Solazyme
is a US Based company that was founded to produce fuels using low-cost sugars
in response to the growing concern over the adverse effects of the use of
fossil fuels in powering industries and the transport systems (Solazyme, 2011).
It capitalizes on the use of biotechnological expertise that uses algae’s
(microalgae) ability to cause fermentation of sugars where such fermentation
period is reduced by use of advanced technology to a much shorter time.
Solazyme was established with the goal of being the market leader in production
of renewable fuels and bio-products (Solazyme, 2011). The potential limitations
of traditional fuels that propel Solazyme to invent better solutions include
constrained supply, price fluctuations and detrimental effects on the
environment.
Solazyme
has therefore focused its attention to produce organic fuels which is
considered much cleaner, and with a significantly low carbon output. The
success of these fuel innovations can be demonstrated by the fact that Solazyme
has won and is the current provider of fuels for the US Navy with prospects of
winning more contracts in future (Solazyme, 2011). Solazyme also produces
chemicals (petrochemicals) such as those used in production of detergents and
airplane de-icing fluids. Solazyme also has its focus on the food industry
where it aims to produce and distribute food ingredients derived from the use
of micro-algae in the fermentation processes in partnership with some of the
established food distributors such as Roquette Freres (Solazyme, 2011). Other
innovative products include skin health products which are derived from the
micro-algae and which have been proven to improve the skin health of the users.
These products are also distributed in partnership with some of the leading distributors
of skin health products such as Sephora International.
With
its extensive growth strategies, Solazyme intends to expand the scope of its
operations in order to achieve its mission of being a world leader in the
production and distribution of organic fuels. In accordance with this vision,
Solazyme intends to enter the UK market to produce and market its bio fuels in
this market. This paper shall focus on the entry modes and marketing plans that
Solazyme needs to adopt to be successful in this market.
The
UK is a stable democracy that has fully embraced the principles of capitalism
and has been known to offer minimal interference with the players in the market
economy. UK has also been a key player in the International efforts aimed at
taming the harmful effects of industrialization and wanton release of
greenhouse gases into the atmosphere (Earth Summit, 1992). It has therefore
been keen to support technologies that are aimed at providing cleaner sources
of energy for sustainable environmental management (Department of Energy and
Climate Change, 2010). This means that ample politica goodwill exists for
organizations like Solazyme that intend to produce clean fuels for the economy.
Being
a developed economy, the UK has a high demand for fuels which is mainly needed
for its industries and the general population whose energy demand is higher
than most consumers’ in the world (Department of Energy and Climate Change,
2010). This makes the shortages and price fluctuations very undesirable.
Solazyme would therefore stand to fare well in the economy is they can
innovatively produce products that are stably priced and ensure constant
supply.
The
UK population is very sensitive to their environment and is keen to embrace
ways to ensure sustainable environmental management. In addition to this, the
general campaign by environmentalists around the world together with the
efforts taken y the United Nations to ensure sustainable environmental
management has ensured that the general population is sensitized on the
importance of using clean energy in ensuring sustainable environmental
management (Earth Summit, 1992).
Like
the rest of the developed world, the UK enjoys high technological advancement
in most areas of development. This drives down the cost of some of the
technological materials that Solazyme is likely to need in the production of
fuels such as machines and materials such as sugar which can be produced
cheaply in bulk. Technological advancement in the UK is also means higher
productivity of staff hence manageable labor costs (Anon, 1979).
The
UK, like the rest of developed world is grappling with excessive pollution of
the environment in many fronts. Key among this is the atmospheric pollution
occasioned by the release of greenhouse gases and other harmful gases that not
only threaten to adversely affect the climatic conditions around the world, but
also cause various health risks resulting in substantial budgetary expenditures
in the health of the population. It is these harmful effects to the environment
that is expected to fuel the popularity of bio-fuels which are clean, produce
little carbon dioxide and contain no harmful components such as Lead or Sulphur
as contained in the fossil fuels.
The
UK has elaborate laws that prevent anticompetitive behavior by current market
players hence Solazyme should be able to penetrate the market with a brilliant
marketing plan. The legal frameworks in the UK regarding labor and work safety
as not significantly different from those in the US; hence Solazyme is expected
to fit in the new market without having to grossly adjust its practices at
home.
The
target market for Solazyme shall be the Industrial Sector, specifically the
transport sector. This choice of target is informed by the fact that the
consumers in this category are the highest consumers of energy in the UK market
and that they are the ones that are most likely to be swayed by environmental
considerations when making their purchasing decisions. Statistics on the use of
fossil fuels in the UK at 2009 indicate that the transport sector accounted for
77% usage while industries came at a distant second with a 14% usage
(Department of Energy and Climate Change, 2010). Collectively, these two
segments make up 91% of fossil fuel consumers in the market. The decision to
focus on the fossil fuel consumers has been informed by the fact that the
innovation of bio-fuel was done with the aim of providing a clean alternative
to the fossil fuels which emit large quantities of green house gases and other
harmful gases which irreparably degrade the environment. The choice is also
informed by the fact that, unlike other sections of the society, these consumers
tend to use fuels in their original forms in either their automobiles in the
case of the transport sector, on use of these fuels to produce electricity in
the case of industries.
Desire
for cleaner energy among the target customers has been mounting and Solazyme’s
solution is timely. Besides, most corporate organizations have elaborate
policies on corporate social responsibility that binds them to pursue
production processes and technologies that are more likely to cause the
preservation of the environment. This would mean that it is this section of the
population that is likely to be on the lookout for new fuels that can be of
good to both the industries and the environment. Beside, the promise of lower
costs allows them to improve their bottom line. Similarly, the rising costs of
fuel have been causing significant strain to motorists who are forced to spend
more to maintain the level of convenience they are accustomed to by using their
private automobiles. The provision of more efficient and low cost fuel is
likely to influence their purchasing decision. Moreover, motorists will always
feel gratified to note that their choice of fuel does not impact negatively on
the environment or on people’s health. The reasoning behind the decision to
target the corporations operating in the transport sector are similar to the
rationale for targeting the industries as both are businesses with the aim to
maintain healthy bottom-lines while adhering to their CSR policies (Carlsson,
2003).
The
best entry mode into the UK energy sector would be through a joint-venture with
a UK based corporation that is either already pursuing the production of
renewable energy or a strategic partner that would enable them meet their
goals. The importance of going into a joint venture is that it will enable
Solazyme to share costs and risks with the partner and consequently need fewer
resources for the exercise. Moreover, the production and distribution of
bio-fuels require that they mount an operation that encompasses a number of
players at the same time including the suppliers of raw material, government
agencies and the prospective consumers. Without the services of an already
established partner, these networks would prove very costly and would likely
impact on their pricing and market performance.
The
use of a joint venture also puts them in the way of government incentives that
the government may come up with to encourage innovation and production of
bio-fuels to meet its global responsibility to ensure carbon emissions are
scaled down significantly. Such incentives can only be extended to local
corporations hence Solazyme may lose out on it if they were to choose an entry
method that does not apportion significant ownership of the business to UK
investors (Carlsson, 2003). If that were to happen, the organizations
benefitting from various incentives would be able to charge lower for their
products hence make it difficult for Solazyme to penetrate the market. Beside,
engaging a strategic partner in a joint venture enables Solazyme to optimize on
the partner’s existing market base, distribution channels and marketing
expertise. Such strategic advantages are non existent if an organization
settles for acquisitions or establishment of wholly owned subsidiaries in the
UK (Buzell, 1968). The most appropriate partner for Solazyme to work with would
therefore be one with an elaborate distribution network and one with a
favorable brand image in the market. Joint ventures also come as a better
choice than direct exportation. This is because the existence of a subsidiary
in the UK enables them to create relationships with their clients hence
generating some measure of brand loyalty. Other possible options for entry
would be contracting or franchising. However, these methods, unlike the Joint
venture options do not provide the organization with an ample opportunity to
establish themselves in the market (Ryans, et al, 2003). Joint venture remains
the best option that ensures that the entry is cost effective, effective and
with credible prospects of growing market share in the specific economy (Aaker
and Joachimsthaler, 1999).
The
success of any organization in the market largely depends on the design and
implementation of its marketing strategy. Having carried out its product design
and produced the bio-fuel that the market clearly needs, Solazyme should ensure
that an elaborate marketing mix is put in place to stimulate demand and realize
the sale of the products.
The
principle of demand and supply which emphasizes the influence of price on
demand levels is largely applicable in the UK. Since Solazyme aims at using low
cost sugars as its raw materials, they should be keen to pass this cost
advantage to the consumer by charging prices lower than the traditional fuels. The
lower operating costs are also sufficient to ensure the low prices do not
adversely affect their financial performance. This will offer the consumers the
incentive to switch to the new fuels.
Solazyme
shall be keen to ensure proper distribution of the products in places of
convenience to their target customers. Proper distribution ensures that the
customers can easily access the products at any time hence increasing the
chances for good performance in the market (Dawar and Parker, 1994). The common
model of gas stations shall be adopted to serve the customers in the transport
sector with other elaborate designs made to serve the industries.
The
specification of the products is also essential. Research should be carried out
to ensure the product that Solazyme is offering is satisfying the customers
accordingly. They must ensure they deliver on the promise to provide clean
energy and make quick adjustments where this is not satisfactorily met. It is
the reliability of the product and the level of satisfaction with the product’s
design that determines just how well the product fares in the market
(Subramaniam, et al, 2005). On top of producing bio-fuel as the actual product,
Solazyme shall ensure that the core product which reflects the benefits of
efficiency and environmental preservation is reliably delivered to the
customers.
Solazyme
shall adapt an effective promotional mix that will ensure the products perform
well in the market. Advertising shall be done through the mass media using
television and print media to reach the target market. Care shall be taken to
ensure the effectiveness of advertising programs used in order to realize value
for money. Solazyme shall also take place in various exhibitions to show case
the efficiency and benefits of their products to attract customers keen on
embracing clean affordable energy innovations. Extensive public relations
exercises shall also be mounted to portray the organization as one that cares
for the welfare of the customers by encouraging proliferation of
environment-friendly fuels. The goodwill generated from this exercise is
expected to further help generate sales for Solazyme. Personal selling shall
also be embrace where sales agencies will mainly focus on winning fuel supply
contracts with corporations and industries.
To
enhance physical evidence, Solazyme shall ensure the business premises are
designed and furnished to reflect on the brand image they have adopted. The
staff shall also be dressed in uniforms to help customers identify with the
company and its products.
Solazyme
shall make use of their sales and marketing staff as well as those involved in
public relations in order to meet the goals of the organization. Staff members
shall also be actively involved in providing quality service that will add to
customer satisfaction. Solazyme shall categorize these responsibilities and
ensure the staff members are well trained to meet their respective
responsibilities perfectly. There shall also be reward schemes to ensure good
performance is adequately rewarded.
The
delivery process shall be made simple enough to lessen chances of
dissatisfaction. A variety of outlets shall be established to ensure different
client preferences are met. There shall be both self service outlets which will
be modified to enable clients who prefer to serve themselves at any time.
Premium outlets shall also be established where customers will receive special
treatment in addition to the provision of fuel at a premium. This will be
useful in capturing the higher market segments.
The
insight into the prevailing macroeconomic factors in the target market is
crucial in ensuring the successful performance of any brand. Entry modes into
that market should also be carefully evaluated in order to weigh the options to
decide on the entry mode that best suits the objectives of the organization.
Having carefully weighed the options, Solazyme should ensure they use joint
ventures to enter the UK market. This would not only ease their entry, but it
would also help them establish themselves in the market with a solid market
share and therefore be able to advance their vision as described above.
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