Solargain Strategy Report of Entering into Japan Market

International Marketing

Solargain Strategy Report of

Entering into Japan Market

1


Executive summary

The report below aims to help Solargain Company to expand

its market to Japan. The research result indicates that

Japan is in demand of renewable energy after the great

2


damage from Fukushima disaster in 2011. Based on the good

trading relationship between Japan and Australia,

Solargain Company with good reputation in Australia is

reliable in Japan. However, it will face many challenges

in the globalization period from both internal and

external environmental especially the unique culture and

climates. Finally, Solargain Company is recommended to do

some changes in terms of price, language, panel

installation and distribution. And keep its good quality

and service.

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Contents

Introduction............................................5

Background of the company...............................6

Analysis of the proposed country........................7

Identification of target markets within this market.....9

Major external influences..............................11

Political and legal environment..................................11

Australia and Japan Free Trade Agreement.........................12

4


Climate and geography challenges...............................12

Fierce competition challenge....................................13

Cultural implications..................................15

Modifications for Price, Product and Distribution......17

Recommendations and conclusion.........................19

Appendix...............................................21

References.............................................22

5


Introduction

Environmental problems that we face today require long-

term actions to solve to achieve a sustainable

environment (Dincer 2000). One of the effective solutions

is using a renewable energy resource and this will be a

popular trend in the future global market. As a top 10

Australian solar energy company (Parkinson 2012),

Solargain should not just satisfy with a domestic market.

With an abundant experience in solar energy industry,

Solargain should expand their product globally,

especially to a big market.

Japan is a good choice to expand. Even though Solar power

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in Japan has been expanding since the late 1990s and the

country is a leading manufacturer of solar panels, the

country still has a big market potential to enter

compared with other considered countries due to the

Japanese government’s promotion and environmental

disaster. For example, according to Hueneler, Schmidt &

Kanie (2012), the Japanese electricity sector is facing a

big challenge after the Fukushima nuclear disaster, so

the government has promoted increased utilization of

renewable energy. Besides, one of the researches had

shown that solar demand in Japan has been increasing

(Parnell 2014).

Therefore, Japan is our final choice for

internationalization of Solargain. This report will focus

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on different aspects in expanding Solargain’s products to

Japan. It includes a background of the company, reasons

why Japan is regarded as an appropriate market,

identification of target market, major external

influences for the company’s products and adjustment of

marketing mix for expanding to Japan.

Background of the company

Solargain is one of Australia’s largest integrated solar

energy and solar hot water business. The name, Solargain

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was established eight years ago however the company

started their business 20 years ago in Perth. Therefore,

Solargain is an experienced company within solar energy

industry.

In terms of product lines, Solargain is engaging in two

product lines which are solar panel and solar hot water

system. These two product lines respectively involve

different types to meet different demands of customers

(See Appendix A).

As for services, Solargain is doing well in sales service

and after-sales service. For sales service, website of

Solargain enables customers to select their locations and

browse their solar packages in their states. Customers

can also call the staff directly to ask for detailed

9


information. For after-sales service, Solargain provides

system maintenance, customer service hotline to solve any

issues in using its products (See Appendix B).

For areas of expertise, Solargain mainly works in

residential and large commercial projects (See Appendix

C), usually work in partnership with quality affiliates

and builders. Solargain is also the sole supplier and

installer for some of the largest builders in Australia

such as ABN Group and BGC.

Finally, as Solargain has a high reputation and abundant

experience within the Australian solar industry, it has a

really big potential to expand overseas.

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Analysis of the proposed country

As mentioned above, Solargain has a big potential to

expand to other countries. Japan, one of the developed

countries, will be an appropriate market to expand for

products of Solargain. There are different aspects to

indicate why Japan is a proposed country to expand.

The first reason is their environmental

issues. The impact of Fukushima disaster in 2011 created

the huge gap of electric power supply. About 127 million

people need energy without relying on nuclear power (Noto

etc al. 2013). After the incident, the public confidence

in nuclear power was destroyed, and with disasters like

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earthquake is still high frequency impact, Japan is

looking for a renewable energy now. For example, the

Japanese government has promoted increased utilization of

renewable energy (Hueneler, Schmidt & Kanie 2012). Also,

Bloomberg New Energy Finance pushed out recent research

for Pew Charitable Trust and Japan invented more than any

other county in solar energy (Hoedt 2014).

As a result, solar energy product is one of

their preferred choices because it reduces their concerns

about non-renewable energy products. Solar energy product

is cost-competitive, clean, reproducible, useful for

everywhere on earth without restrictions and capable of

making up for the energy shortfall (Subramani et al.

2011). When Japan meets earthquake or other

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environmental disaster again, the effects for society

will be decreased. Therefore, we expect that the demand

of solar energy products will be keep increasing in

Japan. Hence, Japan is an appropriate market to expand.

Secondly, a good relationship between Japan and

Australia enhance a benefit of expanding products to

Japan. According to Department of Foreign Affairs and

Trade (2014), Australia signed the Economic Partnership

between Japan, which would provide valuable preferential

access for Australia's exports and is the most

liberalizing trade agreement Japan has ever signed so

far.

Due to the good relationship between both

parties, it will bring their economies and societies even

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closer between each other in the future. Although there

are many differences between Japan and Australia such as

their culture, it is a really good chance for Solargain

to expand their products to Japan with decreased

restrictions. Trefler (2004) has mentioned that free

trade increases exposures of products to competitive

world market. The decreased restrictions will also save a

cost and time for Solargain while exporting the products

to Japan.

Third, as mentioned, Japan is one of the

developed countries in the world. Therefore, Japan has a

high living standard. Their high living standard leads to

a bigger consumer buying power. Also, developed countries

seriously focus on protecting environmental issues in

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these recent years (Martinot et al. 2002). Therefore,

there is a high demand and purchasing power for solar

energy products under the developed country like Japan.

Finally, when compare to other considered countries

that are Singapore and New Zealand, Japan is also a

better choice to select. In terms of economics, according

to the research (Trading Economics 2014), Japan has the

world’s third-largest economy by their GDP and the

world’s four-largest economy. Their economic is much

stronger than Singapore and New Zealand thus Japan should

have a higher purchasing power than these two countries.

Also, in terms of geographic characters, environmental

disaster is not common in Singapore and New Zealand

therefore they don’t have an urgent need for solar energy

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products than Japan. Therefore, Japan is a better choice

to expand compare to Singapore and New Zealand.

Identification of target markets

within this market

In order to achieve an effective internalization,

Solargain must seek out a target market in Japan. Before

deciding the target market, Solargain firstly needs to

focus on market segmentation. Market segmentation means

grouping customers into segments that have common needs

and response for services or products. The total market

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demand will be disaggregated into segments with different

demand functions (Dickson & Ginter 1987). The market can

be segmented by four areas which include demographics

such as age and gender, geographical area such as state

and climate, psychographics such as value, lifestyle, and

behaviour such as brand preference.

After dealing with the market segmentation, Solargain

needs to select a target market carefully. A market

orientation leads to diversified managerial strategies

that are designed to respond customer needs (Urde 1999).

Within the Japanese market, products of Solargain are

focusing on two target markets. These two target markets

are lifestyle and cities which have environmental

disasters frequently. These two target markets are

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particularly fit within the Japanese market when compare

with other countries.

In terms of lifestyle, it is based on a psychographic

target market. Lifestyle refers to a way of living of

individuals, families, and societies. As Solargain is

selling renewable energy products such as solar panel, a

target market in Japan definitely is focusing on

customers with a sustainable environment lifestyle.

Nowadays, more customers are concerned about a

sustainable environment. Klein & Dawar (2004) also

mentioned that CSR plays a role in the evaluation of

brand or products. To establish the sustainable

environment, using renewable energy is one of the ways of

living of individuals because it reduces negative

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environmental effects such as greenhouse effect, produce

minimum secondary wastes (Panwar, Kaushik & Kothan 2010).

Particularly, in Japan, a demand of renewable energy such

as solar energy is increasing (Parnell 2014). Also,

based on an environmental uncertainty in Japan, more

Japanese people are willing to protect their environment

by using renewable energy.

Besides, the Japanese government are promoting this

lifestyle in Japan. Fereidoon (2008) mentioned that the

promotion of electricity produced from renewable energy

has gained more important position in the energy policy

of Japan. Through a support of the Japanese government,

this kind of lifestyle will be more popular within Japan.

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Therefore, this target market will have a big profit

potential in Japan.

On the other hand, another target market of Solargain

products within Japan is cities of Japan which have

environmental disasters often. As renewable energy is

safer than non-renewable energy, especially nuclear

power, renewable energy products of Solargain can reduce

the effects of earthquake and tsunami. Therefore, our

product is focusing on cities of Japan which have

frequent earthquake or other disasters. However, as we

know, anywhere in Japan has a possibility to have

earthquake. Therefore, this target market is really wide.

Moriarty & Honnery (2011) also mentioned that the

earthquake and tsunami in Japan reduce future use of non-

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renewable energy to prevent a bigger environmental

disaster. Hence, this target market is particularly fit

in Japan compare to other countries which have less

environmental disasters around their country.

Major external influences

Political and legal environment

The Great East Japan Earthquake and tsunami hit Fukushima

in March 2011, and result in nuclear plant disaster. For

safety reasons, many of the nuclear reactors were shut

down. The government then turned to expand electricity

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generation from renewable sources to solve the

electricity shortage problem. This has accelerated the

development and implementation of the Feed-in Tariff

policy. It is the central policy in Japan to support the

development of renewable electricity. With the

implementation of the new policy, the tariff is high

enough to encourage the companies to enter the renewable

generation business. Solar power is clearly one component

of the renewable electricity. (Takase,2014) Further, the

government has ruled the public power facilities to

purchase alternative power, for example solar power, at

an above-market rate. (Fitzpatrick, 2013) This may expand

the solar market even further.

As for Solargain, great opportunity can be captured at

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this stage. Under the FIT system, the implementation of

solar power system can receive subsidy both for

residential and commercial use. Since that time,

renewable energy developments in Japan have accelerated,

with sales of home combined heat and power units and of

solar photovoltaic systems in particular markedly higher

in recent months and years. Moreover, Japan is heading

towards to be the largest solar market in the world. The

customers in Japan would be more willing to purchase

solar power system due to the susidy, which may provide

opportunity for Solargain.

Australia and Japan Free Trade Agreement

Across the globe, there is an expanding network of free

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trade agreements (FTAs). High-quality, comprehensive free

trade agreements can play an important role in providing

great opportunities for international trade. (Department

of Foreign Affairs and Trade, 2014) Australia and Japan

have entered a Free Trade Agreement, this will benefits

both of the Australian importers and exporters.

On the full implementation of the Free Trade Agreement,

all of Australia’s current resources, energy and

manufactured goods exports will gain benefit from duty-

free at the time of entering into Japan market.

(Department of Foreign Affairs and Trade, 2014)

Obviously, Solargain is involved and will gain

opportunity from the agreement. When Solargain export the

products to Japan, all the products will benefit from 0

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tariff or less tariff for exporting. As a result of it,

Solargain could gain price advantage when competing with

the local or other global competitors. There will be

lower barrier for the company to be entry market.

Further, the intellectual property rights will be

protected.

Climate and geography challenges

The climate will significantly affect the efficiency of

solar power system. For example, temperature increases,

increased cloud cover, wind and extreme events. Solar

photovoltaic panels have an estimated operating lifetime

of 20 or more years. During its lifetime, solar power

systems are vulnerable to hail, wind, and extreme

temperatures. (Patt et al. 2010)

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As for Japan market, the climate is of the major external

factors that may influence Solargain products. The

climate in most of the major cities is mild in the winter

and hot and humid in the summer. (Neumann & Price 2009)

Solar cell output is usually rated at 25℃ with output of

average 20%. However, the output will typically decrease

by about 0.25% to 0.5% for each temperature rise of 1℃.

Cell temperatures for roof-mounted arrays in warm

climates can easily reach 50℃–75℃. At 50℃, output can

be 12% below rated output. (Solar Facts 2011). Therefore,

the high temperature in summer may bring challenges for

our products.

On the other hand, typhoons hit parts of the country

every year in the late summer due to the special

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geographic location of Japan. (Department of Foreign

Affairs and Trade, 2014) This is another huge challenge

for solar power system. Higher wind speeds can increase

dust particle deposits in the solar panel. The output of

the solar will be, therefore, decreased. If the dust

particle deposits even more, the normal operating of the

system is possible to be interrupted. (Goossens &

Kerschaever 1999) Also, the solar panel is extremely

vulnerable when exposed to the typhoon. Moreover, it can

be easily damaged or even destroyed. This could be

another problem that requires attention.

Fierce competition challenge

Since Japan is a large solar market, not only the global

companies but also the local companies desire to share

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this big cake. For the reason that Japan is a relatively

small country with very limited resources, both of the

government and the commercial giants are aware of the

importance of renewable energy. Many companies have

started the course of studying sun power from very early

age. There are several leading companies with rich

experience that make the competition more tough. For

instance, Mitsubishi Solar has been developing solar

cells since 1974, Kaneka started to study solar

technology in 1980. For Kyocera Solar, they have been

producing solar panels for over 40 years. Also, the

history of Sharp Solar of studying the power of the sun

can be dated back to 1959. That’s over half century.

(Patt et al. 2010)

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From the perspective of Solargain, it is indeed not an

easy task to compete with these electronics giants. Many

of them have been involved within the industry over

decades. Japan is a country with extremely strong

technology background, over the years of studying and

competing, they have gained leading solar technology.

After long time of accumulating, these companies have

already gained huge occupation of market share. This is

great challenge for Soalrgain. It could be high

difficulty for entry when Solargain first enter into

Japan market.

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Cultural implications

As is known, Japan is suffering from natural disasters

all the year round and more so after Fukushima disaster

of 2011, which made the whole world people focus on this

troubled land and show compassion to Japanese. That is

the reason why Japanese have had strong uncertainty

avoidance and environment protecting awareness since

ancient times. (THE HOFSTEDE CENTRE 2014) In other words,

Being prepared for danger in times is the most important

culture symbol to Japanese.

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Culture often affects life style of people, which means

consumer behavior could also reflect the major culture of

the country. For example, when credit cards consumption

has been popular in most western countries, persuading

customers to use credit cards in Japan is still

impossible. But after many years, Japanese people finally

accepted the credit cards consumption in the culture.

(Tina 2012) This phenomenon shows parts of consumption

habits in Japan, which reflects another major cultural

symbol of Japan: Following rules and do not like to

change in some aspects of life styles.

In order to explore the market in Japan, the following

suggestions should be considered.

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First of all, make sure all potential customers in Japan

know the safety and quality of the SOLARGAIN’s products.

The installation procedure and use procedure, sales

consultants should make consumers believe SOLARGAIN puts

the quality safety on the first place. At the initial

stage of pioneering, company could offer free maintenance

to their products, which get damaged from uncontrollable

natural disasters. After that, SOLARGAIN would build

brand image with safety very well.

In addition, because Japanese people do not like change

or they need really long time to adapt to new things.

SOLARGAIN ought to take adaptation strategies to meet the

local consumers’ needs such as offering variable payment

methods’ service to meet all levels of society needs.

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Modifications for Price, Product and

Distribution

Based on the analysis of major external influence and

cultural factors, numerous of adjustments are required to

better satisfy Japan market.

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The first adjustment needs to be made is for Price

aspect. The stiff competition might be the biggest

challenge that Solargain is facing with. When first enter

into the market, it is extremely important to gain market

shares. However, when competing with these big players in

the market, Solargain does not possess overwhelming

advantages. Therefore, decreasing the price by tolerable

percentage might be a practical choice for Solargain. By

deducting the price, it could be possible to attract

customers with preference of lower price. Therefore, it

enables Solargain to gain some market share.

Since the climate factor will significantly influence the

solar power system, few adjustments are needed to adapt

the Product to the market. The high temperature should be

36


taken into consideration. For locations where temperature

increases or significant heat waves are expected,

products should use more heat-resistant PV (photovoltaic)

cells. In the meantime, materials designed to withstand

short peaks of very high temperature should also be

implemented. (Asian Development Bank, 2012)

Moreover, the products should be modified to resist

strong wind in Japan market. Stronger structure, for

instance, mounting structure needs to be implemented.

This structure will allow the strong wind to slide off

the panel, thus reduce the pressure posed on the panel to

prevent it from being damaged or destroyed. (Asian

Development Bank, 2012)

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Further, Japan is a country with limited land resources.

The space available for solar panels is relatively small

comparing with Australia. To fit the market, the panels

should be designed smaller but still with same level of

efficiency.

Taking cultural factors into consideration, it may impact

the way we distribute in Japan. Different from Australia,

Japan is relatively conservative and quite resistant to

change or new events. Hence, it might be slightly

difficult for Japanese people to accept a company from

overseas in a short time period. Moreover, difficulties

may arise at the time of entering the local social

network due to the local resistance to change. The

customers might need a long time period to get used to

38


our company and our products. Directly establishing a

company at first in Japan might be costly and time

consuming. It might be more beneficial to distribute

through a wholesaler in the early days. In addition, the

local wholesalers understand the market better than we

do. They could be helpful when enter the market, the

reason is that they are able to enter the social network

without any resistance from local people.

39


Recommendations and conclusion

If Solargain wants to enter the Japanese market, it is

very important for the company to set a suitable entry

strategy. Based on the good trading relationship between

Australia and Japan, it will not be very difficult for

the company to enter. As is known to all, Japanese market

40


is different from Australia market due to the different

culture, climate and other factors. Therefore, Solargain

Company ought to make some changes on it current

products. Firstly, Solargain Company should take the

price setting into consideration carefully according to

Japanese consumption level. It also needs to compare its

price with Japanese local brands like Sharp, Kyocera and

Panasonic. After all, Solargain as a new brand imported

from Australia does not have too many advantages to win

the competition at the beginning. Secondly, the company

should add a new language of its official websites,

because not all Japanese can understand English. It

should open to the whole public in Japan. Thirdly,

Japanese climate is not good because of frequent natural

41


disasters especially the typhoons. All known to all,

typhoons have great damage to buildings and facilities.

Therefore, when installing the solar panel, it should be

installed more stable than in Australia. The shapes may

also be change to minimise the damage by typhoons.

Finally, the sales distributions should be changed. In

Australia, Solargain Company sales its products directly

to the customers, based on its good reputation in the

local market. While in Japan, it has not caught people’s

attraction and has not formed the reputation. Therefore,

the indirectly exporting method to the wholesalers in

Japan may be the best choice. With this strategy, the

company will have low commitment in terms of resources

and it may also lower the risk.

42


However, it also needs to remain something good. In the

past 40 years, Australia’s supply of energy is the most

attractiveness in Japan because of its high quality.

Therefore, Solargain Company must keep producing the

products with high quality. In addition, good sale and

after-sale services are also very important. The company

should guarantee the satisfaction from customers.

In conclusion, when Solargain Company goes to

globalization, it must plan and set its strategy well.

With different trading environment, Solargain Company

must face numerous challenges. While solar energy is a

sustainable energy, which has great prospect in the

modern economy if it keeps operating well.

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44


Appendix

45


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Partnership Agreement, Free Trade Agreement Blog,

Australian Government Department of Foreign Affairs and

Trade, viewed 15th October 2014.

46


< http://www.dfat.gov.au/fta/jaepa/>

Asian Development Bank 2012,‘Climate risk and adaptation

in the electric power sector’

Mandaluyong City, Philippines: Asian Development Bank,

2012

Cusick, D 2014, “Power Companies in Japan Move to

Restrict Solar”, ClimateWire blog, SCIENTIFIC AMERICAN,

viewed 15th October 2014,.

http://www.scientificamerican.com/article/power-

companies-in-japan-move-to-restrict-solar/

Department of Foreign Affairs and Trade 2014, Japan-Australia

Economic Partnership Agreement, Free Trade Agreements, viewed

19 October 2014.

47

http://www.scientificamerican.com/article/power-companies-in-japan-move-to-restrict-solar/

http://www.scientificamerican.com/article/power-companies-in-japan-move-to-restrict-solar/

http://www.dfat.gov.au/fta/jaepa/


< http://www.dfat.gov.au/fta/jaepa/>.

Fitzpatrick, M 2013, ‘Japan: The world's new star in

solar power’, Fortune Magazine, [JUNE, 2013]

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deposition on photovoltaic solar cells:the effects of

wind velocity and airborne dust concentration on cell

performance. Solar Energy, vol.60, no.4, pp. 277–289.

Hoedt, R.T 2014, “Solar Power Booming In Japan”,

CleanTechnica, viewed 15th October 2014.

< http://cleantechnica.com/2014/05/17/solar-power-

booming-japan/>

Martinot, E, Chaurey, A, Lew, D, Moreira, J.R, Wamukonya,

48

http://cleantechnica.com/2014/05/17/solar-power-booming-japan/

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http://www.dfat.gov.au/fta/jaepa/


N 2002, ‘Renewable energy markets in developing

countries’, Annual Review of Energy and the Environment, vol. 271,

no. 1, pp. 309-348.

Noto, Y, Kitamiya, C, Itaki, C, Urusizaka, M, Kidachi, R

& Yamabe, H 2013, ‘Role of nurses in a nuclear disaster:

experience in the Fukushima Dai-ichi nuclear power plant

accident’, International Nursing Review, vol. 60, no. 2, pp.

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Neumann, J. and Price, J 2009. ‘Adapting to Climate

Change: The Public Policy Response: Public

Infrastructure’.

Patt, A., S. P Fenninger, and Lilliestam , P

2010.Vulnerability of solar energy infrastructure and output to extreme

events: climate change implications. Paper prepared for

49


presentation at the Joint ICTP/IAEA Workshop on

Vulnerability of Energy Systems to Climate Changes and

Extreme Events. Vienna. International Institute for

Applied Systems Analysis. 22 April, 2010.

Solar Facts, 2011, Photovoltaic Efficiency—Inherent and System

Controlled, viewed 16th October, 2014.

www.solar-facts.com/ panels/panel-efficiency.php

Subramani, A, Badruzzaman, M, Oppenheimer, J & Jacangelo,

J 2011, ‘Energy minimization strategies and renewable

energy utilization for desalination: A review’, Water

Research, vol. 45, no. 5, pp. 1907-1920.

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Economics, viewed 18 Oct 2014.

50

http://www.solar-facts.com/%20panels/panel-efficiency.php


< http://www.tradingeconomics.com/japan/gdp-growth>.

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International Marketing’, The Marketing Philosopher blog,

viewed 15th October 2014.

<http://marketingphilosopher101.blogspot.com.au/2012/08/

standardization-versus-adaptation-in.html>

Trefler, D 2004, ‘The Long and Short of the Canada-U.S.

Free Trade Agreement’, American Economic Review, vol. 94, no.

4, pp. 870-895.

Takase, K 2014, "Renewable Energy Burst in Japan", NAPSNet

Special Reports, pp.4-5.

51

http://marketingphilosopher101.blogspot.com.au/2012/08/standardization-versus-adaptation-in.html

http://marketingphilosopher101.blogspot.com.au/2012/08/standardization-versus-adaptation-in.html


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Solargain Strategy Report of Entering into Japan Market

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