Global Strategic Business Plan 1

Week 6 Paper: Global Strategic Business Plan 1

E. Ann Adams

Class

Professor

September 3, 2016

Week 6 Paper: Global Strategic Business Plan 2

Introduction:

When doing business in other countries there are a lot of things to take into consideration.

Whether a company already has an established product line or is thinking of expanding, extensive

research must be done before diving into a new market. After completing a cultural, economic,

and demographic analysis of countries and cultures, it seems that it would be advantageous for our

company to sell solar water heaters to the people and businesses of Portugal.

Our Company and Product:

AquaTech is an American company specializing in solar hot water heaters. The solar water

heaters use renewable energy to supply households and businesses with hot water. The advantages

of solar water heaters over electric ones are cost savings, environmental incentives, tax rebates,

and the availability of hot water without electricity. (U.S. Department of Energy) The company

has successfully established itself in America as the leading name in solar water equipment and

wants to expand into foreign markets. Some weaknesses that the company faces are a lack of

consumer knowledge about the company and products and inability to lower costs because of the

intricacy of the products.

Week 6 Paper: Global Strategic Business Plan 3

Picture from: http://www.solar-energy-for-homes.com/images/solar-water-heater-diagram.gif

Description of Portugal:

Geography and Demographics:

Portugal is a small country located on the Atlantic coast of Europe. The climate is temperate

with warmer summers and high precipitation in the winters. The official language is Portuguese

and the population is around 11 million. Approximately 80% of the population is Roman Catholic

and this plays a key role in the day-to-day lives of the citizens there. (The World Factbook) The

literacy rate in Portugal is fairly high in relation to the rest of the world, with approximately 96%

of the population being literate. According to UNICEF, 99.1% of Portuguese children are enrolled

in primary education systems, meaning that education is important to their society and contributing

to the high adult literacy rate. (UNICEF, 2013) The Portuguese are considered to be highly

educated consumers and expect high quality products.

History of Trade in Portugal:

Trade has always been extremely important to the country of Portugal, dating back several

centuries. Key players in their trade industry included China, India, and England. In the early days,

they were large exporters of spices and wine. Trading was a major business and was crucial to the

survival of the people there. But it wasn’t until after the wars of the 18

century that the Portugal

we know today began to form. (Encyclopedia Britannica) This was when the government of

Portugal began to become more solid and the country developed a constitution. In 1910, the first

Republic was created. Since then there has been some restructuring of the government. We are

now in the era of the third Republic. Since then, Portugal has grown to be a very well-structured

and successful country in today’s world. The stability of the government is variable, depending on

which party has control of Parliament and the Prime Minister and Presidential positions.

Week 6 Paper: Global Strategic Business Plan 4

(Portugal.com) Generally, the government is relatively stable in relation to other European

countries.

Economy:

The economy of Portugal has been becoming more and more favorable in recent years. The

main is issue with the economy of Portugal, however, is the public sector debt, which is 130% of

GDP. (Google Public Data, 2014) Because of this increase in debt, fluctuating unemployment

rates, and political unrest due to 2015 elections, the consumer confidence index fell several points

in recent years. (Focus Economics, 2015) But, many analysts project growth in the overall private

consumption rates over the next few years. Overall, the economy of Portugal is favorable for doing

business, so long as the product is in a business sector with opportunities for foreign importing.

Why Portugal is Ideal for Our Company:

There are several reasons that our company sell solar water heaters over other products.

The primary reason is that in recent years, Portugal has made several pushes towards a higher use

of renewable energy sources and they have even put new building codes into effect that require

building to use renewable energy for a certain portion of their energy usage. These codes apply to

both residential and non-residential buildings, meaning that renewable energy products will be in

high demand as both consumers and businesses try to get their buildings and homes up to code.

(Solar Thermal World, 2014) Because every building is required to use renewable energy, our

target market is extremely large. The Portuguese market can be broken into five segments of

consumers. They are:

1. Households with income below per capita GDP

2. Households with income above per capita GDP

3. Local/small businesses

4. Government

5. Large businesses/corporations

Week 6 Paper: Global Strategic Business Plan 5

The reasoning behind this specific segmentation was that because our product can be sold

to both individuals and consumers, both should be included in the segmentation. Not all

households will be able to afford the same quality of our product so the households were down

into two sub-segments based on income. The same principle goes for businesses. Different size

businesses will have different prices ranges and needs as well as different amounts of heated water

depending on the size and function of the business. Because of the size and capabilities of our

product, the segments were narrowed down to both household segments and the local/small

business segment. The households with income below average per capita GDP were then

eliminated because they would more than likely not be able to afford our product.

After researching the competition that our company will face in this market we have

learned that our biggest threat will be the low prices of the Chinese manufacturers. Three of our

five biggest competitors are Chinese, with one other being American, and the last one being

British. (Top Ten Reviews, 2016) One of the most important advantages that our product has over

the competitors is the higher quality of American-made components. Though the price may be

slightly higher, our company would promote our superior quality. Also, we will have to provide

exceptional service and warranties to ensure that our customers do not switch brands and that they

will recommend our product to others. Despite the obstacles and because the market is so large,

our company has a great opportunity in this country. Also, since the movement towards renewable

energy is still the “hot new thing”, we are entering the market in a prime time. The following

SWOT analysis outlines the situation our company will face in doing business in Portugal

Strengths

Opportunities

1. High demand product

1. Practically everyone needs at least one

2. Required by legal building codes

2. Sells in both consumer and business sector

3. American technology makes it more

efficient

3. Government contracts for buildings

Week 6 Paper: Global Strategic Business Plan 6

4. More durable pieces

4. Many Americans living in Portugal want

American products

5. Saves money on water heating costs

Weaknesses

Threats

1. Higher cost to make in Portugal

1. Low prices from Chinese manufacturers

2. Larger size of product makes it harder to

move (from facility to retailer, customer

etc.)

2. European companies that are closer

3. Fragile (could be damaged in transport)

3. Distrust of American companies

4. Company is new to foreign market

4. Mountainous terrain makes transporting

harder

5. Slower delivery times

Recommended Action Plan:

According to Export.gov, the best way to enter the Portuguese market is to find a local

partner or company to help promote your product. Many U.S. companies use the U.S. Commercial

Service office in Portugal to get their company started in Portugal. This office helps U.S.

companies to find agents, distributors and company representatives to help with their product.

Establishing a facility in Portugal is a better alternative to exporting. For example, customers will

have a contact in their own country, rather than having to rely on our company all the way in

America. We will import parts from other countries in order to ensure the lowest possible cost.

The product will be assembled at our Portuguese facility and then distributed to retailers.

The shipment of product components will have to be designed and carried out very

carefully, as our product is fragile and can be crushed or broken very easily. There are also several

adaptations that will have to be made in order for our product to sell well in Portugal. Labeling

will need to be primarily in Portuguese, with secondary labeling in English. Measurements will be

in Metric. Portugal also uses type F sockets, so we will have to make sure our products are adapted

to fit those. The standard voltage is 230 V, so that will have to be taken into consideration as well.

Week 6 Paper: Global Strategic Business Plan 7

(IRENA, 2016) Making sure that our product satisfies all of these specifications will help to ensure

success in selling them.

Staffing:

For the first year or so, our company will send some of the employees from our American

location to staff the new facility and train new employees. These American employees will serve

as top level managers until others are trained. This will allow our company to focus on making

sure the product is adequately adapted for the environment before focusing on promotion and sales.

In order to prepare these employees for doing business in Portugal they will be given language

lessons through the company and take several company-planned business trips to the area in order

to get acquainted. We will hire Portuguese worker as we get established. The ability to read, write,

and speak English as well as Portuguese will be a high priority when hiring.

Potential Conflicts:

Because of the cultural differences between the United States and Portugal, there is a

potential for conflicts to arise when doing business. One potential problem is that the Portuguese

people expect business to be done on a more personal level and for there to be more of a

relationship than Americans are typically used to. Patience and building a relationship are very

important when doing business in Portugal. Building business relationships does not happen

overnight or through a simple phone call. They expect business partners to be friends as well, so

you must try to form a good personal relationship in order to have a good business relationship.

Even if something seems to be taking a long time, you must realize that there is not as much of a

sense of urgency as there is in the United States. As with any country, there can be a disdain for

foreign products. We will address this situation and adjust our promotion, packaging, etc.

Week 6 Paper: Global Strategic Business Plan 8

accordingly if necessary. This is something that will have to be determined once we have

established our business.

Conclusion:

After a thorough examination of any of the aspects of the Portuguese culture and business

environment, I have concluded that selling solar water heaters in Portugal will be beneficial to our

company. Some of the biggest factors that played into this decision as the large size of the target

market, the timing of our entry due to the recent push towards renewable energy, and the expected

profits from this product. Although there are also some risk factors involved, I believe that this

opportunity should be taken advantage of now before the demand for this product decreases

drastically.

Week 6 Paper: Global Strategic Business Plan 9

Works Cited:

2016 Best Solar Water Heaters Reviews. (2016) Top Ten Reviews. Retrieved from

http://www.toptenreviews.com/home/hvac/best-solar-water-heaters/

At a glance: Portugal. (2013) UNICEF. Retrieved from

http://www.unicef.org/infobycountry/portugal_statistics.html

Government debt as percentage of GDP. (2014) Google Public Data. Retrieved from

https://www.google.com/publicdata/explore?ds=ds22a34krhq5p_&met_y=gd_pc_gdp&idim=co

untry:pt:it:es&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=gd_pc_gdp&scale

_y=lin&ind_y=false&rdim=country_group&idim=country:pt&ifdim=country_group&hl=en_US

&dl=en&ind=false

History of Portugal. Portugal.com. Retrieved from

https://portugal.com/portugal/information/history

Portugal Economic Sentiment. (29 Oct. 2015) Focus Economics. Retrieved from

http://www.focus-economics.com/countries/portugal/news/economic-sentiment/consumer-

confidence-and-economic-climate-deteriorate-in

Portugal: Good Legislation, Bad Economy. (2014) Solar Thermal World. Retrieved from

http://www.solarthermalworld.org/content/portugal-good-legislation-bad-economy

Renewable Energy Policies: Portugal. (01 Sep. 2016) IRENA. Retrieved from

http://resourceirena.irena.org/gateway/countrySearch/?countryCode=PRT

Solar Water Heaters. U.S. Department of Energy. Retrieved from

http://energy.gov/energysaver/solar-water-heaters

Spice Trade. Encyclopedia Britannica. Retrieved from

https://www.britannica.com/topic/spice-trade

Week 6 Paper: Global Strategic Business Plan 10

The World Factbook: Portugal. Central Intelligence Agency. Retrieved from

https://www.cia.gov/library/publications/the-world-factbook/geos/po.html

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