solarcity

Strategic Expansion of SolarCity into Brazil

BUS-D 271: Global Business Analysis

Presented to: Professor Paul Coulis

Presented by: Cole Sears

Executive Summary

SolarCity quickly grew from a startup to the market leader in customized solar energy systems. The company installs one in every three residential solar systems in the United States and has created partnerships with corporations, governments, and schools to provide solar energy systems to fit their dynamic needs. The solar energy growth is not contained to the United States, but is spreading across the globe to meet growing energy demands and prevent further destruction to the environment from traditional energy sources. Following an analysis of possible international expansion opportunities for SolarCity in Chile, Brazil, and Morocco, Brazil presented the highest growth potential for SolarCity to expand its operations.

Brazil offers an emerging economy that boasts a flourishing middle-class that is moving to the city and demanding more energy to fuel their new lifestyles. This emerging market is led by a government that has experience with renewable energy. Brazil is a leader in renewable energy, with a majority of their power coming from hydroelectric dams. While Brazil’s intentions are admirable, their execution is skewed by their dependence on hydroelectric sources. Hydroelectric power is reliable as long as rain is falling. When a drought occurs, production suffers. A drought occurred in 2001-2002 in Brazil, forcing the government to ration energy supplies and kick start a campaign to increase solar usage. Brazil’s electricity rates are steep and strain the budgets of homeowners and businesses. This market’s potential growth will drive electricity demand and rates to increase further, creating a need in the market for cheaper electricity that solar can fulfill.

SolarCity’s product line of customized residential and commercial energy systems provide the means to fill the void and allow SolarCity to begin expanding operations beyond the United States into markets that will provide new revenue streams. Favorable tax incentives, reduced financing rates, and public support from Brazil’s government provide the advantage for an optimal market over countries like Chile and Morocco. These countries are interested in solar, but do not match the actions taken by Brazil to welcome foreign investments in solar technology.

Expanding into Brazil does pose risks for SolarCity including government corruption, regulatory inefficiency, and moderate competition. Brazil’s government leaders are plagued by corruption, giving it a 43 out of 100 on International Transparency’s Corruption Index. The public has begun to protest this corruption and international businesses entering Brazil will promote change in the governmental landscape. Regulatory inefficiency delays permit applications for companies to begin their operations. Local governments are substantially more efficient and are active in promoting solar technology by making it easier to maneuver the regulatory system where the federal government makes it difficult. SolarCity will easily differentiate from the competition in Brazil because many of the firms there are focused on providing large-scale solar production to replace traditional energy plants, rather than specialized individual systems like SolarCity.

SolarCity can provide the source for Brazil’s growing energy demand by creating customized solar systems that meets the customer’s needs, reduces their electricity cost, and allows them to use sustainable energy. SolarCity is at the forefront of technology that will create lasting impacts beyond the United States. Brazil holds the greatest potential for SolarCity to begin their international impact and growth.

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Strategic Expansion of SolarCity into Brazil

The world’s dependence on traditional energy sources has caused shrinking supplies, increasing prices, destruction to the environment, but most importantly the drive to find new sources to power our growing societies. Solar power quickly became a contender in the clean energy market, accounting for one-third of new clean energy capacity in 2012 and increasing in capacity by 55% year-over-year for the last five years (“Renewables 2014”). Solar has proven it can fuel our world while being substantially more flexible than traditional energy sources. Solar is flexible because it only requires solar panels (that mount almost anywhere) and sunlight. This creates independence from the grid while still having a source of reliable power. The solar photovoltaics (PV) market has started to branch out from solely residential and play a larger role in industrial and communal power systems. This presents an opportunity for growth that reaches every corner of the world, no matter how large the demand.

SolarCity created a business model that thrived by allowing consumers to install solar power on their home, business, or factory with little to no investment. SolarCity became so successful that their market share is larger than their next 14 competitors combined (Michaels). SolarCity installs 1 in every 3 US solar power systems, an example of their tremendous ability penetrate markets and prevail over competition (“Solar Panels for Home”). In June 2014, a strategic move was made to purchase Silevo, a US solar panel manufacturer. This purchase is another example of SolarCity’s forward-thinking ability to stay ahead of the competition and bring the best solar energy systems to the market. Silevo is a leader in cutting-edge PV technology and has found success by designing super-efficient solar panels at minimal cost (Musk). SolarCity is also profiting from an increase in global coal prices and a reduction in the cost of solar power, as displayed below in Figures 1 and 2, respectively. These two factors create a promising outlook for SolarCity and put the company in an ideal spot to began entering into international markets.

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Source: Pope

Figure 2: Price of Solar Steadily Decreases

Source: “World Economic Outlook Database”

Figure 1: Coal Prices Continue to Increase

SolarCity SWOT Analysis

Strengths

The potential from the increasing demand for solar energy created numerous sources of cheap capital for SolarCity. This capital helps the company to continue expanding without incurring astronomical borrowing rates, allowing SolarCity to continue to penetrate the market further. Installation costs have been a main focus for investors of SolarCity because they are their largest operating cost (Denning). SolarCity’s installation costs have decreased steadily due to new technology. SolarCity purchased Silevo, a United States solar panel manufacturer, in 2014 to bring panel production in-house. The Silevo purchase will assist in shifting production of SolarCity’s panels from China to the United States, reducing costs by avoiding a 35% tariff placed on solar panels imported from China (Basenese). This purchase also created a new revenue stream for SolarCity since solar panel installations are projected to continue increasing at a steady rate as displayed in Figure 3. Much of SolarCity’s success is due to their corporate connections created to fund their residential Power Purchase Agreements (PPA). PPAs help customers afford solar without paying ownership costs, but still allowing users to buy their system later on if they desire (“Solar PPA Financing”). This provides an advantage over competitors since customers can use solar to replace their traditional energy without having to invest thousands in purchasing a whole system, like many of SolarCity’s competitors require.

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Threats

New solar ventures are creating increased competition

Possible solar tax credit expiration Other solar ventures are quickly

penetrating international markets

Opportunities

Increasing demand for renewable energy Increasing costs for traditional energy International governments are backing

renewable energy providers

Weaknesses

Dependent on Chinese currency High debt-to-equity ratio Weak cash flow Domestic-only sales

Strengths

Access to cheap capital Reducing installation costs Minimal investment for customers Beginning to produce solar panels in-house

Source: Shahan

Figure 3: Solar Panel Demand Increases

Weaknesses

SolarCity receives a major portion of their panels from Chinese manufacturers. Because of this they are dependent on the Chinese yuan and how the US dollar appreciates, or depreciates, against the yuan. Eliminating this risk is another advantage of SolarCity shifting its production to the United States. Due to the rapid expansion, SolarCity has incurred a high debt-to-equity ratio, making the company negatively leveraged and a higher risk to investors. This is soon to change due to a lease program recently created to be another option to PPAs that would reduce costs for SolarCity, and the benefit for customers being that they took ownership of their systems earlier. A weak cash flow for SolarCity caused their dependence on capital investments. Going international would require this to be resolved or more investments would be necessary. The company currently is domestic only, creating an international expansion learning curve that outside assistance and consulting could help become successful. Consulting combined with SolarCity’s leaders and advisors, including Elon Musk, would provide a successful team to transform SolarCity into an international corporation.

Opportunities

Rising costs for traditional energy sources, predominately coal, have

increased electricity rates dramatically and caused consumers to search for cheaper alternatives. Solar emerged as a top candidate because of its reliability on a dependent source, flexibility for its panels to be placed virtually anywhere, and its low installation costs relative to other renewables. Growing demand from

consumers and a desire for clean energy created a renewable energy market that has grown dramatically in the past ten years, displayed in Figure 4. Market research firm IHS, predicts Latin American PV capacity will grow four times its current rate in the next year and continue growing in the future (Shahan).

Governments are actively investing and creating prime conditions for solar providers to increase capacity. In the United States, a 30% tax break provides assistance in initial investment for consumers. Brazil’s government created policies to enact tax exemptions for solar providers, but local Brazilian governments have gone further by creating deeper tax breaks and spearheading projects to bring international providers into Brazil to grow the country’s solar presence. Many projects are under development and 30 projects, for a total of 1.041 MW capacity, are being bid on in December 2014 (Lopez).

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Source: “Renewables 2014”

Figure 4: Solar PV Total Global Capacity Rises

Threats

Increased demand for solar power created an increase in competition for SolarCity in the United States. Industry insiders fear the US government will take away the 30% Investment Tax Credit due to the success and growth industry. While this is only a possibility, it poses a risk to SolarCity’s residential market, because this offsets the price to customers dramatically. These two threats provide incentives for SolarCity to expand abroad and reduce the risk by finding markets with less competition and tax breaks that have no chance of being revoked. As discussed earlier, international market are being penetrated due to their potential. By delaying international expansion, SolarCity is threatening their market share potential and ease to enter a new market. This provides another incentive for SolarCity to act quickly and expand their operations internationally, specifically in Brazil where the market potential is abundant.

Brazil’s PEST FactorsPolitical

Brazil recently created aggressive renewable energy targets and policies to provide for their citizens (“Renewables 2014”). The Brazilian government is looking to bring

investments within their borders, in 2010 when the foreign investment tax rate was tripled, companies complained and the government immediately reversed it back to the original amount (“The Buys from Brazil”). This stance paired with the government’s promise to offer public credits to investors proves their desire for clean energy investments in Brazil (Teixeira). These are fueling the investment market in Brazil, making it the third highest place for private-equity investments for emerging markets, as shown in Figure 5. Some corruption does exist within the government, increasing the regulatory

inefficiency that exists. Brazil is actively growing their relationship with the United States government and currently is one the United States’ top ten trade partners (“Foreign Trade”). This growing relationship provides governmental, logistical, and regulatory support for US companies looking to enter Brazil.

Economic

The Brazilian Development Bank (BNDES) ranks as the industry’s top investor in private-equity investments (“The Buys from Brazil”). More importantly, the BNDES recently created low-financing rules for international companies looking to invest in the Brazilian solar market (Dezem). While some may think rising inflation in Brazil may have negative impacts on the demand for solar investments by consumers, increasing electricity rates give a financial incentive for consumers to switch to solar energy systems. Brazil’s middle-class grew 40% in the past decade, or about 30 million new middle-class members ("In Brazil”). These two facts combine to provide an ideal, growing market for SolarCity to target when entering Brazil. The US dollar is

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Figure 5: Brazil Ranks Third in Emerging Market Investments

Source: “The Buys from Brazil”

relatively strong to the Brazilian real, preventing expansion costs from being inflated due to currency exchange.

Social

Pablo Barros, journalist for The Guardian, stated that the middle-class growth is “stretching Brazil’s natural resources beyond their capacity” (Barros). Brazil’s government began to promote renewable energy sources as a remedy for this problem, creating a huge market potential for renewable energy providers. The campaign is garnering a positive response from the public, particularly due to Brazil’s collective-centered society (Barros). This societal trait creates a selling point for solar companies, because solar is good for everyone, not just the consumer of the power. An advantage to the rapid middle-class growth is the increase in an urban population, which creates a focused area for SolarCity to target. This urbanization allows SolarCity to focus their resources in geographically tight areas, reducing costs from having a spread out market. The language barrier that exists causes a complication for a US company in Brazil, but provides an incentive to employ locals and further improve the public’s view of the company while continuing to improve the local economy.

Technological

The 2014 World Cup and 2016 Olympics spurred infrastructure overhaul in Brazil, especially in the communications infrastructure. These upgrades included 77% year-over-year increase in bandwidth during the past few years, reducing bandwidth costs and giving Brazil the seventh highest bandwidth capacity in the world (Woodcock). Brazil’s technology industry is lacking, though, meaning SolarCity should expect minimal research and development to come from Brazil. Brazil boasts ample access to waterways and ports, with Rio de Janeiro and Sao Paulo, the country’s two largest cities, lying on the Pacific Ocean. These cities boast many river routes that lead throughout the country and plenty of airports to access Brazil from abroad and when traveling within the borders. The most important factor to SolarCity’s success in Brazil is sunshine. Brazil claims some of the highest sunshine rates in the world, displayed in Figure 6, providing the necessary environment for solar power to be effective.

Brazil: SolarCity’s Optimal International Market Brazil stands out as the ideal place for SolarCity’s initial international expansion because of its large energy demand, increased demand for alternative energy and emerging economy. Brazil is South America’s largest energy consumer and ranks 8th largest in the world in the same metric ("Brazil Analysis”). This market continues to grow at a staggering pace with electricity

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Figure 6: Brazil’s Boasts High Sunshine Rates

Source: "Which countries receive the most sunlight?”

consumption expected to grow by 52% through 2019, creating a rapidly growing market for SolarCity to expand their operations into (Markey). Because of this energy growth, Brazil continues to promote alternative sources. The country has set forth policies to increase alternative energy use and publically promotes and assists companies entering Brazil to provide alternative sources. SolarCity could capitalize on the tax breaks, low-financing rules, and alternative energy demand that would come with entering Brazil.

Brazil’s high electricity rates of 18-34 cents, more than triple the United States average rate, creates a strain on Brazilian consumer’s budgets that solar would relieve (Orihuela). Robert Sears, Vice-President of Customer Energy Solutions for Vectren Corporation (a Fortune 1000 company that provides electricity and natural gas to over 1 million customers) stated that once electricity rates exceed a 15 cent threshold, rooftop solar is a cost saving alternative to traditional energy sources (Sears). Using this rationale, solar would provide Brazilian consumers with a way to definitively save on their electricity bills, increasing the demand for SolarCity’s PV systems.

The middle-class, SolarCity’s target market, growth of 40% in the past decade creates a target market that continues to grow substantially quicker than the US market and provides SolarCity a way to tap into the growing energy demand that comes with Brazil’s middle-class growth ("In Brazil”). This would also allow SolarCity to expand beyond the saturated PV market in the United States and began growing in a less-competitive Brazil market.

Brazil Offers Multiple Markets for SolarCity

Three markets exist within Brazil for SolarCity: residential, industrial, and community-owned. SolarCity will benefit greatest from focusing on the residential market upon initial entry due to their expertise and success in this area within the United States. Following sustainable success in the residential market, the industrial and government markets provide new growth and diversification for SolarCity.

Residential

The residential market will target Brazil’s expanding middle-class and will be the main focus for SolarCity’s entry into Brazil. SolarCity has proven their success in the US residential market by providing relief from high electricity rates with many different purchase and financing options that will have the same effect in Brazil.

An article from Reuters suggests that SolarCity’s MyPower loan will be more appealing to customers because there is no money due upfront

and customers can take advantage of any tax credits that exist while owning their system (Groom). This new loan option will also be appealing in Brazil where tax credits exist for solar energy systems. The zero dollar upfront cost will be an appealing marketing strategy for SolarCity to lead with when entering Brazil to gain customer attention and consultations. By SolarCity offering their 30-year warranty with the MyPower loan they will also gain brand

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Source: SolarCity.com

confidence in their product and service, further strengthening their brand appeal by Brazilian consumers.

Leasing the solar energy systems is currently the most-popular financing option. This also has potential in Brazil because of its zero upfront cost, locked in low rates to protect from volatile markets, and only needing to pay for the power consumer uses. These will also be favorable in the emerging Brazilian market where the middle-class is growing, but may not be prepared to commit to a loan to own their solar power system. Brazilian consumers will benefit from reduced costs over traditional energy while also being able to sell excess energy produced back to the grid, a definite possibility in the sunny country (Bullis). These will combine to create a price point that appeals to this middle-class who is learning to manage their new disposable incomes.

PPAs may prove a more difficult means to finance Brazilian customer’s solar systems because it will take time to find willing corporate partners to fund the ventures. Finding corporate partners is also a reason to hire Brazilian natives who network with the top corporation in Brazil. Once the connections are made, corporations will flock to the program just like Google and others have in the United States, because of their ability to profit from their investments by selling excess solar back to the grid (Wesoff). Corporations to consider are Brazilian giants like Telefonica, Telemar, and other leaders in the industry who would like to invest in solar and grow their green portfolio. Targeting US companies that have large operations in Brazil such as General Motors, Ford, and Cargill would allow SolarCity to leverage their common nationality and headquarter locations to create connections in Brazil for PPA funding.

New home building projects will accommodate the middle-class growth and the investments from the World Cup and Olympics going to improving living conditions in Brazil. The home development growth provides a market that SolarCity could capitalize on by partnering with homebuilders to install SolarCity solar energy systems directly onto the home. These would provide benefits for the homebuilder and homebuyer by creating homes that have inexpensive electricity rates and are “greener”. This market could be a lucrative target for SolarCity and prevent failed attempts to convert interested consumers because of their fear surrounding switching costs, risks, and consumer apathy in following through with the process.

These four markets provide different strategies that all provide effective plans to capitalize on the Brazilian residential market that is growing, interested in reducing living costs, and looking to live sustainably.

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Industrial

Companies across the United States are looking for ways to minimize costs and reduce their carbon footprint. SolarCity has helped numerous companies do this by installing solar energy systems on their office buildings, factories, and other structures. Companies in Brazil are looking to accomplish similar goals and SolarCity can help them succeed at this, just like they have done in the United States.

Entering a new market will provide SolarCity with a plethora of new potential clients. They should begin in the Brazilian industrial market by leveraging the relationships that exist with their clients who operate in both the United States and Brazil. Corporations that SolarCity currently works with in the United States and who have sizable operations in Brazil include: WalMart, Toyota, Honda, and HP (“Solar Energy”). By starting with these companies in Brazil, SolarCity will attain their first industrial clients easier while creating a positive reputation and increase their brand presence among other industry and corporate leaders in the country.

Brazil’s growth is expected to continue across many industries, and the country has signed a law requiring a 39 percent decrease in greenhouse gases by 2020 (Messenger). These two facts create an opportunity for SolarCity to capitalize on by providing these new operations to go green from the beginning. The large-scale nature of many of these offices, factories, and warehouses provide large revenue opportunities for SolarCity on a single project. These projects provide the customer reduced electricity bills, reduction in carbon emissions, and safety from any type of power rationing put in place by the government.

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Government

Government and schools offer a third market for SolarCity to enter within Brazil. This market provides a unique opportunity to supply solar energy systems directly to the government structures, such as government offices, water treatment facilities (pictured, left) and recreational areas. When the citizens see that their government is not only saying that everyone should adopt green technology, but doing it themselves, the

public will be more inclined to inquire about solar options for themselves.

SolarCity has succeeded at assisting governments such as the City of Sacramento, City of San Jose, and many others in converting to solar power systems. Governments in Brazil are looking for the same options to reduce their electricity rates and promote the renewable energy push that they are driving for their citizens (“Government Solar”). SolarCity can provide this for the Brazilian Governments, particularly the local governments, who are consistently going far beyond the federal government in green energy reforms (Lopez). These government contracts would provide SolarCity not only revenue from the sales, but connections within the governments that could prove valuable in the future when navigating the bogged-down regulatory system that exists.

The education system in Brazil is struggling in many benchmarks. An Economist article entitled “Brazil’s Poor Schools: Still a lot to learn”, suggest that many of these struggles revolve around financial limitations (“Brazil’s Poor Schools”). SolarCity’s solar power systems provide a mechanism to reduce these school systems’ electricity rates so they can redirect their funds to providing a better learning experience for their students. SolarCity can carry over their success from working with large school corporations, like the Los Angeles Unified School District and Scottsdale Unified School District, into Brazil to create the same outcome for Brazil’s schools: reduced electricity rates, increased environmental health, and promoting sustainable lifestyle for students.

SolarCity’s Entry into Brazil

Entry into Brazil would include bringing SolarCity’s entire product line so that the company can capitalize on each of the three markets, as discussed above. BNDES’s rule to provide low-financing options through 2020 to solar companies that import their PV panels would help SolarCity enter into the market while using their same manufacturing centers in China and at

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Silevo’s US factories. Beyond 2020, SolarCity could continue to import their panels if logistically and cost appealing, or look to expand Silevo into Brazil by opening a manufacturing center and supplying SolarCity’s Brazilian venture with panels from that new factory. This would provide new opportunities for Silevo to grow by also providing PV panels to SolarCity’s competitors in Brazil, as well as throughout Latin America, to profit from their growth.

The right personnel is critical for the success of the expansion. SolarCity should look to hire a part of the management and general employment team from natives of the regions they plan to enter. This would minimize cultural and language learning curves and reduce acclimating to the market by hiring experience instead of taking the time to attain it. These native employees would know how to maneuver regulations and connect with customers effectively. This would also provide SolarCity with positive brand image from the start by hiring locals and stimulating local economies.

Potential Risk of Brazilian Expansion for SolarCity

Risks exist in expanding to Brazil, but mitigation techniques do exist to minimize or eliminate those risks. Corruption is clearly present in the Brazilian government by the Transparency International Corruption Index score of 43 on a scale of 0-100, 0 being most corrupt (“2014 Corruption Perceptions Index”). The public is aware of the widespread corruption and is beginning to voice their opposition. Bringing in international business, such as what will happen in Brazil’s emerging economy, will provide the push for the government to create accountability measures and transparency to rid the government of corruption.

Regulatory inefficiency also poses a risk to SolarCity’s expansion into Brazil. According to the Heritage Foundation, red tape attributed to Brazil’s 53.8 out of 100 score on the business freedom scale (“Brazil Economy”). To prevent delays from regulations, SolarCity would benefit from acting quickly when expanding into Brazil and hiring a professional with experience in maneuvering the Brazilian red tape to prevent delaying their entry.

Competition in Brazil would focus around the three biggest winners in the first solar power auction: Solatio Energia, Renova Energia SA, and Italian provider Enel Green Power. These three companies won the rights to provide 70% of the capacity auctioned on October 31, 2014 (Dezem). While they are the largest competition, SolarCity will succeed in differentiating themselves to customers by copying their business model into Brazil and focusing on individual systems rather than large-scale farms that power the entire grid. By focusing on installing customized systems directly at the source (homes, factories, businesses, etc.), SolarCity’s investment will be substantially less as opposed to building the infrastructure needed for solar farms like their competitors.

Societal Benefits to Brazil from SolarCity Entry

Solar energy at its core is a benefit to society and SolarCity’s entry will provide numerous other societal benefits to Brazil. SolarCity systems would reduce carbon emissions by 690 metric tons, the equivalent of burning 741,000 pounds of coal, for every 1GW created (“Greenhouse Gas”).

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Brazil consumes 455,730GW of electricity per year (“Brazil Analysis”). These changes produce lasting impacts on the society’s health and cleanliness of the community.

Energy dependence is at the forefront of every government and a matter of national security. Through SolarCity’s entrance, dependence on the diminishing supplies of oil and coal would be reduced. This reduction would not stop at the individual user, excess energy created can be sold back to the grid to further reduce the dependence on traditional energy and increase solar energy usage. The spread of SolarCity systems would also reduce the risk involved with Brazil’s massive dependence on hydropower. Droughts, such as those that occurred in the past, caused energy rationing in Brazil and left the country looking for alternative renewable sources ("Renewable Energy in Brazil"). Since Brazil attains plenty of sunlight, lifting the dependence on hydropower through solar energy sources would provide a more stable power system for Brazil’s citizens.

The opportunity exists for SolarCity to provide power to those who live in rural, off the grid areas of Brazil. This aligns with the goal of their GivePower Foundation: “To make clean renewable energy accessible to those who need it most” (“GivePower”). This would give power to those that did not have it before and create a safer, healthier, and more productive society. By SolarCity embarking on this initiative, they would give save these communities by eliminating their need to purchase extremely expensive kerosene and candles. The goal of this initiative would be to power poorer communities in Brazil, providing a social benefit from SolarCity’s expansion to a part of Brazil’s society that traditional energy companies have ignored.

SolarCity Holds the Possibility to Impact the World

Rising electricity rates and a growing trend to live sustainable lives create a solar energy market that is full of potential growth. Specifically in Brazil, where a flourishing middle-class holds disposable income for the first time, looking to reduce their living costs, and is being incentivized by the government to consider embracing green technology. SolarCity’s leadership proved that they can grow a company quickly and create corporate partnerships with multinational corporations. The next step for SolarCity is to capitalize on the globalization trend and enter Brazil’s residential, industrial, and governmental markets. Each market provides unique benefits for SolarCity’s growth while providing numerous benefits to the customers. A swift entry into Brazil is necessary to obtain the greatest market share and reach the Brazilian customers before competition arises. SolarCity is creating a lasting influence on sustainable energy in the United States, and the opportunity exists to continue increasing that impact throughout the world. This will develop one country at a time, and Brazil holds the greatest potential to begin SolarCity’s international impact and growth.

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“P.E.S.T. Survey Scorecard”: Brazil

Critical Factor + - Expansion Implication (so what?)

P:1. Government has been successful at investing in expanding companies

+The government support and investment could offset risks/costs of expansion and fuel growth

2. Regulatory inefficiency -Regulation inefficiency can delay the initial entry into the market, meaning application should begin early on

3. Corruption in government -SolarCity will have to learn how to cope with or bypass inefficiency from corruption

4. Major US trading partner +This means that the path has been paved logistically and there are examples of how to become a legal entity in Brazil

5. Growing relationship with US government

+Brazil is seeking transportation connections with US, helping the logistics of getting products to Brazil

E:1. Growing middle-class +

A middle-class will be one of the main targets for SolarCity, so this means a growing target

2. US Dollar is strong in Brazil + This will reduce relative cost of expansion

3. Brazil Development Bank solar import rules

+Brazil has allowed solar imports to spur increased use of solar power

4. Rising inflation rates - Could reduce consumer’s demand

5. High electricity rates + Solar would make electricity rates cheaper

S:1. Government is encouraging middle-class to live sustainably

+Government support of sustainable lifestyles will increase demand for solar power in Brazil

2. Increased education performance +Future labor force and consumers will be more skilled and apt to take part in new technologies such as solar

3. Collective-centered society +This would increase support for communal solar projects since it would benefit everyone

4. National language is Portuguese -Employees who work between the countries need to be bilingual or they will need translators

5. High urban population + Target market would be in focused areas

T:

1. Increased communication investment

+Created for the World Cup and Olympics, the communication infrastructure will be able to hold increasing demand for bandwidth

2. Weak technological infrastructure - Small amounts of R&D will come from Brazil

3. High sunshine rates +This provides a market for the solar panels to connect enough solar to make it feasible

4. Decreased labor costs + Cheaper labor will decrease production costs

5. Ample access to ports +Importing materials will be simpler with Brazil’s many, easily accessible ports of entry

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“P.E.S.T. Survey Scorecard”: Chile


P:1. Increased government transparency

+

This would reduce inefficiency due to corruption and other covered up actions

2. Many trade agreements + Trade agreements can reduce import/export costs for SolarCity

3. OECD Member + Partnerships create better trade and economic environment

4. Required enlistment of men - This would delay or prevent recruiting promising employment candidates

5. Democratic government +

Rule of law would prevent any unforeseen destructive acts against company’s assets

E:1. Positive economic growth +

This would increase the demand for things such as solar power

2. Large foreign investments + Foreign investment in solar would be accepted

3. High economic freedom ranking + Less inefficiency would occur from regulations

4. Decreased unemployment + Employed people are more likely to invest in solar power

5. Dependent upon single industry

-

Any destruction of this industry could cripple the country’s economy

S:1. Human rights abuses -

Employees would be susceptible to these abuses

2. Increased urbanization + Increased density of target market

3. Small population - Target market would be relatively small

4. Stark contrast between classes -

Target market would be limited by classes

5. High quality of life + Chileans value life-enhancing qualities such as renewable energy

T:1. High sunshine rates +

This provides a market for the solar panels to connect enough solar to make it feasible

2. Skilled labor force + Laborers will be able to handle complex tasks

3. Substantial ports of entry + Easy access from US/China for imports

4. Labor unions actively strike - If business is done with any type of union, a strike is a risk

5. Relatively high labor costs - Increased labor costs would reduce margins

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“P.E.S.T. Survey Scorecard”: Morocco


P:1. Corruption -

Inefficiency would be created due to having to avoid or becoming a victim of corruption

2. Government interference by King -He has great influence on matters and can affect change at any time, meaning assets could be lost if something changes negatively

3. Increased trade freedom + This would allow for easier import of products

4. Difficult regulatory system - Increased costs and time lost from regulations

5. Trade agreement with China/US +

It would be easier and cheaper to import our products from China and the US into Morocco

E:1. Increased financial freedom +

Consumers would have more freedom to spend on things such as solar panels

2. Increased Foreign Direct Investment

+ Acceptance of FDI increases the ability of capital for SolarCity to use to expand

3. Dependent upon agriculture -By being heavily dependent on one industry, any disaster to that industry would affect sales of goods such as solar panels

4. GDP Growth + Increased GDP can equate to increased investment into areas such as renewable energy

5. Increased inflation -

Increased inflation would reduce the purchasing power of consumers and strain their budget to decrease investments in solar power

S:1. High unemployment +

For many this is a negative, but would mean relatively cheaper labor for SolarCity

2. Increased education rates + Consumers will become more informed and workers will become more skilled

3. Strong cultural differences from US

-Business culture and personnel would have to be adapted to work in Morocco

4. Decreased status of women -Women workers moving to Morocco may find difficulties in Moroccan work environment

5. Collectivist society + This would allow SolarCity to play into the selling point that solar is good for everyone

T: 1. High sunshine rates + Solar energy need sunlight be effective

2. Great communication infrastructure

+ Communication will be reliable

3. Key waterway and port access + Getting supplies to Morocco would be simple

4. Increased investment in solar energy

-Solar investments and government support could help streamline business set up and support would be strong from the government

5. Best transportation network in Northern Africa

+ Getting products and installers around the country would not be hindered

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Works Cited

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"Brazil Analysis." U.S. Energy Information Administration (EIA). U.S. Department of Energy, 1 Oct. 2013. Web. 1 Dec. 2014.

"Brazil Economy." Conservative Policy Research and Analysis. The Heritage Foundation, 201. Web. 19 Nov. 2014.

"Brazil's poor schools: Still a lot to learn." The Economist. The Economist, 4 June 2009. Web. 26 Nov. 2014.

Bullis, Kevin. "Why SolarCity Is Succeeding in a Difficult Solar Industry." MIT Technology Review. MIT Technology Review, 4 May 2012. Web. 27 Nov. 2014.

Denning, Liam. "Throwing Light on Value at SolarCity." The Wall Street Journal. Dow Jones and Company, 11 May 2014. Web. 28 Nov. 2014.

Dezem, Vanessa. "Brazil Development Bank to Allow Solar Imports Until 2020." Bloomberg. Bloomberg, 31 July 2011. Web. 28 Nov. 2014.

Dezem, Vanessa. "Solatio, Renova and Enel Biggest Winners in Brazil Solar Auction." Bloomberg News. Bloomberg, 3 Nov. 2014. Web. 19 Nov. 2014.

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