recognized international products. Benefits of franchising system are
attainment of new markets, financial increase and achievement over competitors.
However, franchising also has its disadvantages such as difficulties in selecting
franchisee and training, damaged brand image due to franchisees’ uncontrolled
activities and other various factors. (Czinkota et al., 2009, 231.)
2.4.5 Other contractual modes
Other contractual modes can be in the form of a turnkey project-a project in which
a foreign company pay local contractors for designing, construction of new
facilities and training of personnel in that local country. Turnkey projects are
preferred by industrial companies who specialize in complex production
technologies and are interested in earning profits in the local country. The risks
involved in turnkey projects are the possibility of sharing the company’s secret to
potential competitors and the lack of long-term profits in the country. (Wikipedia
2012.)
27
2.4.6 Green field investment
Greenfield investment is the establishment of a new wholly owned subsidiary in a
foreign country. Greenfield investment has high risk due to the high cost of new
business establishment in a new country and time commitment as it takes time to
find distribution networks, to run new operations and to implement suitable
marketing strategies to compete with competitors on the market.
2.4.7 Acquisition
Acquisition is the buying of most or all of a target company’s ownership stakes in
order to gain control of the target firm (Investopedia 2013). Acquisition is
effective if the company wants to take control of the existing firm’s operations to
gain competitive advantages and expand its business to the new market. The
drawbacks of acquisition might be the difficulties in integrating two different
organizations with different culture, risk of higher debt, too much diversification,
etc.
2.4.8 Joint-Venture
Joint-venture is defined as the cooperation of two or more businesses in which
there is a share of profits, loss and control in a specific field (Investopedia 2013).
Joint-venture is a good way for companies to partner because it allows partnership
without having to merge. Reasons for companies to form a joint venture are the
potentiality of business expansion, development of new products, gaining new
market, potential of sales, availability of suitable business partners, etc. Jointventure gives companies more opportunities to grow with greater capacity, more
resources, more technical expertise, and easier access to market, etc. (Joint
Ventures and Partnering 2013) In some countries, high import barriers or
government’s restriction on foreign ownership may be the reasons for a company
to choose joint venture.
There are a number of joint-venture types such as co-operation with another
business in a limited or specific area, separate joint-venture business in which
28
each company owns shares and is involved in management, business partnership,
etc. (Joint Ventures and Partnering 2013)
The advantages of a joint venture are the ability of sharing risk and cost to the
business partner, obtainment of new local knowledge, technology, finance and
experiences from a business partner, access to new markets and distribution
networks, opportunities to learn, etc. The involving risks can be difficulties in
coordination due to different objectives of business partners, imbalance in level of
expertise, investments or assets, potential of conflict due to different culture and
management style, insufficiency in leadership and assistance, etc. (Joint Ventures
and Partnering 2013)
2.4.9 Strategic alliances
Strategic alliance (or partnership) is defined as “an informal or formal
arrangement between two or more companies with a common business objective”
(Czinkota et al., 2009, 231). There are a number of alliance forms such as equity
participation, joint venture, contractual agreement, consortia, informal cooperation, etc. In informal co-operation, partnering companies cooperate with one
another without a binding contract. This can be in the form of company visit to
exchange information about new products, production processes and technologies
with the aim of building mutual trust and friendship. In contractual agreement,
companies collaborate on joint research and development (R&D), joint marketing
or production. Contract manufacturing is often applied to gain benefits of cost
reduction and of focus on core competencies. On the other hand, the involving
risk is that manufacturing partner might gain enough necessary knowledge and
capability to become a future competitor of its current cooperator. (Czinkota et al.,
2009, 234.)
2.4.10 Foreign Direct Investment
Foreign direct investment (FDI) is defined as “an acquisition or construction of
physical capital by a firm from one (source) country in another (host) country
(Investorguide 2013). There are different kinds of foreign direct investments such
29
as Greenfield investments, Brownfield investments, mergers and acquisitions. As
described earlier, Greenfield investment refers to the direct investment in a new
facilities or expansion of existing facilities. Brownfield investment refers to
investments in a used site which was previously used for an “unclean” business
for a cleaner and less polluting purpose, for example, construction of new
residential areas. Benefits of foreign direct investment entry mode are the
opportunities of gaining greater profits, more markets, resources and efficiency,
increase in firm’s controlling ability, capability of receiving direct feedback from
the foreign market and high flexibility, etc. On the other hand, foreign direct
investment is the most expensive and riskiest mode of market entry. (Foreign
Direct Investmets (FDI) 2012.)
30
3
VIETNAM AS A TARGET MARKET
This chapter begins by briefly describing Vietnam as an emerging market that
attracts an increasing number of investors from abroad. The second part strives to
analyze Vietnam and the country’s related external environmental factors using
PESTEL analysis tool in order to provide understanding and knowledge
foundation for market entry mode decision and strategies in the following
chapters.
3.1
Vietnam in a nutshell
Vietnam is a developing country in Southeast Asia. The political and economic
reform called “Doi Moi” or “Renovation” launched in 1986 has a significant
meaning in the country’s transformation process from one of the poorest countries
in the world with per capita income of less than 100$ to a low middle income
country with per capita income of 1,130 $ by 2020 (World Bank 2013). Since the
reformation, there has been a shift from a centrally planned economy to a more
market-oriented economy (Global Edge 2013). The country has recently been
growing as a leading exporter of agricultural products and an attractive destination
for foreign direct investment (Trading Economics 2013). Vietnam recorded the
highest rate of export growth among developing countries in East Asia in 2011
(World Bank 2012). The country used to be listed as one of the fastest growing
economies in Asia. However, Vietnam’s recent economic development in 2012
showed the slowest growth rate since 1999 (World Bank 2012).
Vietnam is a member of Association of South East Asia (ASEAN), a member of
the United Nations and several international organizations under and not under
United Nations such as World Trade Organization (WTO), International Monetary
Fund (IMF), World Health Organization, World Food Programme (WFP), World
Meteorological Organization (WMO), World Federation of Trade Unions
(WFTU), Asia-Pacific Economic Cooperation (APEC), Food and Agriculture
Organization (FAO), International Maritime Organization (IMO), Group of 77 (G77), etc. (Indexmundi 2012). The country has successfully chaired several
international meetings and conferences such as Annual Meetings of the Boards of
31
Governors of the World Bank Group and the IMF in 2009, conference of the
Association of South East Asian Nations (ASEAN) in the year 2010 (World Bank
2013).
According to the report of Global Intelligence Alliance (2012, 3), Vietnam ranked
third among non-BRIC Emerging Markets that international companies plan to
aim at in 2012-2017, just after Indonesia and South Africa. Below is the graph
illustrating the position of Vietnam in the Top 10 Emerging Markets after BRICs
during the period from 2012 to 2017.
FIGURE 7. Top 10 Emerging Markets after BRICs (2012-2017) (adapted from
Global Intelligence Alliance 2012)
As we can see from the figure, approximately one fifth (20.1%) of companies
have shown interest in targeting Vietnam as one of their market destinations.
Several reasons for companies’ choice of entering the Vietnamese market are the
country’s cheap labor cost, potential large market with high population, and
32
increase in per capita income and affordability of the citizens, improvement in
government policies, etc.
Despite certain achievements and international recognition during its economic
developing progress, the country still needs more reforms and restructuring of the
political system to have more transparent and opener economic policies, to give
more opportunities for citizens in governance, to deal with upcoming international
issues, to achieve its purpose of constructing a modern industrialized society by
2020 and other strategic goals (World Bank 2013.)
3.2
PESTEL analysis
PESTEL method is used in this chapter for analyzing Vietnam as a target market.
PESTEL symbolizes for Political, Economic, Technological, Environmental and
Legal. The PESTEL analysis of Vietnam strived at giving an overview outlook of
the external environment of the country.
3.2.1 Political factors
The official name of Vietnam is the Socialist Republic of Vietnam. The
Constitution in 1992 is the highest fundamental legal jurisdiction which
institutionalizes the country’s political regime, rights and duties of citizens,
national assembly, government, people’s councils and committees, national flag,
etc. The State of the Socialist Republic of Vietnam is the central organization of
the political system. The State President is the Head of the State, elected by the
National Assembly. The National Assembly is the highest-level representative
body of the Vietnamese people. The government is the highest body of State
administration which consists of Prime Minister, Deputy Prime Ministers,
Ministers and other members. The judicial body of Vietnam is the People’s courts
including the supreme People’s Court, local People’s Courts, Military Tribunals
and other tribunals set by law. Besides, there are many social-political
organizations in Vietnam such as the Vietnamese Fatherland Front, Vietnamese
Trade Union, Vietnamese Women’s Union and other professional organizations
(Vietnam’s Embassy in the USA 2013). Map of Vietnam is illustrated below.
33
FIGURE 8. Location of Vietnam in South East Asia (The World Factbook 2012)
Geographically, Vietnam is located in Southeastern Asia, bordering the Gulf of
Thailand, Gulf of Tonkin, and South China Sea. Its neighbors are China, Laos and
Cambodia. The total area of Vietnam is 331,210 sq. km in which land area is
310,070 sq. km and water area is 21, 140 sq. km. The climate in Vietnam is
tropical in the south and monsoonal in the north with hot, rainy season from May
to September and warm, dry season from October to March. The territory of
Vietnam is low, flat in the south and the north with central highlands and hilly,
mountainous in far north and northwest. (The World Factbook 2012.)
3.2.2 Economic factors
The income level of the Vietnamese is listed as lower middle income by the
World Bank (The World Bank 2012). According to the World Fact Book,
estimated GDP (purchasing power parity) is $303.8 billion in 2011 ranking 42 in
the world; estimated GDP (official exchange rate) in 2011 was $122.7 billion.
GDP per capital (PPP) in 2011 was estimated at $3,400. Composition sectors of
GDP are agriculture (22%), industry (40.3%) and service (37.7%). The estimated
grossed fixed investment in Vietnam in 2011 is 34.6% of GDP ranking 11th in
comparison to the world. The Vietnamese budget has revenue of $34.09 billion
and an expenditure of $37.24 billion. Taxes and other revenues contribute 27.8 %
to the overall GDP. Public debt accounts for 48.8% of GDP ranking 60th in
comparison to the world. Inflation rate (consumer prices) is high with 18.7%
estimated in 2011 almost double the inflation rate in 2010 at 10%. The inflation
34
rate in Vietnam in October 2012 recorded by Trading Economics was 7.0%.
(Economics 2012)
Main agriculture products are paddy rice, coffee, rubber, tea, pepper, soybeans,
cashews, sugar cane, peanuts, bananas, poultry, fish and seafood. Main industries
are food processing, garments, shoes, machine-building, mining, coal, steel,
cement, chemical fertilizers, glass, tires, oil, mobile phones. Industrial production
growth rate stands at 6% ranking at 54th in comparison to the world.
Export in 2011 was $96.91 billion. Exporting commodities are clothes, shoes,
marine products, crude oil, electronics, wooden products, rice and machinery.
Exporting partners are the United States (18%), China (11%), Japan (11%) and
Germany (3.7%). Import capacity in 2011 was $97.36 billion. Commodities for
imports are machinery and equipment, petroleum products, steel products, raw
material for the clothing and shoe industries, electronics, plastics and automobiles.
Importing partners of Vietnam are China (22%), South Korea (13.2%), Japan
(10.4%), Taiwan (8.6%), Thailand (6.4%) and Singapore (6.4%). (The World
Factbook 2012.)
3.2.3 Social factors
The estimated population of Vietnam according to the World Fact book in July
2012 is 91,519,289 people, which ranks at 13th in the world. The major cities with
major population are Ho Chi Minh City, Hanoi, Hai Phong and Da Nang (The
World Factbook 2012). The official language is Vietnamese; however, English
has been increasingly recognized as a second language. Other languages are
French, Chinese, Khmer and other mountain area languages. 85.7% of the
Vietnamese people belong to Kinh (Viet) ethnic group. Other ethnic groups are
Tay, Thai, Muong, Khmer, Mong, Nung, etc. The age structure is young with
approximately 70% of the population from the age of 15 to 64 years old.
Urbanization has been growing significantly with 30% of total population being
urban population. The labor force is made up of 48.23 million ranking 13th in the
world with 48% in agriculture sector, 22.4% in industry sector and 29.6% in
35
service sector. Population below poverty line in 2010 was 14.5%. (The World
Factbook 2012)
Energy plays an important role in the functions of the economy as well as the
society. As an emerging economy, Vietnam has a high consumption of energy.
Energy production in Vietnam in 2011 was 106 billion kWh ranking at 34th in
comparison to the world. Electricity consumption was 101 billion kWh. The
amount of electricity exported abroad was 373 million kWh in 2009. Imported
electricity accounted for 281 million kWh. Electricity used from fossil fuels was
high up to 63.7% of total installed capacity. Electricity used from hydroelectric
plants was 36.2% while electricity from other renewable sources was only 0.1%
of total installed capacity. (The World Factbook 2012.)
3.2.4 Technological factors
The analysis of technological aspect focused mainly on the development of
current renewable energy technologies in Vietnam. According to Mr. Cuong,
Director of Center for Renewable Energy and Clean Development Mechanism
(Institute of Energy, MOIT), the current total electricity production from
renewable energies to the national power grid is 2,000 million kWh, which is
about 2% of total electricity generation capacity in the power system (Nguyen D.
C. 2012). It is estimated that the power capacity of renewable energy in Vietnam
will increase from 75.000MW (approximately 5.6%) in 2020 to 146.800 MW
(9.4%) in 2030 (Brown 2011). The government’s Master Plan VII indicated that
by 2020 about 600,000 households will have access to electricity supplied from
renewable power resources. Below is the pie chart showing the targeted capacity
proportion of different types of power including both conventional and renewable
energy sources by 2020.
36
FIGURE 9. Targeted power capacity proportion of different sources of energy in
Vietnam by 2020 (Brown 2011)
There are several renewable energy technologies that are in growing demand in
Vietnam currently. In urban areas there are a number of the new construction of
equipment and installation of solar water heating system and solar photovoltaic.
For example, solar street lights for demonstration and awareness purpose. It was
estimated that there were 50,000 families in southern and central parts of Vietnam
in need solar PV systems (Le 2009). In the rural areas there is a need for
construction of biogas digesters and improved biomass cooking stoves. Moreover,
there have been many waste water treatment projects implemented in Vietnam.
Despite the increasing demand for renewable energy technologies, there are still
limitations in understanding and development of renewable energy. Studies and
applications of renewable energy in general and solar PV technology in particular
in Vietnam are still at low level, small-scale and dispersed across the country
(Dang 2012). There is a lack of service providers as well as maintenance operators
(Huong 2012). Necessities and components of renewable energy technologies are
mainly imported from abroad. For example, 100% of solar PV modules are
imported from abroad; other components such as inverters, controllers, battery,
etc. are partly designed and manufactured domestically (Le 2009, 54).
37
3.2.5 Environmental factors
The National Environmental Agency which belongs to the Ministry of Science,
Technology and Environment is accountable for environmental issues in Vietnam.
There are certain international and national agreements that have been signed and
ratified by the Vietnamese government such as agreements on biodiversity,
climate change, desertification, endangered species, environmental modification,
hazardous wastes, ozone layer protection, etc. (The World Factbook 2012.). Law
on Protection of the Environment was implemented in Vietnam according to
Decree 80-2006-ND/CP of the government on 9th of August 2006 (vietnamlaws
2006). Besides, there are also several ratified laws such as Law of the Sea passed
on June 21st 2012 (tuoitrenews, 2012), Law on Forest Protection and
Development passed by the 11th National Assembly of the Socialist Republic of
Vietnam on December 3, 2004. Under the Climate Change-Kyoto Protocol, the
Hydro-Meteorological Service of Vietnam (HMS) which belongs to the National
Office for Climate Change and Ozone Protection was assigned as a national
authority for Clean Development Mechanism (CDM) which promotes CDM
activities and projects related to renewable energy field in Vietnam. (Dao et al.
2011)
Despite existing legal framework and active organizations working on
environmental issues, Vietnam is still facing environmental problems nowadays.
Rapid economic growth has influenced many of the environmental issues in
Vietnam. Urbanization, industrialization and the exploitation of natural resources
through industrial planning and intensive farming are among the main factors that
affecting negatively on the environment. While environmental problems in urban
areas such as Ho Chi Minh City and Hanoi are air pollution, water pollution, noise
pollution and hazardous waste treatment; problems in rural areas are deforestation,
soil erosion, flooding in the deltas, pollution of coastal and marine environment.
The World Bank has so far engaged in managing the environmental issues in
Vietnam with several priorities such as issues on climate change, pollution and
hazardous waste management, biodiversity conservation, etc. Still, environmental
issues remain challenges for the country to deal with at the moment and in the
future.
38
3.2.6 Legal factors
Generally speaking, there are good macroscopic policies and roadmap for the
development of renewable energies in Vietnam. They are Law on Environmental
Protection, Law on Energy Efficiency and Conservation, National Energy
Development Strategy for period up to 2020 with vision to 2050, Power Master
Plan VII, financial support of Clean Development Mechanism (CDM) projects
through Vietnam Environmental Protection Fund, etc.
The Law on Environmental Protection was passed on November 29, 2005 by the
11th National Assembly of the Socialist Republic of Vietnam. Law on Energy
Efficiency and Conservation was approved by 12th National Assembly on June
17th 2010. The National Energy Development Strategy for period up to 2020 with
vision to 2050 was issued under the Decision No. 1855/QD-TTg on 27th of
December 2007. Its content focused on the government’s effort of increasing
share of renewable energy to 3% by 2010, to 5% in 2020 and to 11% in 2050.
Besides, it also took into consideration the establishment of renewable energy
development fund for supporting investment in development of renewable energy
(Nguyen D. C 2012).
The National Power Development Plan for the 2011-2020 period with a vision to
2030 (the Power Master Plan VII) having emphasis on energy security, energy
efficiency, promotion of renewable energy and liberation of the power market was
signed by the Prime Minister of Vietnam on 21st of July 2011 under Decision No.
1208/QD-TTg. It is also currently considered as the legal background for the
development of renewable energies in Vietnam (Nguyen D. C 2012) .The
roadmap for the liberalization of electricity market in Vietnam was progressively
improved as competitive generation market during the period 2005-2014, as
competitive wholesaling market during 2015 to 2022, as competitive retail market
after 2022 and as fully competitive retail market from 2024 onwards (Cooper
2012, 14). The result of the conducted questionnaire with several Vietnamese
authorities has shown positive confidence in the application of Master Plan VII.
The others also agreed that the Plan has been applied to some extent in reality
(Questionnaire for Vietnamese authorities 2013).
39
Together with approved laws and governmental plans relating to renewable
energy, there are also certain concrete governmental incentives and financial
support to enhance the development of renewable energy in Vietnam. Several
incentive mechanisms have been approved to enhance the development of
renewable energy such as such as Feed-In-Tariff (FIT) for wind power projects,
reduction and exemption of corporate income tax, value-added tax, exemption of
import and export tax duties for imported equipment and machinery necessary for
the creation of fixed assets of renewable energy (RE) projects (Nguyen D. C
2012). Besides, companies are also given different priorities such as priority to
product consumption of CDM project in comparison to the same products which
do not belong to CDM project, access to information relating to decision on
product price CERS, issue of Certificate on Greenhouse gas emission reduction
certified (CERS), opportunities in receiving financial support in establishing
projects according to current law, incentives on tax, land lease fee, depreciation of
fixed assets, investment credit of the government, priority to incentives on product
prices, etc. (Nguyen T.H, 2013). In terms of corporate income tax incentive rate,
newly-establish enterprises in renewable energy projects will have to pay
corporate income tax only 10% for a period of 15 years. If the power projects are
among large scale projects utilizing new technology and in need of investment,
the corporate tax of 10% will be extended up to 30 years.
Speaking of large-scale power investment, Decision No.130/QD-TTG dated on
the 2nd of August 2007 approved by the Prime Minister has specified some
financial mechanisms for investment projects according to clean development
mechanism. For example, the duration of power purchase agreement between the
government and the investors will last up to 20 years. Besides, there are financing
mechanisms for supporting the preparation of CDM project design documents
(PDD) provided that the goal of increasing energy efficiency, application of
renewable energy resources, reducing greenhouse gas emissions, etc. are fulfilled
(VEPF 2012, 16). There is a price subsidy for solar products and Clean
Development Mechanism (CDM) projects having production cost greater than the
contracting electricity selling price (the case of wind power projects) (Cooper
2012). For example, the maximum support level for PDD is 30% of actual costs
for preparation of PDD (VEPF 2012, 21).
40
4
INDUSTRY ANALYSIS: SOLAR PHOTOVOLTAIC BUSINESS IN
VIETNAM
This chapter firstly examines the developing phases of renewable energy in the
world and solar energy industry in particular. The next part describes solar energy
situation in Vietnam with more focus on the development of solar photovoltaic
technology in the country. Situation of rural electrification in Vietnam, the
disadvantages of lacking electricity and potential of rural electrification through
solar PV off-grid systems are also discussed in this part.
4.1
Solar energy industry in the world
This parts aims at providing general overview of renewable energy, its recent
development with focus on solar energy and its technological development in
developed countries as well as developing countries.
4.1.1 Outlook of renewable energy in the world
Renewable energy has been increasingly used as a sustainable source of electricity
generation. According to a recent report in 2012, 20.3% of global electricity is
generated by renewable sources by the end of 2011. Below is the figure of
renewable energy share of global final energy consumption in 2010.
41
FIGURE 10. Renewable energy share of global final energy consumption in 2010
(REN21 2012, 21)
As indicated in the figure, renewable energy accounted for 16.7% of global final
energy consumption in 2010. Modern renewable and traditional biomass shared
the similar figure of over 8% of the total renewable energy (REN21 2012).
4.1.2 Solar energy and solar technologies in the world
Solar energy technologies are technologies applied to take advantage of the sun’s
energy and light to provide heat, light, electricity and hot water for businesses and
individuals. There are a number of advanced technologies that have been
developed to utilize the potential of sun power including photovoltaic systems
(producing electricity directly from sun light), solar process space heating and
cooling, passive solar heating and day lighting, solar electricity, solar hot water,
etc. (Renewable Energy World 2012). Among various solar technologies, solar
photovoltaic (PV) electricity remained its growth trend in 2011 and it has grown
faster even in the midst of financial and economic crisis. As reported by the
European Photovoltaic Industry Association (EPIA) in 2012, solar PV is
nowadays the third most important renewable resource after hydro and wind
power in terms of globally installed capacity with an approximate amount of 70
GW installations globally (EPIA 2012). Solar photovoltaic had the fastest growth
in comparison to the other renewable technologies with operating capacity
increasing an approximate of 58% per year (REN21 2012).
Europe is leading in utilizing solar energy as renewable source. EPIA has reported
that in 2011 solar PV was the number one electricity source in Europe in terms of
added installed capacity (EPIA 2012). With 75% of all new installation capacity
in 2011, Europe is still recognized as the most important market of global PV
(EPIA 2012). Many European countries are leaders for solar PV applications such
as Germany, Italy, the Czech Republic, Belgium, and Spain (REN21 2012).
42
The figure below indicates the significant growth of solar PV capacity globally
during the period from 1995 to 2011.
FIGURE 11. Solar PV Total World Capacity 1995-2011 (REN21 2012)
As can be seen from the figure, the installed capacity of solar PV in 2011 is
almost double the figure in 2010. China and other developing countries are
following Europe in expanding and developing solar PV technology. China was
the on the top among European PV market in 2011 with installation capacity of
2.2 GW. The USA was in the second place with 1.9 GW installed capacity. (EPIA
2012). In terms of market, China has the largest PV market with 2.1GW capacity
followed by the United States (1.9GW), Japan (1.3GW), and Australia (0.8 GW).
With the quadrupled capacity in 2011, China emerged as a dominant player in
Asia with 50%of the region 2011 demand. Other countries which had remarkable
growth were Canada (364 MW) and India (300 MW) (REN21 2012). The figure
below shows the operation capacity of solar PV in a number of countries around
the world.
43
FIGURE 12. Solar PV Operating capacity in a number of countries all over the
world (REN 21 2012)
As can be seen from the figure, Germany remains the largest market of solar PV
applications with 35.6% of total operating capacity while Italy follows with
18.3%. Germany and Italy have covered over half of the solar PV market, and the
rest is divided among other developed and developing countries.
In terms of installation scale, large-scale solar photovoltaic systems continue to be
the main trend. The majority of installed PV capacity is grid-connected with the
off-grid accounting for only 2% of the total global capacity. However, there is an
increasing interest and growth in off-grid, small-scale and rooftop systems
especially in developing countries (REN21 2012, 49).
Despite significant growth, solar PV manufacturing have been challenged by
various factors such as declining policy support, the global financial crisis,
tensions in international trade and so on that leads to negative outlooks or
uncertainties in investing in new projects. The role of market leadership and
manufacturing has been shifted towards developing countries such as China and
India. Furthermore, there are also new emerging players in Asia as well as in
Latin America, the Middle East and North Africa region. (REN21 2012, 22)
44
4.2
Solar energy industry in Vietnam
4.2.1 Energy demand and potential of solar energy in Vietnam
The energy demand in Vietnam is increasing in the future. It is expected that coal
will be imported to generate electricity by 2015 (Nguyen D. C. 2012). As fossil
fuels are running out and the possibility of constructing new hydro power plants is
limited, it is obvious that renewable energy is one of the most potential
alternatives to energy shortage in Vietnam. Below is the graph showing the
development of different renewable energy sources in Vietnam in the future.
FIGURE 13. Different types of renewable energy in Vietnam during 2011-2030
(Nguyen D. C. 2012)
As can be seen from the graph, solar PV energy is expected to increase relatively
just after wind energy and solar hydro power (SHP) in the near future.
Geographically, Vietnam has a huge potential for the development of solar
technology and related applications. In Vietnam, the sun is a priceless and
available commodity all year round. According to Trinh Quang Dung in his recent
research, the annual daily solar radiation in Vietnam is 5.2 kWh per square meter
45
(Trinh 2009). The total sunny hours is over 2500 hours/year, and the total annual
solar radiation is about 230-250 kcal/cm2. The amount of solar radiation is
increasing in the southern regions, which provides a good basis for the
development of solar energy applications (Nguyen D. C. 2012). Pham Dinh
Thong, in his current report of solar PV technology in Vietnam, has described the
variety of solar energy power in different regions of Vietnam. The whole country
can be divided into 5 sub-zones of solar energy as illustrated below:
FIGURE 14. Sub-zones of solar energy in Vietnam (Dang 2012)
Five territory zones which were divided on the map are North-East, North-West,
North of Central Part, South of Central Part & West Highland and Southern Part.
Each zone receives a different amount of solar energy. The table below illustrates
in more detail the annual amount of solar energy in different zones:
46
TABLE 2. Annual average solar energy density and number of sun-shining hours
in various sub-zones (modified from Institute of Energy)
No.
Territory Zone
Annual aver. Solar energy
Annual aver. Number of
(kcal/cm2 year)
shining hours (hrs/year)
1
North-East
100–125
1500–1700
2
North-West
125–150
1750–1900
3
North of Central
140–160
1700–2000
150–175
2000–2600
Southern Part
130–150
2200–2500
Country average
130–152
1830–2450
Part
4
South of Central
Part & West
Highland
5
The potential of solar energy has observed positive feedback from stakeholders
who participated in answering to the question “What is your evaluation on the
potential of solar energy in Vietnam?” Two out of three have rated solar energy as
high potential to develop while one rated as medium potential. (Questionnaire for
Vietnamese authorities 2013)
Speaking of solar photovoltaic technology, there are currently three kinds of PV
systems that are being used in Vietnam. They are stand-alone solar PV systems,
stand-alone hybrid systems of solar PV or other energy resources and solar PV
on-grid system. While solar PV on-grid system is only used as demonstration
systems at the National Conference Center and at the Ministry of Industry and
Trade (MOIT) in Hanoi, the other two types of solar systems are increasingly used
in places where there is lack of electricity grid such as mountainous or island
47
areas (Dang 2012, 6). Stand-alone solar PV system is the main technological
application of solar energy to provide electricity in mountainous and island areas
for lighting and powering of households, school, clinics, cultural houses and
commune centers, for functioning telecommunication activities as well as marine
communication in the form of signal electric light (Dang 2012, 5). It was
estimated that Vietnam has had more than 800 kW of installed solar PV systems
used for households, telecommunications, hospitals, and schools. Most of these
installations are found in the southern provinces of Vietnam because of high solar
radiation in those regions (Nguyen T.H 2013).
4.2.2 Rural electrification in Vietnam
The difference in level of electrification in urban and rural regions in Vietnam was
reported as high. It was agreed by questionnaire participants that the rate of
electrification varied from different to very different between remote and urban
regions in Vietnam. Solar photovoltaic off-grid system was considered as one of
the most feasible options for rural electrification in Vietnam. Besides, there are
also several types of renewable energies that are potential to bring electricity to
remote regions such as wind energy, energy from biogas and energy from
biomass, small-scale hydropower stations, etc. (Questionnaire for Vietnamese
authorities 2013)
There have been a number of rural electrification projects in Vietnam such as
Rural Electrification I and II sponsored by the World Bank, technical assistance
and loans with low interest to expand electricity grid and build new hydro power
stations by Asian Development Bank (ADB), project of biogas storage for
households by Netherlands Development Organization (SNV), EEP project
sponsored by the Finnish government, rural electrification project for households
with no access to electricity by solar PV off-grid systems sponsored by the
Korean government with special loan interest.(Nguyen N.H, 2013). Moreover,
there were also rural electrification (RE) projects in rural communes of Kien
Giang province such as Phong Dong, Vinh Phong, Vinh Binh Bac (Vinh Thuan
district), Tan Thanh (An Minh district), Hoa Chanh (U Minh Thuong district),
Hoa Loi (Giong Rieng district), Hoa Dien (Kien Luong district) and Vinh Dieu(
48
Giang Thanh district) with total expenses of over 30 billion VND. There were RE
projects where the Vietnamese government bought 6 electricity generators for 6
island communes including Tho Chau anh Hon Thom (Phu Quoc province), Lai
Son (Kien Hai province), Hon Nghe and Son Hai (Kien Luong province) and Tien
Hai (Ha Tien province). The government has also implemented RE projects for
Khmer ethical minority groups in 3 communes of Giong Rieng district, 26
communes of Chau Thanh, An Bien, Giang Thanh and Go Quao district with total
capital of over 100 billion VND to electrify 15.000 households, among which
about 9.450 households of Khmer ethical minority group. There was also RE
project in rural communes of Bac Giang province in which the local authority has
made investment in building new electricity cab systems to electrify 94 rural
villages and hamlets of 24 communes of ethnical minority groups in mountainous
areas belonging to Son Dong, Luc Ngan, Luc Nam, Lang Giang, Yen The district
with total capital of 229 billion VND within period from 2012-2015. Besides,
EVN also has implemented RE projects for villages and hamlets in Tay Nguyen
highland areas. Last but not least, Distribution Efficiency Project (DEP) with the
aim of improving the effectiveness of on-grid electricity distribution system
attached to the on-grid systems to rural areas has been conducted with total capital
of 724.8 million VND with loans from other international organizations such as
World Bank (488.9 million VND) (Nguyen T.H, 2013)
4.2.3 Disadvantages of electricity shortage
There are many disadvantages of lacking electricity. Firstly, it prevents the
possibility of improving living standards in many aspects such as education,
career, health, etc. In remote areas, kerosene and candles are used for light; dry
cell batteries are used for radio. The brightness level of kerosene lamps is low and
the usage of kerosene lamps and candles produce smoking air inside the house.
Low education can create many social problems such as criminal and trafficking
activities, increase in birth rate, low quality of life and life expectancy. Those
problems can be alleviated through rural electrification as it improves living
standards by creating more jobs and services, reducing the negative impact of the
use of kerosene lamp on health and local environment.
49
4.2.4 Rural electrification potential of solar PV off-grid household
systems
As rural areas are often remote mountainous areas or islands where the on-grid
electricity system cannot reach, solar PV off-grid system is a feasible solution to
electrify those places. It provides power for domestic activities such as lighting,
cooling, cooking and information exchanging through means of communication.
Working activities such as sewing, social public activities such as education,
health centers, post offices are also benefited from solar PV systems. Therefore,
solar PV small-scale systems bring significant benefits economically, socially and
environmentally. Economically speaking, the application of solar PV in rural
areas is likely to bring benefits for end-users, micro, small and medium-sized
enterprises. Improved condition by solar PV systems enables people to study and
generate income activities after dark. The use of cellphone charged by solar
energy engages more social communication and information exchange. For
medium-sized enterprises, it is their chances to sell the solar products and improve
their businesses. Other benefits are improved health and safety for end-users,
improved gender equality, etc. (Reiche et al., 2010)
50
5
CASE COMPANY: FOSERA CO., LTD.
This chapter includes four main parts. The first part provides general information
about the case company FOSERA. The second part describes different types of
FOSERA products, their features and functions. SWOT analysis is used in the
next part to analyze the company’s internal and external factors. The last part uses
Porter’s Five Forces tool to examine the company’s position and external
environmental players upon its entrance to the Vietnamese market.
5.1
Overview of the company
FOSERA GmbH & Co.KG is one of the leading innovators in the renewable
energy electronics sector and a global manufacturer of PV system used for the
generation of light and electricity (Adelmann C. 2012). Founded in 2009,
FOSERA developed its first solar home system named the “FOSERA Pico Solar
Home System” (PSHS) and is being used all over the world today. The company’s
vision is to electrify Africa, Asia and Latin America. Its mission is to become
global market leader in the field of factory-made “stand alone” solar systems.
FOSERA’s headquarter is in Illerkirchberg (Germany) and its worldwide
distributor are in Afghanistan by Sonnen Plus GmbH, Germany by Sol-Expert,
India by Auroville Energy Products, Mozambique by Sonnen Plus GmbH,
Pakistan by Sonnen Plus GmbH, Peru by Nemetsa and Sri Lanka by Suryavahini
(Pvt) Ltd. In November 2012, FOSERA announced the news on its success of
establishing the first Pico Solar Home System assembly line in Sub Saharan
Africa in commercial production. (FOSERA 2012)
According to the general manager of FOSERA Ms. Catherine Adelmann, the
company’s general market entry strategy is to find a local dealer who has already
had some experiences in the market, for example, mobile phone provider or
retailer. The advantages of cooperating with local dealers are benefits of existing
networks and current know-how in the field. The company also tries to train local
entrepreneurs who go into the field, sell and repair the products to ensure the
maintenance of the company’s products. (Adelmann C. 2012)
51
5.2
Product analysis
In order to understand the products of FOSERA in detail, it’s good to understand
different technical terms for solar products. They include stand-alone solar PV
system, solar home system and Pico solar system.
A stand-alone solar PV system consists of 5 main components: solar PV array or
modules, Charge Controller for controlling the charge and discharge processes to
battery bank, Battery Bank for storage of electricity, Inverter to invert the CD
current from PV or battery to AC current, and Loads ( DC and AC). The photo
below illustrates the typical diagram of solar PV stand-alone system. (Dang 2012,
7)
FIGURE 15. Diagram of solar PV stand-alone system (adapted from Dang 2012)
A Solar Home System (SHS) is a combined system of solar PV panel, battery and
charge controller that provide a modest amount of electricity to households
particularly in rural or remote regions that are inaccessible to the electricity grid
(REN21 2012,166). A typical SHS for rural families consists of PV module of 5070 WP, battery (12 V (50-70) Ah, lead acid), loads such as energy saving lights
(12VDC-12W), TV or radio (Dang 2012, 8). A typical DC loads for rural
electrification includes light (100-1000lm) 1 W-15W, radio/cassette 0.2W-5W,
52
cellphone 1Wh/day, TV (15”) 15W, refrigerator 50W (150Wh/day) (Adelmann P.
2012). In a larger scale, a solar home system for rural community facilities such as
post office, military offices consists of PV module of 400-5000WP, battery (12V,
24, 48V)/ (200-2000) Ah and loads such as lighting lamps, TV, radio, amplifier
and other specific equipment (Dang 2012, 9). A solar home system with small
TV, 3 lamps and radio can cost approximately 100 $ (= 2,075,610 VND). (1
USD=20,756.1 VND (OANDA, 2013). Below is the table showing the
performance capacity of the system:
TABLE 3. Performance capacity of SHS system with small TV, 3 lamps and radio
(modified from Adelmann P. 2012)
Load
Piece
Power(W)
Service
Usage (h)
Energy
(wh/d)
Light
3
1
100lm
3
6
Radio
1
0.2
3
0.6
Cell phone
1
1
1
1
TV 8 “
1
4
3
12
Sum
19.6
Ah/day
1.63
8“
A Solar Pico System (SPS) is a very small solar household system comprised of a
solar lamp or a mean of technological communication such as cellphone with a
power output of 1-10W and a voltage up to 12 volt (REN21 2012, 166).
Illustration of a FOSERA PSHS (Pico Solar Home System) model is found below.
53
FIGURE 16. Model of FOSERA PSHS (FOSERA 2012)
A Pico Solar Home System with lamp, cell phone and radio can cost 50$ (without
load). The table below indicates in detail the performance capacity of the system.
TABLE 4. Performance capacity of a PSHS System with lamp, cell phone and
radio (modified from Adelmann P. 2012)
Load
Piece
Power (W)
Service
Usage (h)
Energy
(Wh/d)
Light
1
1
100lm
3
3
Cell phone
1
1
1
1
Radio
1
0.2
3
0.6
Sum
4.6
Ah/day
0.38
15 “
54
As we can see from the table, the energy consumption of PSHS is relatively small
approximately 4.6 Whs per day. Therefore, the system is highly suitable for
people living in remote areas who consume only a small amount of electricity for
their necessary daily lives.
FOSERA’s products
The following describes different types of FOSERA’s products in detail. The
company’s products are Pico Solar Home Systems FOSERA PSHS
2800/4200/7000.Besides, the company’s products also include FOSERA Lamps,
FOSERA Phone Chargers, FOSERA Radio, FOSERA SCANDLE and FOSERA
BOP. FOSERA PSHS is a Pico solar home system for domestic use such as light,
radio and cell phone. The product’s solar module capacity is from 1.5 to 5W. The
product can be extended by parallel connection. Its user price is between 49 $ and
99 $ (between 1,020,572 VND and 2,061,972 VND). A similar product with
bigger electricity capacity is LSHS System (12V). It is also solar home system for
domestic use. The product is used for several lights, radio, cell phone and TV. Its
solar module capacity is from 10 to 20W. The product can be extended by parallel
connection. Its user price is 199$ (approximately 4,144,772 VND).
FOSERA Lamps have three models FOSERA Lamp 50, FOSERA Lamp 100 and
FOSERA Lamp 200.
FIGURE 17. FOSERA Lamp (FOSERA 2012)
55
PSHS Phone Charger is used to charge mobile phones of almost any phone brands
that are available on the market.
FIGURE 18. FOSERA Phone Charger (FOSERA 2012)
FOSERA Radio is a low power-consuming device. It has dual power input which
enable powering by the PSHS system or normal batteries.
FOSERA SCANDLE is a small light system used for domestic and mobile use
such as light, radio and cellphone. Its solar module capacity is from 0.5 to 1.5W.
User price for FOSERA SCANDLE is between 15$ and 49$ (between 312,420
VND and 1,020,572 VND; 1 USD= 20,828 VND) (The State Bank of Vietnam
2012).
56
FIGURE 19. FOSERA SCANDLE (FOSERA 2012)
FOSERA BOP is company’s new product. It is a small light system for domestic
or mobile use with night-light function. Its solar module capacity is from 0.5 to
1.5W. There are active and passive versions of BOP. Its user price is between 10 $
and 20 $ (between 208,280 VND and 416,560 VND).
FIGURE 20. FOSERA BOP (FOSERA 2012)
Another new innovative product is Solum Street Light which is ultra-efficient
street light for public use. Solum Street Light is less expensive than conventional
57
street lights and provides intelligent light control. Its solar module is from 10 to
20W. The product’s user price is from 499 $ (approximately 10,393,172 VND).
General features of FOSERA products are the usage of high efficient long lasting
LEDs and Li Fe PO Battery which can last up to six times longer than a Pb
battery. Besides, intelligent system and battery management is also part of
FOSERA’s product features. (Adelmann C. 2012). Most of FOSERA products are
easy to extend according to customers’ demand. All systems for domestic lighting
are compatible. As the products were developed with user-friendly and simple
features, customers do not need to have specialized knowledge or know-how in
order to be able to use the products. Furthermore, as the products are oriented sold
to users in remote areas, the company also offers form of financial assistance for
customers to buy the products step by step (Adelmann C. 2012).
This table shows the price of FOSERA products calculated in USD, EUR and
VND currency using the exchange rate information issued by the State Bank of
Vietnam on the 14th of November 2012(1$= 20,828.00 VND); 1$=0.75031 €
(OANDA 2013)
TABLE 5. End-user Price list of FOSERA products in USD, EUR and VND
(modified from FOSERA Price List 2012)
Packing
unit
(pieces)
Weight/
packing
unit
(kg/unit
)
Pieces/20”
Container
Remark
Price/
piece
($)
Price/
Piece
(€)
Price/pie
ce (VND)
PSHS
2800
100
1.5
2,500
System
incl. Lamp
100
52.89
39.68
1,101,592
PSHS
4200
100
1.5
2,500
System
incl. Lamp
200
69.31
52.00
1,443,588
PSHS
7000
100
1.9
2,500
System
incl. Lamp
200
89.37
67.06
1,861,398
Product
58
SCANDL
E 25
100
0.9
5,000
System
with built
in table
lamp
(25lm)
22.80
17.11
474,878
SCANDL
E 75
100
0.9
5,000
System
with built
in table
lamp
(60lm)
31.01
23.27
645,876
SCANDL
E 200
100
0.9
5,000
System
with built
in table
lamp
(160lm)
41.04
30.80
854,781
Lamp 50
100
0.4
12,250
Lamp with
40-50lm
10.76
8.07
224,109
Lamp
100
100
0.4
12,250
Lamp with
70-90lm
14.59
10.95
303,880
Lamp
200
100
0.4
12,250
Lamp with
130-160lm
20.06
15.05
417,809
Radio
100
0.1
10.03
7.53
208,904
Phone
Charger
100
0.1
5.29
3.97
110,180
Ferry
Light
100
0.2
Single
color
6.20
4.65
129,133
Ferry
Light
100
0.2
Multicolor
7.11
5.34
148,087
59
5.3
SWOT analysis
SWOT represents Strengths, Weaknesses, Opportunities and Threats. SWOT is
used to analyze the internal and external factors of FOSERA in order to
understand the company situation upon entering the Vietnamese market. Below is
the chart summarizing FOSERA’s SWOT analysis.
Strengths
Weaknesses
Good image
Lack of information
High-quality and durable
products
Lack of business contact
Physical distance
International
experiences in other
markets
Cultural differences
Opportunities
Threats
Support from the
government
Competition from local
and foreign companies
Potential market in
Vietnam
Disadvantage as a newcomer on the market
Price still high
FIGURE 21. SWOT’s analysis of FOSERA
Strengths
FOSERA’s strengths lie firstly in its innovative solutions and product quality.
Innovative Li-Battery-Technology enhances life span as well cycle life of the
batteries. Besides, the lifespan of the solar cell is also increased up to 20 years
due to the application of crystalline cell technology. LED technology enhances
significantly the efficiency and brightness of the lamps (1W each) up to 20W as
bright as an incandescent lamp. The system can be combined easily into larger-
60
scale PSHS solar home system with just a plug and play connection. Still, the
products are designed as portable and versatile for various purposes. For example,
SCANDLE 160 can power not only Radio but also cell phone; it can be used as
hanging lamp, wall lamp, ceiling lamp, ambience light or portable torch for long
outings. In the case of FOSERA PSHS, the system also enables easy extension
and installation with many efficient necessary appliances such as lamps, fan,
radio, phone charger. Moreover, the company has continuingly improved its
product features through R & D activities, consultancy with experts and engineers
as well as listening to customers’ demand and expectation (FOSERA 2012).
Another strength is in the company’s international market experience. Within two
years since its foundation, the company has established its presence and business
activities in a number of foreign countries such as Cambodia, Indonesia, the
Philippines, Bangladesh, Malaysia, Afghanistan, Pakistan, Iran, Iraq, Tanzania,
Ethiopia, Mozambique, Malawi, Nigeria, India, Thailand, etc. (Adelmann C.
2013). The company has established good contacts and business partnerships with
distributors and other stakeholders in those countries. Distributors have trust and
confidence in the products; thus they are more engaged and motivated to bring
FOSERA products to the rural markets. The company is able in advertising itself
as a world’s leading company in delivering energy solutions to rural areas of the
world through cooperation with universities and participation in various
exhibitions in solar energy field.
In addition, the company has been managing its supply chain well. It has
trustworthy suppliers of different product components. The manufacturing and
supplying process are going well currently in Thailand, China and India.
(Adelmann C. 2013) Besides, the company has successfully established a new
manufacturing assembly line in Sub-Sahara region. The company has ability in
management coordination; therefore, the supplying chain in various countries
shows positive signs.
61
Weaknesses
One of the weaknesses of the company is its lack of local knowledge and
experiences with the Vietnamese market. As Vietnam is different in political and
administration system with other countries, success in Vietnam requires different
strategies and business roadmap. FOSERA has so far not yet established any
contact with the Vietnamese market. One of the prerequisite in doing business in
Vietnam means having good network of relations and business contact. A
motivated, engaged and qualified person with good network will enable the
company to enter the market more easily. The issue can be solved through
establishing contact and network with potential students who are studying and
living in Germany by means of exhibitions, seminars, etc. It’s also important that
those students have intention in coming back to Vietnam after finishing their
study.
Lack of local knowledge and understanding of the administrative system also
means difficulties in dealing with the problems of corruption, bribery and
bureaucracy in Vietnam. As Vietnam is listed as one of the most corrupted
countries in the world’s rank, it’s a big hindrance for the company to enter the
market without any notice or expectation. The positive sign is that the rate of
corruption or bribery in energy sector, especially in the rural electrification area, is
relatively low (Dinh 2013). A person who has previous experiences dealing with
the issue of corruption and bribery is needed in this case in order to ease the
market entry process.
Despite innovative features and ability of extending the solar household systems
quite easily, the company’s products have some limitations which might be a
disadvantage in comparison to other competitors. For example, FOSERA
household systems are able to extend and be connected to other FOSERA loads
such as radio, lamps, phone chargers or refrigerators. Still, there have not yet
loads such as TV, DVD players, fan, etc. As far as the author has done the
research on the Vietnamese market, there are a few companies who offer solar
household systems in larger scale and more options which might attract more
attention of purchasers in urban areas.
62
Another disadvantage which should be taken into consideration is long distance
barrier. Despite the fact that FOSERA has managed its distribution channels well
in many foreign countries, the company might encounter difficulties in
communicating, managing and assisting stakeholders and business partners in
Vietnam. Long-distance communication depends much on the Internet and online
systems such as email, software programs; yet, there is a high possibility of
communication barriers via those systems in Vietnam because of the malfunction
of the unreliable online means of communication such as email, website, etc.
Another disadvantage of FOSERA products is the price. The product price is still
high to reach the end-users who are mainly from the bottom of the pyramid. It is
estimated that there is still 18.2 % (approximately 16.1 million people) whose
income is listed as low (below 2$/day) in Vietnam in 2011 (Brookings 2012).
Therefore, without government financial support, the products cannot approach
customers in rural areas directly and easily.
Last but not least, as solar PV technological solutions are not yet common on the
market, the potential customers or end-users in Vietnam are unaware of
FOSERA’s products. Therefore, it takes time for the company to advertise its
image and build mutual trust. Several suggestions are cooperating with
Vietnamese universities, non-governmental organizations such as Vietnam’s
Women Union, national and local authorities of provinces, etc. to run different
trade fairs, seminars, exhibitions, demonstration presentation, shows, etc. to
advertise the products as well as to establish business networking.
Opportunities
Together with innovative technology and high-quality products, FOSERA has a
good reputation and image as a company from Germany. Up till now, there are
not yet any European companies with solar home system solutions on the
Vietnamese market. There are currently several companies such as SELCO and
Solar World with similar range of products on the Vietnamese market. Therefore,
the company has one important advantage entering the market as a pioneer from
Germany. Being a pioneer might bring challenges to the company; however, the
opportunity of becoming a leading reliable foreign company in supplying solar
63
PV stand-alone and household systems and gaining the potential market are
higher. Furthermore, as German products are generally well appreciated in
Vietnam as with high-quality, excellent innovative design and high durability,
FOSERA can gain more easily the awareness and acceptance of the Vietnamese
government as well as the potential end-users.
Another opportunity is the improvement in legal framework and laws that support
the development of renewable energy in general and solar energy in particular in
Vietnam in the future. Even though there are still lacks of concrete laws
empowering the development of renewable energy on the market, it is likely that
the laws on renewable energy in Vietnam and other relevant legislations will be
approved in the near future. For example, the Master Plan VII has been put into
practice recently (Dam 2013). Most of the authorities and experts interviewed by
the thesis author also showed positive attitude about the improved practicality and
reality of laws in the near future.
The potential large undiscovered rural markets in Vietnam give another
opportunity for the company upon entering the market. Mr. Hai, Deputy Director
of New and Renewable Energy Department in Vietnam, has stated that there is
still approximately 3% of households in Vietnam (about 2, 745,578 Vietnamese
people) lacking access to electricity (Nguyen N. H. 2013). The Vietnamese
population in July 2012 was 91,519,289 (The World Factbook 2012). In addition,
solar PV off-grid systems on small and medium scale was listed by the
government as one of the most feasible options among other renewable energy
solutions such as hydropower in small and medium scale in order to achieve the
goal of 100% electrified households in 2020 set by the Vietnamese government
(Nguyen N. H 2013). Mr. Dam, Director of Electricity Authority Department in
Hanoi, additionally insisted that he has an absolute confidence in the success of
solar PV off-grid small -and -medium-scale systems in Vietnam if companies run
the business with right motives, enthusiasm and good strategies. Moreover, he
also indicated that there have been not yet many results of solar PV on-grid
systems, which means solar PV off-grid system is more practical than on-grid
solar PV systems in rural electrification in Vietnam (Dam 2013). Thus, accessing
64
the Vietnamese market gives the company a high potential of more profits, more
expanded markets and better international image.
Another important opportunity for the company is support and assistance from the
national authorities. As mentioned earlier, the Vietnamese government has been
considering seriously the potential of electrifying remote areas by solar PV offgrid systems. There have been so far a number of rural electrification projects in
Vietnam as indicated in the previous chapter. According to Mr. Dam Tien Thang,
Director of Electricity Authority Department in Hanoi, there are several
supporting methods for local and foreign companies in renewable energy field
promoted by the Vietnamese government such as education, training, fairs,
education class promoting awareness and knowledge, performance model
projects, loans (without interest or with low interest rate) to lower the price of
products and replacement spare parts, etc. Tax exemption for companies who are
doing business in renewable energy field is a popular supporting method that
companies receive (Dam 2013).
In addition, there is a high trend of increasing awareness of the Vietnamese people
about solar PV technologies and applications not only in rural areas but also in
urban areas. Purchasers of urban areas are people who want to buy solar PV offgrid system as an alternative to diesel generator during electricity-cutting-off time
or people who have long outings such as camping, travelling, etc. and need
portable small solar power systems to power their necessities such as cell phones,
radios, etc.
Threats
As a new-comer in solar PV household systems from Europe, FOSERA can
encounter a number of challenges. Working culture differences are among of
them. Business in Vietnam is conducted mainly through a network of contacts;
therefore, it is vital to find the engaged, motivated and experienced person who
has good contact network in assisting the company in early entry stages. Not all
companies in Vietnam have websites and the existing websites are not very
reliable in terms of information, data and communication. It’s difficult to get into
contact with the right responsible business partners just simply by email
65
exchanges. Email and phone contact of the company’s director or manager might
not be available on the website. There are companies who are likely to be
potential business partners or competitors; however, no information if them is
available yet on the Internet. Face-to-face meeting is a more common way to get
into contact with the right person and get the necessary information. Business
negotiations occur not only in the offices but also often in restaurants or other
unofficial places. Agreements are not always signed in the form of contracts, but
they can also simply by saying or words. Word of mouth is a valuable means of
marketing strategies. The level of hierarchy in business is quite high, which makes
the administration process is time-consuming and sometimes costly. Despite the
facts that English has become more common these days in big cities, most of the
people are unable or have difficulties in speaking and understanding English,
which might prevent communication between the case company representative
and other stakeholders.
There are barriers to the implementation of renewable energy related projects or
business in Vietnam in terms of laws and finance. They can be insufficient
support from the government to attract companies doing business in Vietnam,
non-detailed incentive mechanisms, slow and complex administration process
(Nguyen T.H 2013). The current policy and legislative framework for the
development of renewable energy is inadequate to enhance the development of
Vietnam’s renewable energy. Mr. Tien Thang has stated that the challenge that
companies have to face when entering the Vietnamese rural market is the national
law and regulation (Dam 2013). The realization of relating legal documents in
reality is still low or unclear. There are also certain unexpected changes in law
that have not yet mentioned or updated in the official version. Financially, there is
a lack of limited finance assistance for customers and project developers (Thuc,
2012). The Vietnam Electricity Group (EVN) is still the market monopoly of
transmitting, purchasing and distributing of electricity. Therefore, if the company
is going to cooperate with the government through state-funded rural
electrification projects, it is likely for the company to cooperate with EVN
branches in provinces. As stated by Mr. Nguyen The Hai (2013), business
opportunity of solar PV stand-alone systems in rural areas still depends much on
the price level and incentive mechanism of the government towards it.
66
Threat of not being accepted by the people and not winning in governmental rural
electrification projects should be also taken into consideration. Other threats might
be losing the key important assistant personnel as benefits from rural
electrification projects are little and time-consuming, losing good images on the
international market as the company has to deal with bribery and corruption in
Vietnam, not gaining profits but lose money and other minimal threats.
5.4
Porter’s Five Forces Analysis for FOSERA
Porter’s Five Forces tool is used to analyze the external environment factors that
have influence on the company business activities. Five Forces are Competitive
Rivalry among Existing Competitors, Threats of New Entrants, Threats of
Substitute Products, Bargaining Power of Customers and Bargaining Power of
Suppliers. Below is the figure illustrating Porter’s Five Forces.
Bargaining
Power of
Customers:
Medium to
High
Bargaining
power of
Suppliers: Low
to Medium
Competitive
Rivalry among
Existing
Competitors:
Low to Medium
Threat of
Substitute
Products:
Medium to
High
FIGURE 22. Porter's Five Forces for FOSERA
Threat of New
Entrants:
Medium
67
Competitive among existing competitors: Low to Medium
Main competitors of FOSERA on the Vietnamese market are Redsun, Solar Bach
Khoa and Selco Vietnam. Short analyses of these three companies are described
below.
Redsun Energy Joint Stock Company is the first solar photovoltaic panel
manufacturer in Vietnam since 2007. The company produces solar panels for
residential, commercial & industrial, and power plant. The company’s products
are various including Solar Photovoltaic Panels (20W, 50W, 110W, 130W) for
residential usage, Solar Photovoltaic Panels (180W and 190W) for commercial
and industrial usage, Solar Photovoltaic Panels (220W, 270W, and 200W) for
Power Plant (Redsun 2012). One of the most prominent competitive products of
Redsun is Solar Lighting Kit (20W). The package includes 20W solar panel,
charge controller with battery inside, 2*2W LED Light Bulb with 5m cable,
mounting frame and stand. Its applications are for farmer household lighting,
camping uses, etc. Besides, Redsun has gained good reputation in Vietnam among
different stakeholders as an active company with many cooperating projects with
the Vietnamese government (Dinh 2013).
Solar Bach Khoa (or Bach Khoa Investment and Development of Solar Energy) is
a company specializing in R&D, manufacturing and consultancy. The company’s
products are solar energy products such as solar PV system, solar water heater,
wind energy products such as small wind turbines for battery charging, etc. One of
the important product ranges is Micro-Grid Power System which is a combination
of solar photovoltaic, wind with diesel generators to provide electricity in remote
areas. (Bach Khoa 2012)
SELCO Vietnam Ltd. is a subsidiary of SELCO Inc. based in the USA with 100%
foreign-owned capital. The company’s products are Solar Home System “SHS”
from small to large capacity or customized SHS based on customers’ request,
solar modules, LED Lamp Super Energy Saving (12VDC 7W, 9W, 11W),
SELCO Charge Controllers, Genius Inverters, Solar Garden Light (type 1 and 2),
Solar Floating Lamp (UFO), Solar Garden Lamps, DC Fan (12C, 15Watt), Solar
68
LED Lantern, etc. SELCO has had partnership with GE Energy, Kyocera,
Morning Star Corporation, SMA, Solar World, Xantrex, U.S Battery, etc.
SELCO-Vietnam Ltd. was awarded the “Award for Corporate Excellence 2001”
by the U.S State Department. SELCO focuses its business in rural electrification
through Solar Home System for remote areas, solar energy for
telecommunication, clinics, military forces who are in duties in border and utmost
areas, island, solar energy for post offices, people’s committees, schools of rural
villages, etc. (Selco Vietnam 2012) So far SELCO Inc. has installed over 20,000
solar home systems for families with no access to the electricity grid in India, Sri
Lanka, Vietnam, etc. SELCO Vietnam promotes “Solar energy in supporting the
outmost areas” with the aim of bringing solar energy to areas where there are no
access to the national grid or unstable grid. The company cooperates with
Vietnam Women Union (VWU) and Vietnam Bank of Agriculture and Rural
Development (VBARD) to deploy the project of “Electrification the countryside
with solar energy” in 15 southern provinces. SELCO Vietnam has installed over
3,653 solar home systems with total output of 262kW. SELCO Vietnam is also
involved in energy programs in Vietnam such as installing solar energy for over
30 National Parks, conservation zones, over 50 army border stations and islands.
The company has supplied more than 150kWp solar photovoltaic for telecom
companies and rural post offices, over 500 kit of solar signaling for waterway and
airway (Selco Vietnam 2012).
Besides, there are a number of potential competitors on the Vietnamese market
such as Seilar Energy Vietnam Co. Ltd. (part of Seilar Energy Australia group),
Minh Ha co. Ltd. (sole agent of LEONICS), Saigon Solar JSC, Vu Phong Co. Ltd.
(Solar V), Chinatech JSC, VN Solar Inc., Center Point Co. Ltd., Gia Nam
Corporation (Megasun), Viet Trung Technology & Trading Co. Ltd. (sales
representative of Samtrix, sales agent of Schott, Kyocera, Suntech, Xantrex,
SMA, etc.), etc. Though the competition level among companies in renewable
energy field is still low, FOSERA is likely to deal with several competitors on the
markets who offer customers with more affordable price, better customer and
after-sales support, etc.
69
Threat of New Entrants: Medium
There have been so far not so many companies in the solar energy field doing
business in rural areas. As mentioned earlier in the previous part, there are a few
companies who offer solar products for people living in rural areas such as Solar
Bach Khoa, Redsun and SELCO Vietnam. Still, those products are not among
their primary offer or focus in reaching the Vietnamese customers. In addition,
most of the answers from the Questionnaire for Vietnamese authorities (2013)
showed responders’ pessimistic opinion about companies’ interest towards doing
business in remote regions. However, as the Vietnamese government is striving to
achieve its goal of electrifying 100% households in Vietnam by 2020 and
promoting the rural electrification campaign in various means of communication
such as television, internet and website, trade fairs, there will be an increasing
number of companies, both local and foreign, who show more interest to this
unreached market segment. International competitors of FOSERA are also likely
to enter the market if the profitability potential and chance of expanding market
and image are attractive enough.
Threat of Substitute Products: Medium to High
There are substitute products of other renewable energy technologies to rural
electrification such as small-scale hydropower plants in provinces, power
generated from biogas, concentrated solar power, diesel-solar or wind-solar home
systems, solar PV charging power stations, on-grid electricity through the national
power system or through other renewable energies, etc. (Questionnaire for
Vietnamese authorities 2013). There are advantages and disadvantages of
applying one of those mentioned renewable technologies. For example, biogas
technology is still in early nascent stage. Cost for constructing hydropower plants
or stretching electricity cables via national on-grid systems to rural areas is still
high. Price of diesel and oil is increasing in the future. In general, solar PV offgrid home system was confirmed by several interviewees to be one of the most
feasible options to electrify rural areas (Questionnaire for Vietnamese authorities
2013; Questionnaire for experts 2013).
70
Besides, there are several companies which have not yet established business in
Vietnam but also offer renewable energy products in rural areas such as D.Light,
Greenlight Planet, Barefoot, Sundaya, etc. Provided that some of those mentioned
companies enter the Vietnamese market in the future, they are likely to be
FOSERA’s competitors.
Bargaining Power of Suppliers: Low to Medium
As the products of FOSERA are designed in Germany and manufactured in
Thailand and India, the power of suppliers of product components will not play an
important role in the Vietnamese market. Still, the price of batteries for the solar
systems and of LED lamps is expected to go down in the near future (Adelmann
C. 2013). In the future, it is highly likely that there will be an increasing number
of new companies who run similar business as FOSERA and are in need of solar
component supply. Consequently, FOSERA’s suppliers of those components may
increase the manufacturing price of solar components, which lead to increasing
cost for FOSERA.
There are a number of potential business partners for FOSERA such as Devi
Renewable Energies, New Energy (distributor of Sunova), Viet Linh
Manufacturing and Trading Electric-Electronic Co. Ltd., IC Energy Industry Co.
Ltd. (member of IC Holding Vietnam), Tuan An Group (distributor of Hubbell,
Nu-Lec, Wenzhou Lucheng, Solar World, Cygnus Power, Rehau, Roto Frank AG,
etc.), Son Ha TCC. JSC, Bao An Corporation (distributor of Aseries solar water
heaters, Apollo, Bach Khoa, Solarhart), etc. However, as those companies are also
sales representatives for several brands, they have power over the company in
negotiations. In some cases, those potential business partners can turn out to be
potential competitors of the case company.
Bargaining Power of Customers: Medium to High
Customers have power over purchasing decision of the products. There are certain
challenges for the case company in selling its products to customers in Vietnam in
terms of customers in rural areas as well as potential customers in urban cities.
71
Affordability is one of the biggest challenges for people living in rural areas that
are also the main customer segment of the case company. As customers are
usually from the bottom of the pyramid (BOP), they are not able to purchase the
products without any financial supports from the community, from the company
or from the government. There are several solutions to this financial matter, one of
which can be through financial assistance of rural banks and microfinance
institutions. Micro Energy Credit (MEC) is an organization that supports loans to
rural banks and then microfinance institutions. The success of utilizing carbon
funds can be seen in the case of MEC partners in North India selling Solar Home
Lighting System to the Indian low-income customers. MEC partners has utilized
the Carbon funds provided by MEC to establish customer service centers, training
of after-sales service staff, training of bank staff and marketing activities
(Thoumoung 2012). Another challenge is the cost of investment in marketing
activities and awareness generation, after-sales customer service, maintenance
program, etc. People living in remote areas have a low level of education;
therefore, the company needs different approaches towards advertising the
products to them. For example, cooperation with the Vietnamese government and
local authorities will enable the company to advertising its products through
education classes, meetings, seminars, conferences, propagandas, campaigns, etc.
in local regions.
Another customer segment is people living in urban areas. They might be attracted
to purchase the systems as an alternative electricity supply to prevent unexpected
power shortage which often happens in Vietnam during the dry season. (Le 2009,
53) In another way, solar PV stand-alone systems are better alternatives for diesel
generators during electricity cutting-off time. Purchasers can also be those who
need solar stand-alone systems for long-distance travelling such as going hiking
or camping. During their vacation days, they need solar stand-alone systems
which can recharge their necessity devices such as cell phones, small fridges, etc.
The affordability of customers becomes less important; however, customers from
this segment have more purchasing power over the company as they have more
choice. The quality of the products plays an important role in their decision of
what to buy.
72
6
BUSINESS OPPORTUNITIES FOR THE CASE COMPANY
Suggestions of market entry mode to Vietnam are based on comparing and
combining answers of Vietnamese authorities and experts in the renewable energy
sector in Vietnam. The answer of Vietnamese authorities to the question “Which
types of market entry modes is suitable for a company like FOSERA to enter the
Vietnamese market?” in the conducted questionnaire were partnership in the form
of joint-venture and cooperation with governmental and non-governmental
organizations.
A similar question was applied to interview three experts in renewable energy
fields and the answers were 2 out of 3 for direct import, 2 out of 3 for jointventure and 1 for sales representative. Therefore, based on analyzing the solar
energy market of Vietnam with focus on rural areas and interviewing different
stakeholders, the author came up with suggestions of market entry modes for the
case company to enter the Vietnamese market. The suggestions are conducted
based on a timeline showing three periods of time and different market entry
strategies for each period.
73
Direct
export
• Cooperation with
the Vietnamese
government &
NGOs through RE
projects
• Sales area
representative
Direct
export
• Cooperation with
the Vietnamese
government & NGOs
• Distribution system
in Vietnam
• Sales area
representative
Period 1: 1-5
years
Joint
venture
• Cooperation with
Viettnamse
companies
• Sales area
representative
Period 3: following
years
Period 2: 5-7 years
FIGURE 23. Timeline of FOSERA’s market entry modes to Vietnam
As illustrated in the graph, two main market entry modes are direct export and
joint-venture. Yet, assistances and operating activities are implemented differently
for each market entry mode along each period of time.
6.1
Period 1: Direct Export Model + Cooperation with the government and
NGOs in Vietnam
During period 1 (from 1 to 5 years), direct export is implemented in cooperation
with the Vietnamese government and other NGO organizations.
As the Vietnamese government has a fund for rural electrification in Vietnam to
increase social well-being of the people, FOSERA can sell products through direct
export to the Vietnamese government via rural electrification projects. Take the
case of Solar World as an example. Solar World has established its first step in
74
Vietnam through rural electrification projects. As studied, the Vietnamese
government is willing to help foreign companies in renewable energy field to
enter the Vietnamese market. The difficulty is not in the government but in the
administration system. It means that the company should be able to expect bribery
during the administrative process in order to win the projects. As FOSERA is an
international company with high-quality products, it is the strength and advantage
of the company to win other competitors in rural electrification projects. The
important issue is to find a Vietnamese expert or intermediary who is able to ease
the administration process.
Another suggestion is to sell the products through rural electrification projects of
NGOs. NGOs play as funding foundations which purchase FOSERA’s products.
NGOs can be German government. In fact, there is a rural electrification project in
Vietnam funded by the German government. NGOs can be any other national
governments such as the Japanese, the Swedish, the Danish government, etc. They
have already involved in the rural electrification projects in Vietnam. The World
Bank also has funds for Vietnam through different projects. By directly sell
FOSERA’s products to the Vietnamese government or NGOs through rural
electrification projects, FOSERA can first establish the good image and reputation
of the company in the Vietnamese market. It has a significant meaning for the
company in the future because not only the Vietnamese purchasers are
accustomed with the qualitative products of the company, but also the potential
business partners in Vietnam are informed of FOSERA and its products.
Having a sales representative in Vietnam at the same time would assist activities
for direct export. The responsibilities of a sales representative are to advertise
products of the company to different stakeholders such as universities, potential
business partners, organizations, etc. Besides, a sales representative is also in
charge of finding information about rural electrification projects in Vietnam as
well as coordinating with FOSERA in those projects.
Generally, there is a real need for renewable energy in Vietnam in the near future.
As soon as FOSERA enters the Vietnamese market, the company will have more
advantages over other companies who are followers. The Vietnamese renewable
75
market is still in nascent stage, which means there are opportunities for companies
who first quickly catch the trends and invest in the Vietnamese market.
6.2
Period 2: Direct Export Model + Distribution Channels in Vietnam
During period 2 (from 3- 5 years), direct export together with establishing
distribution channels in Vietnam are implemented. Local distributors in Vietnam
can be local enterprises or local companies who are willing to distribute
FOSERA’s products, to advertise the products to the people in rural areas and
provinces and to coordinate with local authorities. Still, it is advisable to maintain
the sales representative who works as an intermediary and coordinator between
distributors and the company FOSERA.
Mr. Dam believed that finding an enthusiastic Vietnamese business partner in the
long term is a better strategy than cooperating with NGOs, universities or subcontractors in the short-term for maintaining and giving loans for purchasers
(Dam 2013). On the other hand, Mr. Hai considered mutual cooperation between
companies with governmental organizations, NGOs and technical universities in
maintaining products and offering loans solutions to purchasers is feasible
because the Vietnamese laws allow and encourage universities and institutes
which have facilities, equipment’s, ability, knowledge and experiences to do that.
(Nguyen N. H. 2013)
During this period, the case company can expand its market from rural areas to
urban cities in Vietnam. The Vietnamese government has already stated in its
recent publishing documents that it aims at achieving 600.000 households in rural
areas electrified in a few years later. According to a recent study by DEVI
Renewable, there are still almost 2 million households in Vietnam who are
lacking electricity (DEVI Renewable 2011). The sales potential in urban areas can
be seen in households whose living areas usually have electricity cut-off problem.
They have a tendency to buy diesel generators which generate electricity during
electricity-cutting time. FOSERA can create a new habit for them by advertising
its products as a better solution to diesel generators. There are also potential for
purchasers who want to buy products for the purpose of travelling. When they go
76
hiking or camping, FOSERA’s products are portable and convenient for them to
electrify their necessary devices such as cell phones, lamps and other necessities.
6.3
Period 3: Joint-Venture model
During period 3 (after 5 years), FOSERA can choose joint-venture as market entry
mode to make more investments and earn more profits. Joint-venture can be
through transferring of technology, building new manufacturing facilities in
Vietnam and having equity as holdings in order to establish long-term presence on
the Vietnamese market. The joint-venture model is well evaluated because it
combines the technology and financial ability of FOSERA with practical
experiences of Vietnamese companies to help the business succeed on the market
(Dam 2013). Three forms of foreign investments that are accepted by the
Vietnamese government according to article 4 of the Law on Foreign Investment
in Vietnam are business co-operation on the basis of a business co-operation
contract, join venture enterprise and enterprise with one hundred per cent of
foreign owned capital (Law on Foreign Investment 2006). If FOSERA wants to
construct a project such as a new manufacturing facility in Vietnam, the company
should be able to prove the source of capital and loan commitment of banks for
the to-be-implemented project. Besides, it was stated that the owner of the project
should have at least 30% of the total investment capital in the projects. Forms for
power projects can be BOT (Build-operate-transfer), BOO (Build-Own-Operate)
or other legal forms such as PPP (Public-Private Partnership) (Cooper 2012, 8).
77
7
CONCLUSION AND SUGGESTIONS FOR FURTHER RESEARCH
In this chapter the author describes main findings from the research and gives
several suggestions for further research in the end of the chapter.
7.1
Main findings
The summary table below indicates the main findings from the study. They
answer the main research question and other sub-research questions.
TABLE 6. Main findings
Research question
Research findings
What kinds of market entry
Three types of market entry modes are suitable based on a
modes are suitable for the
suggested timeline:
case company to enter the
Vietnamese rural market?
Direct export, cooperation with the Vietnamese
government and other NGOs
Direct export and distribution channel in Vietnam
Joint-Venture
Assisting activity: sales representative in Vietnam
How do legislations on
Improved legislations on renewable energy have
power and energy affect
enhanced the development of solar energy industry
the solar energy industry in
in Vietnam.
Vietnam?
Still, more concrete law and detailed incentives on
renewable energy projects and investments are
needed.
What are the challenges
Main challenges are:
facing foreign companies
in doing business in
Vietnam/ in rural areas in
Vietnam?
Complexity and slowness of administrative
procedure
Lack of concrete incentives and support from the
government to companies
Cultural differences & working styles
78
Are there any foreign
Yes, some of them are:
companies which are
currently working in solar
SELCO Vietnam, Solar World
energy sector in Vietnam?
What should be improved
More concrete law and incentives for local and
to enhance the growth of
foreign companies in renewable energy field,
renewable energy sector in
especially for SMEs
Vietnam?
Improvement in administrative procedure (more
transparency, faster administrative process, more
coordination among governmental institutes, etc.)
More provision of information and knowledge on
renewable energy for the Vietnamese citizens
What is the best option
Solar photovoltaic off-grid/stand-alone systems
among renewable energy
technologies for rural
electrification in Vietnam?
Besides solar energy,
Small-scale hydropower stations
which types of renewable
energy are also suitable for
rural electrification?
In conclusion, with the forecast of electricity shortage in the coming years,
Vietnam is in need of renewable energy as an alternative reliable source of energy
for the country’s economic development. As solar water heaters have been
becoming more popular on the Vietnamese market in urban areas, solar PV is
likely to dominate the rural markets especially in remote regions where there is no
access to electricity or difficulties in installing an on-grid electricity system. The
Vietnamese government has been paying more attention to the economic potential
of renewable energy and has been making effort to improve the law and
79
regulations on renewable energy, to liberalize the power market and to attract
more foreign investors and companies in the field.
Local and foreign SMEs are looking forward to more effective and quick support
from the government to do business in the field. New projects should not be any
more funded by international or national organizations for demonstration purposes
only, but they should be invested in by people who are intending to do business in
the field (Le 2009, 57-59). To enhance the efficiency and effectiveness of
renewable energy industry in Vietnam, more concrete law and incentives for local
and foreign SMEs from the government are needed. The administrative process
systems should be less complicated, more transparent and more cooperative.
Besides, more campaigns, tradefairs and public events in renewable energy are
expected in order to raise the citizens’ awareness of the environment as well as
sustainable solutions to the green and economic issues through renewable energy.
For the case of FOSERA, it’s high time to enter the market. There are only a few
foreign companies existing in the Vietnamese market such as SELCO Vietnam,
Solar World. The number of Vietnamese companies is larger including some
potential competitors such as Solar Bach Khoa, Redsun Vietnam and other SMEs.
Despite certain risks, the company still has high opportunity to win the nascent
power market in Vietnam.
Solar photovoltaic off-grid home systems were confirmed by several Vietnamese
interviewed authorities to be one of the best options to electrifying rural areas in
Vietnam provided that the company has a high commitment, passion and right
strategies. Still, there are a few options of rural electrification besides solar PV
off-grid home systems such as small-scale hydropower station, solar-wind standalone systems, etc.
Market entry mode suggestion for FOSERA is direct export and joint-venture
with cooperation with the Vietnamese government as well as non-governmental
organizations in Vietnam. The presence of a sales representative or intermediary
who works as a coordinator and assistant between the headquarters of the
company in Germany and the distribution channels in Vietnam would assist
operating activities. The timeline of market entry is recommended to follow as the
80
solar PV energy industry in Vietnam is still in a developing phase. Therefore, it is
not profitable to implement all options of market entry modes at the same time.
7.2
Proposals for further research
Some suggestions for further research are deeper investigation in structure and
mechanism of financial support for BOP customers, thorough marketing strategies
and sales for entering the rural markets, more information on coordination
methods with local government and on resources for new rural electrification
projects in Vietnam. Last but not least, more information and deeper market
research about potential distributors and business partners in Vietnam such as
their strengths and weaknesses, product features, etc. can also be further explored.
7.3
Validity and Reliability
This thesis has been written after careful and diligent research. The used
information was collected from updated sources including books, earlier studies,
articles, questionnaires, interview, email exchanges and other online sources. With
a careful restructuring of the data collected, the author reassures that the thesis is
itself a reliable source of information for future writers or authors. However, it
should be noted that the business landscape is evolutionary which might render
some useful information to become obsolete over time. The empirical study was
conducted based only on interview and questionnaires with different stakeholders
such as Vietnamese authorities, companies and experts in renewable energy
without taking a survey with Vietnamese citizens living in rural areas; therefore,
the study result lacks valuable contributions from the consumer point of view.
81
8
SUMMARY
Vietnam is in need of renewable energy in the future. The Vietnamese
government has increasingly been supporting the development of renewable
energies in Vietnam recently. The upcoming Law of Renewable Energy and
changes in legal framework in the near future will provide more opportunities for
local and foreign companies including large as well as small and medium-size
companies to enter the Vietnamese market. As the Vietnamese government is
committed to electrify 100% of Vietnamese households by 2020, the
governmental authorities are open to any cost-effective and reliable solutions from
renewable energy to reach their target. Among a few options of rural
electrification, a PV off-grid system has demonstrated to be a feasible solution in
Vietnam.
Now it’s the right time for FOSERA to plan suitable market entry and business
strategies in order to enter the Vietnamese market. Being a pioneer of solar PV
off-grid home systems from Germany gives the company both advantages and
disadvantages. As Vietnam’s political issues and economic development path are
different from those of other developing countries, it is necessary not to stereotype
the market entry modes applied to those countries. By thorough analysis of the
Vietnamese external environment together with well-planned market entry
strategies and flexible business models, FOSERA can reach its goal of entering
this potential market by gaining firstly the trust of the government, the awareness
and acceptance of potential customers and other stakeholders. Despite estimated
challenges upon entering the new unfamiliar market, the author has high
confidence in the success of the case company in the Vietnamese market. The
urgent question is when to enter and who the company is going to contact in order
to invade this potential market.
82
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Interview
1. Dr. Petri Konttinen, Business Development Manager of Aurubis Finland,
interviewed by author, 12.12.2012
2. Mrs. Maarit Virtanen, Connect Project Manager, interviewed by author,
12.12.2012
3. Mr. Bui Thien Toan, Business Development Manager of Aschoff Solar
Vietnam, interviewed by author, 17.1.2013
4. Dinh Ngoc Quang Ph.D, Institute of Energy, Power System Development
Department, Ministry of Industry and Trade, interviewed by author,
17.1.2013
5. Ms. Catherine Adelmann, General Manager of FOSERA Co. Ltd,
interviewed by author, 18.1.2013
Participants in the interview questionnaires
1. Mr. Nguyen Ninh Hai, Deputy Director of New and Renewable Energy
Department, General Directorate of Energy, Ministry of Industry and
Trade
93
2. Mr. Nguyen The Huu, Deputy Director, Planning and Demand Supply
Balance Department, Electricity regulatory authority of Vietnam, Ministry
of Industry and Trade
3. Mr. Do Duc Tuong, Managing Director of DEVI Renewable Energies
4. Mr. Dam Tien Thang, Director of Electricity Management, Hanoi
Department of Industry and Trade
5. Mr. Nguyen Lam, expert in carbon and renewable energy, Blue World
Carbon
6. Mr. Hung Thanh Ph.D, expert in biomass and biodiesel, Yamanishi
University
94
APPENDICES
Appendix I: Online questionnaire for experts in renewable energy sector in
Vietnam
Questionnaire for experts in renewable energy sector in Vietnam
1. General information
Name
________________________________
Last name
________________________________
Company/ Organization
________________________________
Department
________________________________
Current position
________________________________
Field of expertise
________________________________
Company/Organization location
________________________________
Email address
________________________________
Phone
________________________________
2. In your opinion, is the application of solar energy an effective and feasible solution to
the shortage of electricity in Vietnam?
Yes
No
3. What is your evaluation on the application potentiality of solar photovoltaic (PV)
technology in the rural electrification in Vietnam?
High potential
Medium potential
Low potential
Not at all potential
95
4. Are there any financial supports for people in rural areas in purchasing products from
renewable energy in general and solar energy in particular?
Yes. Could you please name some of them?
No.
I don't know.
5. Could you please name some solar energy companies in Vietnam?
________________________________________________________________
________________________________________________________________
________________________________________________________________
6. Among those mentioned companies, which ones have already had position in rural
electrification in Vietnam?
________________________________________________________________
________________________________________________________________
________________________________________________________________
7. What is your evaluation of current competition in solar energy field in Vietnam?
High competition
Medium competition
Low competition
No competition
8. What is your evaluation of different market entry modes to rural electrification using
solar photovoltaic technology?
Direct import. Why?
Join Venture. Why?
Sales representative. Why?
Franchising. Why?
Others, which ones?
9. What is the rate of electricity shortage in rural areas in Vietnam?
100%
80%-100%
60%-80%
40%-60%
20%-40%
0%-20%
96
10. What are the other feasible solutions to rural electrification?
Wind energy. Why?
Solar concentrated energy. Why?
Biomass. Why?
Biogas. Why?
Others, which?
11. Do you think that stand-alone solar photovoltaic (PV) system is an effective and
feasible solution to rural electrification?
Yes. Could you please explain shortly?
No. Could you please explain shortly?
I don't know.
12. Do you think that off-grid solar systems will be overcome by on-grid electricity
system in rural electrification in the future?
Yes. Could you please explain shortly?
No. Could you please explain shortly?
It depends. Could you please explain shortly?
13. Do you think that there is also a high potential for stand-alone solar photovoltaic (PV)
systems in urban areas?
Yes.
No
It depends. Why?
14. What is your evaluation on the sales of solar energy products in Vietnam in the
future?
Remarkably increase
Relatively increase
Slightly increase
Not at all increase
Decrease
15. Could you please give shortly your evaluation on the affordability of Vietnamese
customers towards solar products in the future?
________________________________________________________________
________________________________________________________________
________________________________________________________________
97
16. Which forms of support do companies in renewable energy sector receive from
government?
Tax exemption
Tax reduction
Feed-in-tariff
Others, which?
17. Do you know any incentives offered by the Vietnamese government for small and
medium-sized companies (both local and foreign) in renewable energy sector in Vietnam?
If yes, could you please name some of them?
________________________________________________________________
________________________________________________________________
________________________________________________________________
18. What is your evaluation of current practicability of energy legislation in Vietnam?
High practicable
Average practicable
Low practicable
Not at all practicable
19. What is your evaluation of future changes in law and legislation in renewable energy
sector in Vietnam?
Lots of changes. Which changes?
Certain changes. Which changes
Changes to some extent. Which changes?
No changes at all
20. Are you satisfied with the questionnaire? Could you please explain the reasons for
your answer?
________________________________________________________________
________________________________________________________________
________________________________________________________________
21. Could you please give some of your suggestion for further changes or improvement of
the questionnaire in the future?
________________________________________________________________
________________________________________________________________
________________________________________________________________
22. Could you please summarize in one sentence your view on the business potential of
renewable energy in general and solar energy in particular in Vietnam in the future? Thank
you very much for your interest and your participation!
98
________________________________________________________________
________________________________________________________________
________________________________________________________________
Appendix II: Online questionnaire for Vietnamese authorities in energy and
renewable energy sector
Questionnaire for Vietnamese authorities in renewable energy sector
1. General information
Title
________________________________
First name
________________________________
Last name
________________________________
Name of company/organization
________________________________
Department
________________________________
Current working position
________________________________
Field of expertise
________________________________
Location of working place
________________________________
Website of company/organization
________________________________
Email address
________________________________
2. Do you think that the Vietnamese government will support more local and foreign
investors in solar energy field in the future?
Yes
No
Depends on the type of business or investments. Can you specify?
3. What is your evaluation of the role of the Vietnamese government and nongovernmental organizations (NGOs) in rural electrification in Vietnam?
99
Very important
Important
To some extent
Not at all important
4. Could you please name different kinds of supports given by the Vietnamese government
and non-governmental organizations (NGOs) to people living in remote areas in recent
renewable energy projects?
________________________________________________________________
________________________________________________________________
________________________________________________________________
5. What is your evaluation of solar energy potential in Vietnam?
High potential
Medium potential
Low potential
Not at all potential
6. What is your evaluation of the level of rural electrification in Vietnam?
High level. At which percent?
Medium level. At which percent?
Low level. At which percent?
Very low level. At which percent?
I don't know.
7. What is your evaluation of companies’ interest toward business opportunities in rural
Vietnamese market?
High interest
Medium interest
Low interest
Not at all interest
8. Are there any solar projects in rural electrification in Vietnam recently?
Yes. Please name some of them.
No.
I don't know.
9. What is your evaluation on the relations between unemployment rate and potential of
100
job creation in rural areas through solar projects?
Strongly related
Related to some extent
Not at all related
10. What is your evaluation on the electrification differences between rural areas and
urban areas in Vietnam?
Very different. At which rate?
Different. At which rate?
To some extent. At which rate?
Not at all different
11. What is your evaluation on rural electrification through on-grid systems and
standalone (off-grid) systems in Vietnam?
________________________________________________________________
________________________________________________________________
________________________________________________________________
12. What are the challenges for rural electrification in Vietnam? Could you please name
some challenges companies faced when entering the Vietnamese market?
________________________________________________________________
________________________________________________________________
________________________________________________________________
13. From your point of view, is a stand-alone solar photovoltaic (PV) system an effective
and feasible solution to rural electrification in Vietnam? Could you please explain your
answer shortly?
________________________________________________________________
________________________________________________________________
________________________________________________________________
14. Which one is more popular in Vietnam?
Solar photovoltaic
Solar concentrated
Other forms of solar technology, please specify
I don't know
15. Which source of renewable energy will suite best for rural electrification?
Wind energy
Biomass
Biogas
101
Others, which
16. What is your evaluation of the reality of Master Plan VII towards the development of
renewable energy in Vietnam?
Applied
Applied to some extent
Not yet applied
17. Which form of incentives do companies in renewable energy field receive from the
government?
Tax exemption
Tax reduction
Feed-in-tariff
Other, please specify
18. Will there be any incentives for small and medium companies in renewable energy
field in Vietnam? If yes, could you please name some of them?
________________________________________________________________
________________________________________________________________
________________________________________________________________
FOSERA is an international company originally from Germany that sells stand-alone
solar photovoltaic products such as solar Pico systems, solar PV home systems, solar
lamps, etc.
19. In your opinion, which form of market entry is suitable for a foreign company in solar
sector like FOSERA to enter the Vietnamese market?
Joint-Venture. Why?
Sales representative. Why?
Direct import. Why?
Cooperation with NGOs and organizations. Why?
20. Is it possible for companies to cooperate with non-governmental organizations (NGOs)
and universities in product maintenance and financial solution to customers? Could you
please explain shortly your answer?
________________________________________________________________
________________________________________________________________
________________________________________________________________
21. Are you satisfied with the questionnaire?
Yes
No, please explain
102
To some extent, please explain
22. Could you please give some of your suggestions for further changes or improvement
of the questionnaire? Thank you very much for your interest and your participation!
________________________________________________________________
________________________________________________________________
________________________________________________________________
Appendix III: Online questionnaire for companies in solar energy field in Vietnam
Questionnaire for companies in solar energy sector in Vietnam
1. General information
Name of the company
________________________________
Headquarter address
________________________________
Branch address
________________________________
Website
________________________________
Phone
________________________________
Email address
________________________________
2. What is your company's field of business?
Solar photovoltaic
Solar concentrated
3. What are your company's locations in the Vietnamese market?
South of Vietnam
North of Vietnam
Central of Vietnam
103
Highland
Other regions of Vietnam. Where?
4. What are the international markets of your company?
Asia
Europe
North America
Latin America
Africa
Other regions. Which?
5. What are the strengths of your company in the field?
Price
Product Quality
Market knowledge
Networking
Others. Which ones?
6. What are the weaknesses of your company in the field?
Price
Product Quality
Market knowledge
Supply chain management
Networking
Others. Which ones?
7. Do you think that Vietnam has a potential market for the development of renewable
energy business in general and solar energy business in particular?
Yes, why?
No, why?
I don't know.
8. Which form of market entry mode has your company been using to enter the
Vietnamese market?
Direct export
104
Sales representative
Joint Venture
Franchising
Subsidiary
Others, which ones?
9. Could you please name some of your competitors in the market domestically and
internationally?
________________________________________________________________
________________________________________________________________
________________________________________________________________
10. What is your evaluation of the importance of mutual cooperation with other
companies?
Very important
Important
Important to some extent
Not at all important
FOSERA is an international company originally from Germany that sells stand-alone
solar products such as solar Pico systems, solar home systems, and solar lamps and so on.
11. Are you willing to cooperate with a foreign company like FOSERA in the Vietnamese
market? Please explain reasons for your answer.
________________________________________________________________
________________________________________________________________
________________________________________________________________
12. Which forms of business partnership would you prefer in cooperation with a company
like FOSERA? Please explain your answer.
________________________________________________________________
________________________________________________________________
________________________________________________________________
13. Are your products
100% manufactured in Vietnam?
Partly manufactured in Vietnam, partly manufactured and imported from abroad?
100% imported from abroad and assembled in Vietnam?
100% imported to Vietnam
Other means, please specify
14. What is the weakest link in your supply chain? Please specify.
105
________________________________________________________________
________________________________________________________________
________________________________________________________________
15. What is the strongest link in your supply chain? Please specify.
________________________________________________________________
________________________________________________________________
________________________________________________________________
16. Which countries or regions are your suppliers from?
Europe
Asia
North America
Latin America
Africa
Other regions, please specify
17. How is your customers ‘attitude towards your products?
Positive
Positive but don't want to try nor to buy
Positive but cannot afford to buy
Neutral
Negative
18. Do you consider customers in rural areas in Vietnam in your business and sales
strategies?
Yes. Which activities has your company been doing towards customers in rural
areas?
No
19. Does your company provide means of financial means of sales for customers? If yes
please specify some of them.
________________________________________________________________
________________________________________________________________
________________________________________________________________
20. What is your company's future plan to expand the market?
________________________________________________________________
________________________________________________________________
________________________________________________________________
21. Do law and legislation influence much your business in Vietnam?
106
Yes, in which aspects?
No
22. Which kinds of incentives does your company receive from the government?
Feed-in-tariff
Tax reduction
Tax exemption
Others, please specify
23. What is your expectation towards changes in legislation in Vietnam concerning
renewable energy application and development?
More applicable
More practicable
Others, please specify
24. How do you evaluate other sources of renewable energy such as wind energy, tidal
energy, biomass energy, etc. as solutions to rural electrification?
High potential
Medium potential
Low potential
Not at all potential
25. Are you satisfied with the questionnaire?
Yes, please explain
No, please explain
26. Could you please give some of your suggestions for further changes or improvement
to the questionnaire? Thank you very much for your interest and your participation!
________________________________________________________________
________________________________________________________________
________________________________________________________________
107
Appendix IV: Interview summary
Name of interviewee: Catherine Adelmann
Title: General Manager of FOSERA Co. Ltd
Interviewing date: 18th Jan 2013
Summary of discussed issues:
1. The company’s strengths, weaknesses, product features and company’s
future plan in terms of market expansion and product development
2. FOSERA’s international markets, business partners, competitors, market
entry modes in international markets, cooperation activities with different
stakeholders
3. Different market entry options to enter the Vietnamese market; challenges
and obstacles upon entering the market
Results:
1. FOSERA has expanded its market quickly in two years to many countries
in Africa, Asia and in the future to South America. The company
continuously develops its product features, strengthens its images and
eliminates weaknesses
2. The company is interested in entering the Vietnamese market and
cooperating with the Vietnamese government as well as with different
NGOs provided that the company has good contact and engaged human
resources
3. FOSERA’s main market entry mode strategy is establishing distribution
channels and cooperation with universities to provide training and
maintenance
108
Name and title of interviewee: PhD. Dinh Ngoc Quang
Office: Institute of Energy-Power System Development Department
Ministry of Industry and Trade
Date of interview: 17th Jan 2013
Interviewing questions:
1. What is your evaluation of energy situation in Vietnam currently and in
the future? In which fields or industry the shortage of energy can be seen
most clearly?
2. Could you please describe a little bit the practical reality of Law on
Renewable Energy, Law on Energy Saving and Efficiency and the decree
21/2011/ND-CP?
3. Could you name some laws and decrees that support the development of
renewable energy in Vietnam recently?
4. What do you think about the commercial potential of solar PV off-grid in
Vietnam?
5. Besides rural areas, do you think that customers who live in urban areas
are also an important market segment in the future?
6. What is your evaluation of FOSERA’s opportunity if they want to enter
the Vietnamese market?
7. What is your evaluation of competition in solar energy sector on the
Vietnamese market?
8. Do you think that FOSERA can sell products to rural areas only through
cooperation with the government and funds from ODA projects?
9. Do you think that it is the right time for FOSERA to enter the Vietnamese
market now?
10. FOSERA is a German company. Are there many solar companies from
Europe entering the Vietnamese market? How about competitors from
Asia such as China?
11. Do you think that off-grid solar PV project will be overcome or not be able
to develop in Vietnam because of on-grid renewable energy projects in
rural areas?
109
12. What is your evaluation of solar PV home systems in rural electrification
in comparison to other renewable energy such as wind energy, biomass,
biogas, etc.?
13. Have you heard any law or decrees in the future that will support foreign
SMEs in renewable energy in general and solar energy in particular to
enter the market?
Name of interviewee: Bui Thien Toan
Title: Representative of Business Development Department, Aschoff Solar
Vietnam
Date of interview: 17th Jan 2013
Interview questions:
1. Could you please describe a little bit your company business activities in
Vietnam?
2. Where are your company’s international markets?
3. What is your evaluation of energy situation in Vietnam in the near future?
4. What is your evaluation about the economic potential of solar energy in
Vietnam?
5. Could you please name a few companies who are competing with your
company on the Vietnamese market?
6. What is your evaluation of current competition level among companies in
solar energy field in Vietnam?
7. FOSERA is a German company which manufactures and sells solar
photovoltaic home systems such as solar lamps, solar PV Pico home
system. The company is intending to enter the Vietnamese market. Do you
think that there is profit potential for the company to do business in
Vietnam?
8. What kinds of incentives or support from the Vietnamese government that
your company is receiving?
9. What is your evaluation of legislations on renewable energy promotion
and its practice in reality?
10. What is your evaluation of applying solar PV off-grid household systems
in rural electrification in Vietnam?
110
11. Products of FOSERA are of high quality and durability; however, the
prices are higher than products of other companies, do you think that
FOSERA can still compete on the Vietnamese market?
12. Solar water heating systems have become more popular on the Vietnamese
market. Do you think that solar PV off-grid system is a more effective
solution than diesel generators during electricity cut-off time?
13. Do you think that this is the right time for FOSERA to enter the
Vietnamese market?
Name of interviewee: PhD. Petri Konttinen
Working position: Business Development Manager of Aurubis Finland OyFormer member of International Solar Society in Finland
Name of interview Ms. Maarit Virtanen
Working position: Connect project manager
Date of interview:12th December 2012
Interview questions:
1. From your experiences, what do you think about the business
opportunities of renewable energy in general and solar energy in particular
in Vietnam?
2. What should be done in order to attract more foreign investors in the field
of renewable energy in Vietnam?
3. Do you think that solar PV stand-alone household system is a feasible and
effective solution to rural electrification in developing countries and in
Vietnam particularly?
4. Do you know any solar/renewable energy projects or investments between
Finland and Vietnam recently?
5. What is your evaluation of Finnish companies’ eagerness to do business in
Vietnam in the field of solar energy?
6. Do you know any Finnish companies that are planning to enter the
Vietnamese energy market?
7. Do you know any Finnish companies that are currently doing business in
Vietnam in solar energy sector?
111
8. What are the hindrances or barriers for Finnish companies from
approaching the Vietnamese market?
Appendix V: Potential business partners in Vietnam
1. DEVI Renewable Energies (Hanoi)
Website: www.devi-renewable.com
Business type: retail sales and distributor
Service type: consulting, design, installation, construction, education and
training services, research services
2. Viet Trung Technology & Trading Co, Ltd (VTECHCO, Hanoi)
Website: www.samtrix.vn
Business type: retail sales; distributor; sales representative of Samtrix;
sales agent of Schott, Kyocera, Suntech, Xantrex, SMA, Samlex, etc.
Service type: contractor service
Product type: solar electric power system; stand-alone solar PV system,
on-grid PV systems, etc.
3. New Energy Co., Ltd. (Ho Chi Minh City)
Website: www.sunnova.vn
Business type: importer, distributor of Sunnova products
Service type: consultancy, installation, engineering
Product type: LED lighting, solar electric power systems, battery charge
controllers, photovoltaic systems, DC to AC power inverters, etc.
4. Viet Linh Manufacturing and Trading Electric- Electronic Co. Ltd.
(HCMC)
Website: www.ast-vn.com
Business type: manufacturer, trading company, distributor/wholesaler
Product type: solar equipment, backup generator, DC-AC Inverter, ACDC converter, DC-DC converter automatic voltage stabilizer, charger,
UPS, etc.
5. Company for Technology Development (CFTD) Corporation Member of
CFTD-Group
112
Website: www.cftd.com
Service type: development and consultancy; experiences with many
different projects
Product type: security devices, support devices, criminal science devices,
traffic devices, fire prevention devices, etc.
6. IC Energy Industry Co. Ltd. (Quang Nam province)
Website: www.icenergy.vn
Business type: member of IC Holding (Vietnam).
Product type: solar street lamps, solar garden lamps, etc.
The company is accelerating to become to first solar thin film panel
manufacturing factory in Vietnam.
7. Tuan An Group
Website: www.tuanan.com
Business type: manufacturer, distributor of Hubbell, Nu- Lec, Wenzhou
Lucheng Foreign Trade
Product type: solar and wind power system using SIPV technology, solar
panel, solar for home, solar system, wind system, solar & wind street
lighting, etc.
Completed project: Tuan An building with solar PV system (12.6 kWp);
solar stand-alone systems in Binh Phuoc (3kWp); solar stand-alone system
in Con Son (Can Tho) with capacity of 525Wp and in Vung Tau with
capacity of 175W; on-grid solar PV systems in HCMC, Vung Tau; solar
PV street light systems at the industrial zone Dong Nai, at the electricity
company Khanh Hoa and at the building of trade and industry in Vung
Tau.
Partnership with Huebbell, Schneider Electric, Wenzhou Lucheng, Solar
World, Cygnus Power, Rehau, Roto Frank AG, Guoqiang Hardware
Group Co., Ltd
8. Son Ha TCC., JSC
Website: http://www.sonhatcc.com
Product type: solar PV ferry light and other solar products
Partnership with Carmanah and Sabik (Sonhatcc 2013)
113
9. Bao An Corporation
Website: http://maynangluong.net/
Business type: distributor of Aseries solar water heaters (Aseries,
Megasun); distributor of Apollo, Bach Khoa, Solarhart (maynangluong
2013)
10. Green Field Consulting Co. Ltd. (Hanoi)
Website: http://www.gfd.com.vn/
Service type: consulting service and technical assistance for biomass
energy, biofuel, biogas, hydropower, etc. (Source Guides 2012)
11. Vietnam Energy and Environment Joint Stock Co. (VNEEC)
Website: www.eec.vn
Service type: information provision and consultancy on energy and CDM
projects; experiences with over 40 projects
Partnership with South Pole Carbon Asset Management Ltd. Co
Appendix VI: List of potential competitors in Vietnam
1. Seilar Energy Vietnam Co. Ltd. (Hanoi)
Website: www.seilar.vn
Business type: part of Seilar Energy Australia (SEA) group; wholesale
supplier, importer, distributor, Distribution and guarantee service
Product type: solar water heater pumps, packaged power systems,
photovoltaic systems such as solar PV power, solar lighting
1. Minh Ha Co. Ltd. (HCMC)
Website: www.minhha.vn
Business type: import, retail sales, wholesale supplier, sole agent of
LEONICS
Product types: stand-alone solar power systems, grid power system, solar
inverter, etc.
Service type: consulting, supply, design, installation
2. Saigon Solar JSC (HCMC)
114
Website: www.maynangluong.com
Business type: manufacturer of different solar products, distributor of solar
PV home systems of Solar World
Product type: solar PV household system of 20W, 40W, 100W; solar PV
systems of 200W, 500W, 1000W, >1000W. Include 4 LED energy-saving
lamps, each with 12 V 4W in 5hrs (Solar PV of 20W); 8 LED energysaving lamps, each with 12V-4W, in 6 hrs. (Solar PV 40W), 4 LED
energy-saving lamps, each with capacity of 4W; 1 TV 21inch 220V
(80W), 1 table fan 220V (45W) (Solar PV 100W). (maynangluong 2013)
3. Vu Phong Co. Ltd. (Solar V) (HCMC)
Website: www.solarpower.vn
Business type: manufacturer
Products: solar PV stand-alone system (Solar V), LED energy-saving
lamps (Solar V), solar panels, wind turbine, etc.
Remark: Product price list can be checked at the company website.
(Solarpower 2013)
4. Name: China Technology JSC (Hanoi)
Website: www.chinatech.vn
Business type: Manufacturer and trader
Products: solar PV systems (2kW, 1kW, 500W, 300W, 200W, 100W),
solar PV household systems (40W, 10W), solar lamps, solar street lights,
solar recharger (Chinatech 2013)
5. VN Solar Inc.
Website: www.solarvn.com
Products: solar water heat systems SKY; solar PV systems SKY (640W,
160W, 120W, 80W, 60W). For solar PV system of 640W, 140W, 120W
and 80W, electric devices include 1 TV (70W), 1 DVD (30W), 1 electric
fan (60W), 2 lamps (5W); for solar PV system of 60w, the included
devices are 1 fan (40W), 4 lamps (5W). (usolar 2013)
6.
Center Point Co., Ltd. (HCMC)
Website: www.solarpowervietnam.com
Business type: Distributor of solar garden lights
115
Products: solar household systems (2 LED lamps and components), solar
signal lamps, solar street lights, LED lamps, solar heat water systems, etc.
(cp-lights 2013)
7.
Gia Nam Corporation (Megasun)
Website: www.megasun.com.vn/vn/
Business type: Distributor of Megasun products and solar PV household
systems, solar lamps, solar street lights
Products: Solar water heat system (Megasun), heat pumps, solar PV
household systems (megasun 2013)
Appendix VII: Previous and ongoing solar projects in Vietnam
First solar PV household project in Mekong Delta (Tien Giang, Tra Vinh,
Long Hoa, Hoa Minh) in 1994; cooperation between Solar Electric Light
Fund (SELF), Vietnam Women’s Union and Solar lab (Solar Electric
Light Fund, 2012).
First solar PV factory in Vietnam in Duc Hoa District (Long An province);
5MW/year during first stage (2009-2011); 10-million-USD investment by
Red Sun (Dang, 2012, s. 16)
First solar on-grid project (12kWp) in Vietnam on the roof of Ministry of
Industry and Trade (MoIT); used solar PV modules of Solar World;
sponsored by Germany; implemented by Altus (Germany) and Centre of
New Energy (Hanoi University of Technology)
Solar photovoltaic system (200kWp, 2012) at Intel VN factory in
Vietnam; used solar PV modules of Sun Power; designed and
implemented by GES
Solar PV-diesel project (11kWp) in Cu Lao Cham (Quang Nam);
implemented by Systech; sponsored by Sweden government and Quang
Nam province
116
Solar PV power plant (11kWp, 2010) in Thuong Trach Commune, Bo
Trach(Quang Binh); sponsored by Suez Foundation; installed by
Schneider Electric
Solar PV system (1.3kWp) at primary school Minh Chau, Quan Lan and
Health Centre Minh Chau; installed by RCEE and Abakus Solar AG
within Vietnam Solar Campus project
Solar PV systems (>1000kWp) in Truong Sa Island
Solar PV station (1500Wp) in Ngoc Vung (Quang Ninh); implemented by
Global Advanced Investment JSC.
Solar PV system (5kWp) in Hon Chuoi (Ca Mau); installed by RCEE and
Abakus Solar AG within Solar Campus project
My Dinh National Conference Hall (154kWp, 2009)
Solar PV system at Tam Ky Health Centre( Quang Nam); sponsored by
Spain government and installed by Solar Lab (May 2010)
XP Power Building (40kWp, 2012)
Tuan An Corporation Building (12.6kWp) at Binh Tan district (HCMC);
installed by Solar Lab (Devi-Renewable 2011.)
Construction project of solar PV module manufacturing factory at
industrial zone Chu Lai (Quang Nam) by Indochina Energy Industry Co.,
Ltd. (DEVI-Renewable 2011.)
Construction project of solar PV module manufacturing factory
(60MW/year) at Phong Dien industrial zone, Phong Dien district (Hue);
investors from United Arab Emirates. (Do D.T 2013)
Under-construction project of Big C in Binh Duong province (212kWp)
(Do D. T 2012)
117
Appendix VIII: Short Solar Energy Glossary
Alternating current (A/C): An electric current that reverses direction at regular
intervals. Power producers distribute alternating current.
Direct current (D/C): An electric current flowing in one direction only.
Photovoltaic solar panels generate direct current.
Efficiency: The percentage of energy input an energy system puts out as useful
energy. All energy systems suffer losses during operation.
Electrical voltage (V): The difference in potential between two points of an
electrical device or circuit. Voltage is measured in volts.
Photovoltaic (PV) solar panels: An assembly of interconnected photovoltaic cells
producing enough power to supply a device.
Power (W): The amount of electricity used instantaneously by a device or
delivered instantaneously by a source of energy; measured in watts.
Volt (V): An international unit for measuring voltage, for which the symbol is V.
One kV is equal to 1,000 volts.
Watt (W): The international unit for measuring power, for which the symbol is W.
One watt is equivalent to a current of one ampere across a potential difference of
one volt. One kW is equal to 1,000 watts.
Light-emitting diode (LED): is a semiconductor light source.
Watt-peak (Wp): is a measure of the nominal power of a photovoltaic solar energy
device under laboratory illumination conditions. Kilowatt-peak or kilowatts-peak
(kWp) is also used in the context of domestic installations (Wikipedia 2013)
(Schneider Electric 2011)
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