Market research for wind energy project in China

This report analyzes the wind energy market in China and provides recommendations to the WIND KRAFT management team for expanding their business in China. It covers legal, political and economic environment, cultural diversity, Guanxi, characteristics of wind energy market, required goods and services.

Running Head: Market Research 1
Market research for wind energy project in China

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Executive summary
The main purpose of the report is to analyze the decisions of expansion of WIND KRAFT as the
company has developed its business in 1997 in Germany. In 20 years, company has got growth
and more than 2000 wind energy projects were implemented by the company in many countries
of the world. The company want to expand its business globally and majorly at that place where
legal, technical and commercial risks are limited. This report has defined that the management
team has assessed China´s energy market because of its attractive wind energy market. China is
the world leader in generating the wind power in which it has 2,380 gigawatts of access capacity
on land and apart from those 200 gigawatts on the sea. The political and legal factor of the
country is stable which will be good for WIND KRAFT Company to expand its business. The
economic environment of country is effective along with that market of wind energy in china is
huge which can bring huge opportunity for the business of WIND KRAFT to get more success.
The characteristics of Wind Market in China have been emphasized in this report with significant
manner.

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Contents
Executive summary.........................................................................................................................2
General challenges for international management in China............................................................4
Legal, political and economic environment.....................................................................................6
Characteristics of wind energy market in China..............................................................................8
Required goods and services.........................................................................................................10
Final assessment and recommendation to the WIND KRAFT management team.......................11
References......................................................................................................................................12

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General challenges for international management in China
The Chinese marketing has huge advantages as it provides number of opportunities to the
businesses of other countries to expand their business in this country. It is more populated
company and due to an average annual economic growth rate of 9.5% since 1979, the market of
China attracts a number of foreign companies. However, there are many companies that have
failed in China but it has been found that many companies get huge success due to expansion in
China. WIND KRAFT Company was founded in Germany and now it wants to expand its
business in China as developed wind farms from start to finish that offers its expertise at every
phase of projects. Along with that the company has dealt with financing and planning and takes
care of engineering, commissioning, operation and procurement. There can be various
international management challenges that can be the cause of issues for WIND KRAFT at the
time of expanding its business.
Cultural diversity
There are many inhabitants of China that share the same traditions and values, although it is
totally different from some extent between rural and urban areas. The values are highly
appreciated in China such as righteousness, wisdom, loyalty and honesty (Jin, Zhang, Shi and Ju,
2014). The cultural diversity can become the major issue in handling the international
management in china as one should always try to communicate to focus on the integrity of moral
and harmony of the universe (Moran, Abramson and Moran, 2014). However, this kind of
activity is considered as the negative if one use communication to pursue own individual self
interest (Kull and Wacker, 2010).
Guanxi

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Guanxi is another challenge for international management as it depicts the effective connections
of relationships that link the incorporated person by mutual accountabilities of exchanging
loyalty, obligations and mutual obligation to filling an effective relationship. Guanxi is made up
of two words such as Guan and Xi. Guan refers the view of Chinese on groups in which inside
the gate you are one of us on the other hand outside they are not recognized and it would be
required to be the part of the network. While Xi entails the favours which can be banked (Wang,
2007).
Economic stagnation
There is another concern of international management such as growing debt in China. It has been
found that most of the infrastructure investment s of China has decreased due to costs that
outweighed the benefits (Changliang and Zhanfeng, 2009). The company WIND KRAFT can
face the challenges as the country’s economic growth has slowed.

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Legal, political and economic environment
There are some factors that impact the company in a positive as well as negative manner at the
time of entering in new market (Han, Mol, Lu and Zhang, 2009). It is required for the new
company to analyze political, economic and environment factor entire entering into new market.
These factors have significant impact on the entire businesses. These three factors are defined
below:
Legal
The legal system of China is generally based on the Civil law. In the past few decades, the
country has lost the trade policy to the outside world which had become the great issue as it was
facing issues regarding trading all over the world. The company will be benefitted if it invests in
this country as the friend investments are encouraged by the government in strong basis. There is
a favourable policy of attracting foreign investment in China and the country has developed and
organised judiciary. There are many companies in China that generate wind power in more
efficient manner which shows that these are getting full support from the government of China
that is why they are established for many years. WIND KRAFT will be getting huge advantages
in the term of legal prospective as they are already established in which it has better
understanding about legal prospective of different countries.
Political
The political system of the company is stable as the government of china entails a system of
multi party co operational as well as political consultation undertaken the leadership of the CPC.
It has been found that China is especially hazardous with the term of political risk. It is required

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for the country to focus on the possibility of nationalization of industries. Likely wise, there are
some risks of expropriation, currency inconvertibility and confiscation. It has been found that the
rampant inflation currency devaluation is the scenarios that are faced by many companies
(Glasse, 2010). In the context of WIND KRAFT, the company can expand its business in China
but it is necessary for the country to keep strict policy regarding coming or exit of employee as
there is a huge risk to the employees of the company of personal harm or kidnapping, along with
that the risk to the organization of extortion attempts. There is some political issues in China that
can impact the business of wind energy as the business freedom is quiet tight due to the imposed
regulations in the context of restricting businesses from other countries coming in (Han, Kang,
Salter and Yoo, 2010).
Economic environment
It has been found that China has a primary recipient of the destination of world of FDI in latest
years. FDI includes 27% of value added promotion, 58% of foreign trade and 4.1% of national
tax revenue. Along with that over 190 countries all over the world are invested in China wich
involves 450 of the world’s fortune 500 Companies (Foreign Investment in China, 2018). It
represents that WIND KRAFT will be benefitted if it initiates wind energy projects in China as
the economic stability is good of this country. The inflation rate of China is increased in an
efficient way against a standard level of purchasing power and in 2009 the prices were dropped
by 1.5% from last year which forced customers to spend on buying products (China Inflation
Rate, 2010). The installation of the project of wind energy in China is not consuming that much
cost that is why it would be great benefitted for the company to implement the project in China
as company is finding that places for expansion where technical, legal and commercial risks are
limited.

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Characteristics of wind energy market in China
In all over the world, the wind energy market is expanding at a much faster rate. This has created
a huge opportunities for the companies all around the world (Da, et. al., 2011). Since the wind
energy demand is increasing at much faster rate in China also hence the wind energy market is
also expanding at much faster rate. Even the government of China has shifted its focus towards
the wind energy market within the nation. This has benefitted many of the firms at the same time
it has increased the chances of the company to make sure that they can gain more market share.
Wind Kraft which is one such a big company of Germany aims to enter into the market of China
with their plan to capture the larger part of the renewable resource market in China. The wind
energy market in China is not different from other markets like in any developed market. Since is
the nation that is developing at much faster rate and hence their energy requirements is also
increasing at much faster. A fact also needs to be considered that the Chinese market is very
large hence the demand of the wind energy will also be increasing.
The geographical structure of the China promotes Wind energy market. This can be understood
by the fact that there are larger numbers of plain and plateau regions where strong winds are
blowing hence these places acts as wonderful centres where Wind Kraft can install its wind
mills. Such a large abundance of the wind energy facilitates the company to provide the
electricity to the people at the lower cost. With the fact that Tibet is a part of China, the potential
for the wind energy generation increases considerably (Traber and Kemfert, 2011). This is
because of the fact that Tibet has a lot of steep mountain ranges where the wind is blowing in
abundance. Such a plateau region helps in installing a large numbers of wind mills in a very
small area.China has an exploitable wind capacity of 2380 gigawatts on lands while 200 GW on
sea. The potential of China can be understood by the fact that China is having the total capacity

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of 149 GW and it is the highest in the whole world and a forecast suggests that by 2020 it will be
having a capacity of 250 GW. Since the Chinese government is also helping the projects that are
related with the Wind energy. This can be understood by the fact that Chinese government plans
to produce 15% of its electricity requirements through wind energy. This makes the market
highly suitable for the new investors to invest in this energy market (Jiang, et. al., 2011).
Chinese market is considered to highly techno-friendly and hence it will help the Wind Craft to
easily available the technology that will be required in the installation of plants. China is also
known for its highly advanced technologies at lower prices which will further help the
companies to reduce their operational cost (Hong and Möller, 2011).
Along with this one important fact about the Chinese market is that it is a highly research
oriented market and hence the innovation can easily be made in the technology that is used in the
wind energy harnessing (Zhao, Wang and Wang, 2012). This is extremely beneficial for any
company that is related to the technology. Since there are huge amount of innovation going on in
the renewable energy industry which will help the Wind Kraft in making sustainable
development and it is the most important aspect in any industry. Since China has large
population that is living under the poverty line who wants the energy at lower prices. For them
this wind energy can be an excellent option which can fulfil their demands. Since the network for
the energy distribution is excellent in China hence the company will not face problems in making
energy available to the people of China. Since China is the supplier of the energy to many
neighbouring states hence the market for the wind energy becomes even greater. It is expected
that the Return on Investment will be higher especially in terms of the fact that the industries that
are powered through wind energies are also increasing.

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Required goods and services
There are various types of goods and services that are required by the wind energy market
especially in China. This can be understood by the fact that today the wind energy market in
china is at developmental stage hence it is crucial for Wind Kraft to check the potential goods
and services that can be provided by them in the market. Since there is large numbers of
companies that are coming in this industry hence the requirements is narrowing down. But there
are many products whose market is still left to be captured. There is a limitation with the wind
energy that it does not provide power on demand rather it has wait for the time when the wind
will blow. Some of the products and services that it can offer are:
Wind energy powered mills: The energy that is generated through the wind can be used for
powering the mills of various products such as the flour mills, sugar mills etc. This has the
potential to generate electricity that could help in the working of mills which is having less
power requirements (Zhao, et. al., 2013).
Water pumps: This energy can be used for pumping the water out of the ground. Since the
energy requirement in this case is also less hence can easily be provided by the wind energy
sources. China requires a whole lot of wind powered water pumps.
Lighting far off places: There are many remote areas where it is not feasible to provide energy
through other resources hence this energy can be used in this regards. It will help in their
household activities. The regions like Tibet can be easily lighted with the help of it.
Sailing in the boat: Since there is electricity requirement in boats that are selling over the rivers
and sea. This wind energy can be used to power them. China has a huge amount of goods
transportation through the help of sea boats in which this energy can help (Energy4me, 2015).

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Final assessment and recommendation to the WIND KRAFT management team
It has been recommended to the WIND KRAFT management team to enhance the wind energy
project of the company in the wind energy market of China. The wind energy market of china is
significant in having number of skilled employees which would be the great opportunity for the
WIND KRAFT to get skilled work forces. It is recommended to the CEO of the company to do
not hire workforce from other places because the wind energy market in china is world’s largest
which shows that the people of china has better understanding about the concept of Wind energy
consumption and generation. Along with that the WIND KRAFT Company can expand their
business in easy way due to attractive and easy policy of China. There is no required for the
company to large investment in the project of China as it is the developing country and the cost
of products and things are quite lower in comparison of Germany. However, the political,
economy and legal factors are favour in the company but it is necessary for it to take appropriate
action in against of implementing strategies in the country. There should be proper training and
development program for them who are new for the country as it has been observed while
researching that due to cultural differences many companies are failed to expand its business in
the country of China (Briscoe, Tarique and Schuler, 2012). There are number of challenges that
can be the cause of issues for the company but it can be resolved if WIND KRAFT focuses on
the culture of China and develops strategies for the company by keeping consideration of the
cultural concept of China.

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References
Briscoe, D., Tarique, I. and Schuler, R., (2012). International human resource management:
Policies and practices for multinational enterprises. Routledge.
Changliang, X. and Zhanfeng, S., (2009). Wind energy in China: current scenario and future
perspectives. Renewable and Sustainable Energy Reviews, 13(8), pp.1966-1974.
China Inflation Rate, (2010). Available [online]
http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx Accessed on 1st June 2018.
Da, Z., Xiliang, Z., Jiankun, H. and Qimin, C., (2011)Offshore wind energy development in
China: Current status and future perspective. Renewable and Sustainable Energy Reviews, 15(9),
pp.4673-4684.
Energy4me, (2015) Wing Energy. Available [online]
http://energy4me.org/all-about-energy/what-is-energy/energy-sources/wind-energy/ Accessed on
1st June 2018.
Foreign Investment in China, (2018). Available [online]
http://www.uschina.org/info/forecast/2007/foreign-investment.html Accessed on 1st June 2018.
Glasse, J., (2010). Foreign Business in China Political Instability. Available [online]
http://www.faqs.org/abstracts/Business-international/ Accessed on 1st June 2018.
Han, J., Mol, A.P., Lu, Y. and Zhang, L., (2009). Onshore wind power development in China:
challenges behind a successful story. Energy Policy, 37(8), pp.2941-2951.

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Han, S., Kang, T., Salter, S. and Yoo, Y.K., (2010). A cross-country study on the effects of
national culture on earnings management. Journal of International Business Studies, 41(1),
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Hong, L. and Möller, B., (2011) Offshore wind energy potential in China: under technical,
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Jiang, L., Chi, Y., Qin, H., Pei, Z., Li, Q., Liu, M., Bai, J., Wang, W., Feng, S., Kong, W. and
Wang, Q., (2011) Wind energy in China. IEEE Power and Energy Magazine, 9(6), pp.36-46.
Jin, X., Zhang, Z., Shi, X. and Ju, W., (2014). A review on wind power industry and
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culture. Journal of operations management, 28(3), pp.223-239.
Moran, R.T., Abramson, N.R. and Moran, S.V., 2014. Managing cultural differences. Routledge.
Traber, T. and Kemfert, C., (2011) Gone with the wind?—Electricity market prices and
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obstacles of conflict between market and planning. Energy Policy, 48, pp.222-232.

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Zhao, Z.Y., Yan, H., Zuo, J., Tian, Y.X. and Zillante, G., (2013) A critical review of factors
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