Vestas: Moving into the South African emerging market

Jacob Chipe Brolund

Student thesis: Master thesis

Abstract

Multinational companies are increasingly focusing on emerging economies in the developing world for new growth opportunities as developed markets become more saturated and competitive. The thesis evaluates the most appropriate strategy and entry mode for Vestas in South Africa with a focus on the formal institutional requirements. The paper focuses on the energy institutions in South Africa along with the degree of local resources required to manufacture wind turbines in South Africa at this present time. Considering these factors, the most suitable strategy and entry mode must be used. The wind energy industry in South Africa is about to take off. The global wind players are in South Africa formulating contracts with local independent power producers to gain approval by the Department of Energy. Approximately 1850MW is to be produced via wind energy. The wind energy industry for large-scale wind production is very underdeveloped with only one large-scale wind tower and blade manufacturer. Global wind energy suppliers will initially have to leverage their domestic market resources and capabilities in order to operate in South Africa. According to affirmative action legislation, known as Broad Based Black Economic Empowerment at least 25% of a company’s employees should be black South Africans. The main purpose of the legislation is to increase the empowerment of black South Africans in the economy. Vestas needs to maximise its local content value i.e. have the largest local portion of the total construction cost in South Africa. A joint venture mode of entry coupled with a network-based strategy should be implemented in order to access the necessary local resources. A network based strategy would enable Vestas to reach the goal of a fully green field operation as they would become more familiar with the relevant industries that have the capabilities but currently lack the know-how to manufacture wind turbines.

EducationsMSc in International Marketing and Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages100