Solar Energy in the Cook Islands, The Pacific and Beyond
Created | Updated Jun 8, 2009
1.1: Describing the Product or Service:
The Earth receives more energy from the sun in just one hour than the whole world combined uses in one year. - Solar Aid
Solar energy technology is a rapidly developing field, and is employed in many countries around the world as a means of energy. The product presented in this business plan is based around micro-solar infrastructure being used to generate electricity for small Pacific Island communities, in this case, the Cook Islands.
The idea is to setup a company that specialises in the development of these products for Cook Island society from within New Zealand, and to allow the eventual establishment of micro-enterprise within communities. Hence, one of the major aims is to produce these solar products for the future development and positive associative impacts on the communities of the Cook Islands.
The main difference in micro-generation solar infrastructure which will be used in this case is the scale and size of operation. In this case, the product is used to generate energy for communities of a few hundred people. As such, the scope of the actual physical product used to generate the electricity (including batteries and equipment) is up to the size of a tennis court. This is made up of 15 or so 2m x 3m sized solar panel arrays. These are then angled in an appropriate direction on a mount to maximise sun exposure throughout the day.
Source: UN.org
The benefits to the communities are obvious. Energy can be used to power anything, from lighting, refrigeration equipment and water pumps to cell phones and radios. The product life cycle is up to 25 years, so the return of investment and benefits for these communities are huge. (Hislop, 2002).
1.2: Business Opportunity Analysis:
The small islands states of the Pacific are faced with enormous development problems Their small size, lack of resources and isolation mean that it is difficult to provide a high standard of living that their citizens increasingly demand (Bailey, 1993). Most communities on the Cook Islands are only a few hundred people at the very most. Their energy demands at the moment are met by diesel or petrol generators that are noisy, polluting, unreliable and costly to run, with no guarantees of electricity output when it is required. (Cook Islands Government, 2008). As such, communities are demanding more and more energy to run equipment, such as refrigerators that require a permanent current supply to store commodities and resources such as food and vaccines.
This is where the idea of solar steps in. The Cook Islands are perfectly positioned near the equator, with high sunshine hours to ensure high operational energy yields from solar panels. Solar energy is non-polluting, requires limited maintenance, and can provide a reliable source of power for critical devices such as radios, refrigerators, lighting beacons and telecommunications.
1.3: The Action Plan:
Action 1: The manufacture and distribution of solar based energy infrastructure for the Cook Islands based on community demand to provide energy for several (10+) communities.
Action 2: Provide a cost effect method of producing electricity over existing measures such as diesel generators and alternators, that is reliable and with a long lifespan leading to a high return of investment for communities.
Action 3: Encourage the development of microenterprise amongst the Cook Island communities to help establish continual economic growth and prosperity in the area.
1.4: Continuous Improvement:
Some limitations in this report are that the scope mealy focuses on the Cook Islands. It would be appropriate to consider options in other Pacific nations in the future.
I have an extensive engineering knowledge of solar infrastructure, so this will come in mutual benefit to this particular assignment.
2.1: Identify Potential Competitors:
In terms of solar energy infrastructure being used to help developing communities in the Cook Islands meet their energy needs (or even other small Pacific Islands such as Kiribati), there are no existing potential competitors, as there is currently no infrastructure or development organisations that specialise in this field within this particular region. Solar energy is employed to power very small items such as weather stations (Cassedy, 2000), but not on a scale like the one presented in this proposal that will be used to help power whole communities.
As such, this is a first mover based business incentive, with intended backing of foreign development agencies such as the United Nations and the New Zealand Government, as well as local and region governing bodies within the Cook Islands. This provides some form of protection from outside competition.
2.2: Competitive Advantage:
Manufacturing and the research and development of solar panels already take place within New Zealand for other domestic applications such as home heating and small scale energy. (Flavin et al 2008). The main idea is to optimise price, and to minimise costs not only for the business, but for the communities on the Cook Islands.
This strategy is also used by another business - Solar Aid, based in the United Kingdom, who provides panels and solar equipment to underdeveloped African communities. By searching for the best prices on products on the international market, as well as provide locally produced products, they can pass the cost benefits on to the communities and allow them to also reap the benefits.
2.3: International Strategies:
Solar Aid in the United Kingdom, a similar incentive to this one uses a strategy that is specifically tailored for local responsiveness in the African market. This means that the product is specially adapted to meet local market conditions, some of which include cost and availability of materials. However, the innovation of this product means that similar incentives of this scale have not been tested in this particular marketplace (the Cook Islands/ other Pacific nations) yet.
2.4: Absolute and/or Comparative Advantages:
This business plan will have an absolute advantage in the Cook Islands, as it has never been done before in this particular market.
On a manufacturing front, the raw materials such as aluminium and steel are readily and cheaply available in the New Zealand market. This means that the product can be produced efficiently.
In terms of the Solar Aid example, they too have an absolute advantage in Africa. There is currently no other company setting up similar to them. This business at the moment is seeing record growth, and it is envisaged that a similar scenario will be realised in this project.
2.5: The Action Plan:
Action 1: Follow a similar innovative approach to that of Solar Aid, providing something completely different and unthought-of to a new market
Action 2: Establish the product/company as an innovator in its field. Allow the influence of foreign organisations and development funds to shape development and provide financial incentives.
Action 3: Continually strive to push the boundaries of development, innovate and allow the product to work in collaboration with the community, allowing them to reap the benefits.
2.6: Continuous Improvement:
In this scenario, because something of this scale has never been really looked at, it is difficult to make assumptions. The weakness here is that it is simply so difficult to predict what the likely outcome in this specific market will be.
2.7: Supplemental Activity:
Solar Aid is a UK based organisation that provides solar based infrastructure and equipment to impoverished African communities. Their aim is to basically allow for the setup of micro based enterprises within the communities to allow for economic development and vitality through trade and the setup of basic enterprise. So far, Solar Aid is having a huge success in Africa with a high up-take rate. In email correspondence with them, they stated that they were extremely busy working on projects and development which just goes to show this fact.
3.1: Country Information (Hunt, Keller 2003):
• Official Name: Cook Islands.
• Land Area: 240 sq km.
• Capital: Avarua, Rarotonga.
• Population: 19, 569 (2006 census).
• Demographics: Population is spread across ten islands, most living in small villages.
• Major Centres: Most towns and villages have a population of fewer than 4000 inhabitants.
• Currency/Exchange Rate: New Zealand Dollar. $1NZD ≈ $0.56USD.
Map of the Cook Islands: Source: Pacific Travel Guides.
Rarotonga International Airport is situated outside of Avarua, the main centre of the Cook Islands. Regular flights operate by Air New Zealand and Air Tahiti Nui to Auckland, Christchurch, Los Angeles, Fiji and Tahiti.
Main seaport located in Avatiu. This handles shipping to other island groups both internationally and domestically. The nature of the islands means that they are all easily accessible by boat or yacht (Hunt, Keller, 2003).
Roading infrastructure on the islands is primitive, with only the main islands such as Rarotonga having some sealed roads. As such, the most popular way of travelling on the main islands is by moped.
3.2: Geographical Influences:
The nature of the Cook Islands is that of small, volcanic landmasses and coral atolls. In this sense, most of the land is low lying, with the highest points on some islands only a few meters above sea level (Cook Islands Government, 2008). The effect this will have on the business opportunity is minimal, as the majority of island communities that are being targeted are on flat, low lying islands that are easily accessible by boat.
The region being near the equator in the tropics enjoys a year round tropical climate, with warm temperatures and high sunshine hours making the location perfect for solar energy. However, the Cook Islands are located in a cyclone zone, which means that tropical storms are a usual occurrence throughout the summer months. This means that in terms of setting up the solar infrastructure, the season will need to be chosen that is at lowest risk – usually winter. It also means that the product will have to be durable and able to withstand the forces imposed by cyclones.
3.3: Major Products and Industries:
The major natural resources of the Cook Islands include fishing and aquacultural industries (CIA, 2009). These are two of the islands main primary industries in terms of products. However, they are only small ventures with limited product processing capabilities, and as such, restricted ability to cope with highly perishable products.
The major industry in the Cook Islands is however tourism, providing a significant contribution to the economy (Cook Islands Government, 2008). Hotels, resorts, restaurants and cultural attractions are all popular with foreign tourists, many of whom are from New Zealand, Australia and the United States.
3.4: Government and Politics:
The Cook Islands are in free association with the New Zealand constitutional system, and as such are a democratic state. The Islands are self governing with their own parliamentary system in place. (Cook Island Government, 2008). As a result of New Zealand’s close relationship with the island, we have several programmes in place to encourage sustainable economic development as well as strengthen social services and infrastructure.
3.5: Current Economic Conditions:
Current economic conditions in the islands are reasonably stable admist the global recession, which is in part due to the close ties of the New Zealand government and the adoption of the New Zealand dollar as the standard form of currency. Consequently, the Cook Islands have a high GDP per capita compared to many of the other Pacific Island nations (Hunt, Keller 2003).
Foreign investment in the Cook Islands is mainly from large international hotel and resort chains that are attracted to the area because of its location in the tropics. As a result, investment is made to the economy from foreign tourists and tourism based industries.
3.6: Social Facts and Conditions
The majority of Cook Island society lives in tight-knit communities. As such, society is very stable with low crime rates, and a high degree of morality and cooperation rates between individuals. Religious values are highly respected, with church attended every Sunday, with this particular day being a day of rest. Society is generally very relaxed, enjoying a high level of freedom.
One of the major problems however has been the net migration losses of Cook Islanders to New Zealand and Australia, especially in the mid 1990’s. This is in part due to the better level of employment opportunity that is enjoyed in these countries, as well as educational aspects. As such, the local population has a high proportion of middle aged individuals. (Cook Islands Government, 2008).
As a result, projects such as solar energy development are encouraged by local government. This is because they provide a source of income and employment, as well as allowing the local economy to enter the “digital age” and play a part in the information age.
3.7: Technology and Infrastructure:
Infrastructure on the main island in the Cook Islands, such as Rarotonga is reasonably well developed with good roads, telecommunications, and internet and cellphone coverage. (Hunt, Keller, 2003). The main international airport has a sealed runway and is capable of serving large aircraft, and has regular international services to Australia, New Zealand, and Fiji, Tahiti and the United States as well as local domestic services to other islands.
The establishment of company based communications on these main islands is easy, with services and infrastructure maintenance being handled by Telecom New Zealand.
On the outer islands however, infrastructure is generally lacking, with unsealed roads, poor communications and telecommunications facilities and limited amounts of energy, with the majority being generated by small, unreliable and expensive to operate diesel and petrol generators.
3.8: Legal:
The Cook Islands government adopts and uses the New Zealand constitutional legal system. Therefore, commercial contracts are honoured, as well as intellectual copyright and patent/property protection laws as they are basically governed by the New Zealand judicial system (Fiji Trade and Investment Board, 1998). Consequently, the legal system is also effective, with disputes being resolved in a timely manner. There is no organised crime in the country. The legal system is going to have limited impact.
3.9: Environmental:
Environmental conditions on the Cook Islands are some of the most un-polluted and tranquil on earth. (Hunt, Keller, 2003). The islands are unspoilt by urbanisation and development that are experienced in western countries. Levels of pollution are very low, with the main forms coming from such areas as diesel powered generators and automobiles. The Cook Islands is governed by New Zealand’s Kyoto agreement signatory. This presents an attractive opportunity for this project, with the ability to cash in on carbon credits and international grants for environmentally friendly energy projects such as this (Flavin, 2008).
The Cook Islands has a very good record on environmental protection. However, it and many other Pacific nations are threatened by the acts of other nations. Greenhouse gas emissions from industrialised countries such as the United States are believed to be behind the melting of the polar ice caps. (OECD, 1997). This is raising sea levels, which threatens the very nature of the islands.
3.10: Formal Trade Barriers
Because of the aid based package and development guise of this business project, there are no formal trade barriers that are going to be of concern, other than those domestically imposed. Infrastructure projects with the aim of increasing the vitality of society are encouraged.
3.11: International Business Incentives:
Foreign investment is dealt with by the Cook Islands government (www.cook-islands.gov.ck). Foreign investment, especially of this nature is encouraged by the Cook Islands government with such aid as tax incentives and funding for aid based projects. This is the same for New Zealand, with our aid based contribution package. The UN also provides extensive funding for development projects such as this. This means that funding will be available for this business plan from a multitude of sources, both local and international, and because it is an aid based project with the help of multinational organisations, risk is minimised.
3.12: The Action Plan:
Action 1: Because of the Cook Islands close association with New Zealand and that manufacturing is going to be done offshore there is really not much that is required to be done in terms of the product and business environment. Basic understanding of the cultural and geographical environment at hand I believe is already present everyday on a New Zealand business basis.
3.13: Continuous Improvement:
This business plan only targeted one specific country. In these terms, it would be best in a future business plan to widen the scope somewhat to look at the broader context of the Pacific Islands.
4.1: Business Culture:
Business culture in the Cook Islands is of a casual New Zealand and is generally very similar to that of New Zealand. A typical working week is 8:30am to 4:30pm. Monday - Friday. Unlike New Zealand however, the weekends are very relaxed and business is not usually conducted, especially on Sunday which is a religious day of rest.
The language of business in the Cook Islands is English; however islanders may talk to each other in Cook Island Maori to clarify understanding when discussing projects and proposals. This should not be taken as offence by foreign parties.
When greeting a business partner, it is important to understand local customs and traditions. Usually, before at the beginning and end of a meeting a prayer is given, and it is important to respect this.
Because the Cook Islanders have a great respect deal of affiliation with New Zealanders, and because our cultures are similar in many ways, entertaining is usually very similar to that of New Zealand. In terms of giving gifts, Cook Islanders generally prefer gifts such as food (tropical fruits).
4.2: Cultural Analysis:
Cook Islands culture is very similar to what we experience in New Zealand, but on a much smaller scale. Beliefs and traditions are similar to that of the New Zealand Maori.
As such, in terms of any impacts on the business opportunity to sell solar based infrastructure, there is unlikely to be any major problems from a cultural perspective.
Cook Island society is not capitalist. Therefore, the location is not suitable for business that requires a quick return of profit. Because this business plan is centred on a long term aid based project with local and international funding from major organisations, this is not going to be a problem.
4.3: Social Institutions:
Social institutions such as family life do play a significant role in conducting business in the Cook Islands. Because of the nation’s small size and low population, communities and villages tend to be very close meaning that people communicate and conduct themselves with wider society in mind. (Cook Islands Government).
From a business perspective, family play an important role. Land cannot be bought, but can only be rented (with exceptional circumstances however). Knowledge of a particular trade is passed down from generation to generation meaning that traditional values plays and acknowledgement of one’s past plays an important role in a business environment.
4.4: Business Ethics:
The Cook Islands is a very ethical nation is terms of the way it conducts business. This is in part due to its close relations to New Zealand, which is known to be a very ethical business and organisational environment. There are currently no human rights issues such as sweatshops or discrimination that affects the labour and business market in the Cook Islands. Therefore, there is not going to be any significant ethical dilemmas faced by this business opportunity.
4.5: Informal Trade Barriers:
The Cook Islands at the moment is very encouraging of foreign based infrastructure projects such as that presented in this business plan. Island society also takes an optimistic viewpoint on any project that is likely to result in an increase in their overall livelihood. As such, social and administrative barriers are limited in the context of this business plan.
One of the main issues to this project however is because Cook Islanders do not know a great deal about the technology involved in maintaining this sort of infrastructural, training and educational programmes will need to be introduced. This will help them understand what needs to be done to ensure the reliable operation of the equipment.
4.6: The Action Plan:
Action 1: Similarly to section 3, the business environment is very similar to New Zealand.
Action 2: Realise however that cultural and language barriers are slightly less formal than New Zealand, and that this will need to be taken into account.
4.7: Continuous Improvement:
The scope of this assignment was very narrow, and as such could not look into wider matters with regard to the overall business culture.
4.8: Supplemental Activity:
As stated above, the culture of the Cook Islands is diverse, however similar to that we experience in New Zealand.
5.1: Strategic Planning:
The best option in terms of international strategy for this business plan is localisation strategy. This is when the products, in this case solar infrastructure is adapted to suit national conditions; in this case that of the Cook Islands. This will allow for a high level of local responsiveness, to meet the needs of society.
The major goal is to adapt these solar technologies for high energy and electricity yields in the realm of 80+ percentage cost to energy ratio. Consequently, the target market anticipated for this product is the local and business population of the Cook Islands. The excepted uptake of this infrastructure is aiming for a 70+ percentage usage rate among the population. Customer benefits are obvious; with the aim of maximising local responsiveness, the product is tailored to meet specific needs. The effects are lasting, such as meeting long term demands for energy and providing much needed electricity for resources such as lighting and refrigeration equipment.
Because this business proposal is unique, it aims for a 100% (total) share of the market. A return of investment is likely to be made within 5-7 years of initial uptake. Due to the aid based nature of the project, returns will not be instant, however, the benefits and return of investment for local communities are huge, not to mention the easy adaptability of the product for other markets.
5.2: Entry Modes:
Entry Mode Benefits Costs/Risks
Exporting No manufacturing costs at the destination, help reduce costs
Cook Islands has limited infrastructure for developing and producing solar technology – would otherwise be expensive to set up.
The ability to realize and take advantage of experience curve in terms of allocating production to the most efficient location as well as location economies. Risk of damaging the inherently fragile nature of solar panels that are made of glass.
Cost of transport to location could be expensive; however because of the location of the Cook Islands, this is a necessary cost.
Joint Venture The ability to share costs with a local partner, i.e. a local business or organisation.
The ability to bypass certain regulations, such as land ownership tenures in the Cook Islands. Loss of control over specialised solar technology.
Potential conflicts of interest.
Turnkey The ability to tap into specific know-how, i.e. specialising in production of micro solar infrastructure.
Lower risks of political and economic instability.
Easier setup times, as the product is already ready to go.
Return on investment for a local community is much faster, product ready to use. Valid only for a large scale project such as this.
Possibility may arise in the future that a competitor enters a similar market and undercuts (unlikely however).
The best option for this particular project is to sell a turn-key base d package that is customised for the local environment. The solar based products are exported from the manufacturing base, and then set up to begin producing energy immediately. This helps maximise local responsiveness and allows the communities to experience a quick return of investment.
5.3: Strategic Alliances:
This product has the intention of setting up strategic alliances with organisations such as the United Nations, and local government development agencies, especially from a New Zealand perspective as part of our yearly development fund for support. This helps provide funding for initial setup.
Another area of alliances will be with manufacturers of electronic equipment (i.e. distributors and wholesalers). They will be able to provide the required manufacturing base of products for development into a finished product.
5.4: The Action Plan:
Action 1: Setup strategic alliances with New Zealand and foreign aid base agencies that specialise in funding for the development of energy based infrastructure.
Action 2: Tap into specific market potential within New Zealand energy industry that specialises in the development of solar based products, and potentially exploit/employ and use some of the developments.
Action 3:Collaborate with Cook Islands government agencies on the ways to best market and efficiently get the product to market, targeting communities in need.
5.5: Continuous Improvement:
Sections 5 and section 6 have similar evaluative properties.
6.1: Strategic Planning:
To establish solar based infrastructure to be used for the benefit of the community basis as a whole, with a 20% uptake at the end of year 1 and a 70+ percent uptake and usage of the technology within 5 to 7 years on the Cook Island. To eventually expand the development of this product market into other Pacific Island nations.
6.2: Strategic Objectives:
• To develop and introduce a high quality solar energy infrastructure to Cook Island communities that provides high yields and low maintenance.
• Minimise costs with funding from national and overseas interests such as the United Nations.
• To maximise coverage and government uptake of solar energy projects in the Cook Islands to achieve a 70+ percent uptake within 5-7 years.
• To pass on the benefit solar based energy projects have to help communities with their growing demands for electricity.
• To encourage the development of micro enterprise amongst Cook Island communities, and to instantiate this in their best interests.
6.3: Centralisation:
The business will largely follow a centralised structure, due to the specialised type of equipment being used. The equipment being produced largely remains the same; it is just the size and scope of the infrastructure product that varies from community to community depending on the requirement
6.4: Organisational Structure:
Due to the specialised and direct approach on a specific market it is envisaged that this business will adopt a worldwide area structure, in line with the specific targeting of individual regions. The main advantages of this structure are that it facilitates local responsiveness, and the fact that there is low diversification of the product required.
Basic Worldwide Area Structure in Context – (Hill, 2007).
6.5: Integrating and Control Systems:
Using a worldwide area structure means that local responsiveness of the product is of utmost importance. This will mean that the company will need to liaise closely with local government and community groups in the Cook Islands throughout the product development lifecycle to ensure that it meets requirements for specific regions.
6.6: Location of Value Chain:
Due to the service nature of this product, the manufacturing of the product is likely to take place offshore from the Cook Islands in New Zealand. The value chain can be represented below:
As can be seen, the location of the majority of the value chain in the product (manufacturing, outside funding) is located offshore. The end product however is located in the Cook Islands.
6.7: The Action Plan:
Action 1: Develop an effective market entry strategy to take best advantage of the first mover strategic advantage that this project represents.
Action 2: Develop and respond to the needs of the local community environment. Ensure that the product is shaped around this and these aims.
Action 3: Communicate and effectively setup the infrastructure and allow for the eventual self management of the systems by communities.
6.8: Continuous Improvement:
The development of a value chain is important and will need to be considered throughout the organisation to optimise and allow for future development and cost reductions.
7.1: Start-Up Costs:
Below is a table of estimated start-up costs for this international business enterprise within New Zealand and overseas. Estimated from: Statistics New Zealand.
Manufacturing Costs:
Raw Materials:
Labour:
Research and Development:
Legal and Licensing:
Building (Rent):
Insurance:
Interest:
Technological/Communications
$50,000
$ 300,000
$20,000
$10,000
$20,000
$30,000
$15,000
$10,000
Distribution Costs:
Transportation:
Customs:
Material:
Legal:
Compliance:
$50,000
$2000
$10,000
$5000
$5000
Staff Costs:
Remuneration/Salaries/Wages:
Insurance/ACC:
Legal:
$300,000
$20,000
$5000
Business Costs:
Materials (office supplies)
Business Related Printing:
$5000
$2000
Advertising Costs:
Consultants
Printing
Legal
Research
Distribution
$15,000
$10,000
$5000
$5000
$5000
Discrepancy Cost: $25,000
TOTALS: $924,000
5 Year Return on Investment:
Selling 100 packages at $20,000 each* est. (subsidised by government and foreign aid).
Total = $2 million.
*All associated costs included and deducted to get this final figure.
7.2: Economic Environment:
The economic environment of the Cook Islands due to its close association to New Zealand is very similar. (Cook Island Government). However, the Cook Islands do have a high unemployment rate with most young people immigrating to New Zealand. This is due to the low levels of educational facilities on the Islands, lack of jobs and low levels of personal income.
Interest rate levels are the same as New Zealand at the moment, as with inflation. (RBNZ). There is a big potential with this project to help increase boost the local economy of the Cook Islands and help create much needed jobs to increase personal income levels. Interest rates are reasonably low, so the ability to gain finance for this project from banks should be straightforward.
7.3: Financing Sources:
The company structure for this organisation is likely to be that of a limited liability company. This means that there will be investors who buy shares. However, it is likely that the shareholders themselves will be from within the government or foreign aid agencies. It is an aid based organisation, so this will likely be a suitable choice.
Another source of finance is that of the Cook Island Government, New Zealand Government, and international aid and development organisations. This will allow for direct investment into the product, and as such a source of finance. This is a key stakeholder in financing the company and its development.
The use of loans, in particular, government loans will likely be used in the short term to help start the company up and it is envisaged these will not be used in the long term.
7.4: Economic and Financial Risks:
This is an innovative project that does have an aspect of risk that needs to be dealt with. These include the fact that a totally new infrastructure is being introduced into a country, and there is an element of uncertainty surrounding this. For example, uptake and cohesion rates may be much slower than expected. Another risk is that associated with the world recession in that markets are volatile and it is not a time that people want to be spending.
7.5: Social, Cultural and Ethical Risks:
There are very few demographic and ethical risks associated with this venture aside from normal operational risks.
One risk however could be local disagreement of foreigners establishing a business venture. Individuals on the Cook Island need to realise that this venture is aid based, and is for their ultimate benefit and that of their country.
7.6: Political and Legal Risks:
There are no/limited political and legal risks aside from associated company risks within the Cook Islands and New Zealand. The fact that both countries have a very close relationship helps to further exemplify this point.
7.7: Risk Management Techniques:
One of the key ways to reduce risk in this organisation is to spread the sources of potential revenue across several different areas (such as government and international aid revenue sources). That way, the organisation is not “putting all its eggs in one basket” meaning that if one source of revenue fails, there are more to fall back on.
Another way is to make strategic alliances with other producers, for example manufactures of complementary equipment such as electrical products. This also helps spread risk.
Finally, the employment of local managers of the organisation within the Cook Islands helps increase the level of organisational stability meaning there is less risk involved from potential grievances such as communications breakdown, employment disputes, and legal issues
7.8: The Action Plan:
Action 1: Realise that starting a new business is both risky and expensive.
Action 2: Find secure and stable sources of financing such as international aid organisations and government based funding incentives to help reduce liability to loans, and as such decrease risk.
Action 3: Realise that it is a new, unchartered market in which case there is an element of risk involved.
Action 4: Develop a comprehensive risk/benefit and mitigation plan within the organisation identifying potential sources of risk and their implications.
7.9: Continuous Improvement:
This was a rather difficult section. These are uncertain times in the recession, so it is difficult to predict what start-up costs are likely to be as they are constantly changing. This aspect has also increased the amount of applicable risk when starting a new organisation.
It would be interesting to see what this project would be like in a boom time in the economy, as I believe it could be very different.
7.10: Supplemental Activity:
Please see section 7.10, Exchange Rates Exercise located on the enclosed CD.
8.1: Staffing:
The actual development and production process of solar based equipment is a specialised job requiring training and relatively high tech infrastructure in an economy such as New Zealand with manufacturing experience. Company personal and the end user of the product based within the Cook Islands are anticipated to be taking a low tech approach, as the product is pre-built and only requires maintenance Below is a diagram representing different staffing approaches.
Staffing Approach Details Relating to this Company
Ethnocentric: This approach would involve a large proportion of the company’s workforce to be indigenous to the Cook Islands. Although some of the workforce will be located within the Cook Islands this approach is not ideal because this company has a high tech manufacturing base offshore, requiring educated personal that the Cook Islands do not have, additionally, taking this approach is likely to be expensive and complex.
Polycentric: Taking this approach would mean that key areas of the company are located within the Cook Islands (subsidiaries etc) and the main headquarters, parent company/manufacturing base located within New Zealand. This would be less expensive, and allow for the use of high tech manufacturing techniques within New Zealand, as well as permitting the ability of local distribution, maintenance and product setup channels to be situated on the Cook Islands, allowing for a degree of local responsiveness of the product to the local demographic which is important, because it would allow for the product to be tailored to local needs.
Geocentric: This type of approach would take employees most suited to the job no matter where they are located. Because the nature of this project is aid- based from within New Zealand, and because it is targeting a specific country with a low tech manufacturing base, this plan is unlikely to be effective, and would not allow for a degree of local responsiveness with local employees, something that is very important.
Based on information from: Class Lecture Notes and Yorks. L.
Based on the above, it is expected that this organisation will take a polycentric approach to its human resource management.
Key job positions are likely to be located within New Zealand, as our country has a strong manufacturing and educational basis for which to develop the product. However, the organisation also needs a strong human resource approach to the Cook Islands, in which the product will be sold. Company personal located within the Cook Islands are likely to be a mix of indigenous and foreign personal.
8.2: Training and Organisation:
Ongoing training and development is critical to an organisation of this nature that has a wide degree of cultural diversity (Shaun, T.). It is important that in a high tech organisation such as this that training on modern manufacturing and product development occurs so that the organisation remains at the forefront. Some of these are:
Cultural Training: To establish Cook Islands culture to employees who are unaware of this.
Interpersonal/Communication: Ensuring that the organisation communicates effectively from different levels within the organisation.
Technological: To ensure that the organisation remains at the forefront of innovation by utilising new engineering and product development skills and techniques.
8.3: Performance Appraisal:
In a high tech organisation like this, it is important to balance personal needs. (Davis. K.). Therefore, all staff no matter what level will be given comprehensive remuneration and leave packages. At the same time, they will be expected to operate in an effective manner. By combining these two incentives, staff within the organisation can work to the potential.
Also, for long serving or qualified staff that possess excellent engineering or interpersonal qualities are likely to gain key positions and have additional benefits such as working in tropical Pacific Islands. This is just part of the rewards package that all staff will aim for.
8.4: Compensation:
Staff will be given a comprehensive remuneration package that takes into account their level of skill and abilities, and is reflective of cultural factors. All take into account current economic conditions and are estimated in the current climate (all in $NZD).
Top Level Staff (Senior Engineers, Business Managers, CEO)
Comprehensive remuneration package of $70,000+ - $110,000 per annum. Generous leave entitlements.
Middle Management (Technicians, Managers)
Comprehensive remuneration package of $40,000 - $65,000 per annum. Generous leave entitlements. Possibility of promotion/advancement.
Ancillary Staff (Cleaners, Part Time Trainers, Basic Cook Island Staff)
Remuneration package of $15,000 – $35,000 per annum. Standard leave entitlements, with increase based on performance. Possibility of promotion/advancement.
Estimated from Statistics New Zealand.
8.5: Staff Turnover:
In order to minimise staff turnover, the organisation will provide a comprehensive remuneration package to its employees. A high tech organisation such as this one cannot afford to lose staff and employees, costs of replacement would simply be too high (Byers, P.Y.). As such, salary and wage packages for staff will be high, reflecting the technological nature of the product.
If employees do feel obliged to leave the organisation, then exit interviews will be conducted. This will help the organisation establish why an individual has left or resigned, and to help rectify any future problems.
8.6: The Action Plan:
Action 1: Develop a tactical staff base that reflects the needs of the organisation in the current economic climate.
Action 2: Recognise the importance of training, and implement comprehensive schemes within the organisation.
Action 3: Release the importance of staff appraisal in maintaining a balanced and efficient working environment.
Action 4: Attract staff into the organisation by offering comprehensive salary/wage packages and other remuneration benefits.
8.7: Continuous Improvement:
Human resources are crucial to an organisation. I feel that the most useful concepts were establishing salary and remuneration levels which gave a good idea as to the overall expenses.
Some difficulty was found in locating average salaries on the Cook Islands, especially in jobs such as engineering. I could have done better by interviewing or travelling to the Cook Islands to gain insight into employment conditions.
9.1: Product Concept:
The potential of solar energy products, especially to regions such as the Cook Islands is huge. There are many different and widespread aspects and attributes of the product being offered, as well as customer benefits, features and competitive advantages.
• The product being produced consists of solar (photovoltaic) panels that can be customised to suit the customers’ needs and requirements. As part of the product and its setup, batteries, wiring and inverters are included, and as such, is a turnkey package for the customer.
• The product will be marketed to the Cook Islands as a source of energy to replace existing infrastructure such as diesel and petrol generators that are obsolete and unreliable. It is expected that funding will be in part contributed from such sources as the United Nations Development Fund, as well as New Zealand’s own contribution package to the Cook Islands.
• Solar is one of the cheapest forms of energy production. It has an excellent reliability rate compared to other forms of generation (e.g. petrol and diesel), and can provide many years of trouble free operation, whilst delivering high energy yields throughout the product lifecycle.
• Development of solar infrastructure will allow for an abundant source of energy to meet the growing demand for energy and infrastructure on the Cook Islands.
• A major aim of the organisation is to help improve the lifestyle and ability of individuals and communities to meet the demands of the technological era we now live in.
• As part the solar investment package, training and the establishment of microenterprise type schemes will be setup to allow for the product to benefit the local economy in ways other than producing energy, for example trade and small enterprise.
• A competitive advantage of this product to potential investors, as well as company personal is that it is a “first mover” organisation.
• Develop and implement funding initiatives from the United Nations and the New Zealand Government to help reduce costs, lower company risk, and make the product more accessible to the end user.
9.2: Product Life Cycle:
The particularly innovative nature of this solar product being produced lends itself potentially to a long product lifespan (Prasad. D., Snow. M.). The introduction is likely to be a long term based project, taking several years. Maturity of development is likely to last several decades, as this also reflects on the durability and sustainability of the actual physical product. Decline will occur, however, it is not going to be significant. In fact, the future is likely to lead to spin offs and greater product introductions as technology become cheaper and more accessible. There is always going to be a demand for energy, so this again is another reflection of this factor.
9.3: Branding and Packaging:
The company name is anticipated as being SolarGen. This would create a distinctive identity, combining the terms “solar” and “gen” which implies the generation of solar energy. Because this particular term does not have any ambiguous anagrams or pseudonyms if the language is changed to Cook Islands Maori. Branding of the product has a core aim of exemplifying the products clean and green image.
Packaging of the product is likely to take the form of one or two aircraft sized pallets. The entire product can be easily packaged inside these, and once at location, easily unpackaged and assembled. Packaging will consist of environmentally friendly MDF wooden pallets that are cheap, strong, and can be recycled on the Cook Islands for other means (such as building materials). The whole product from packaging to the solar modules can all be used or recycled, making the product both environmentally friendly, minimising waste and increasing the net utilisation rate of all aspects of the product.
9.4: Target Market:
The target market for this product is inhabitants and consumers of the Cook Islands, in particular those in villages and small communities. Currently, society in the Cook Islands generally utilise a low level of technology, and are very traditional in the way that they live, with conservative, agricultural and subsistence based lifestyle patterns and activities. However, because of technology advancement in many different areas, there is an increasing demand for communications, infrastructural based services such as lighting and water pumping as well as general consumer items such as refrigeration equipment.
Through producing these solar based products for consumers and community groups on the Cook Islands, it will allow for the more reliable, cheaper and more cost effective production of energy to fulfil a variety of tasks (Anderson. T. et al.). Because energy is a resource that is increasing in demand, the reliable production of electricity by solar means will present itself as being very attractive compared to existing diesel and petrol powered generation means.
9.5: Production Location:
The optimal, or core production location for this product is likely to be Auckland, in particular, East Tamaki, New Zealand. Auckland is one of New Zealand’s chief product manufacturing locations (Statistics, New Zealand). It is an ideal place, because of the comprehensive distribution of supplemental and complementary industries (such as wiring and electrical based resources) within close proximity to this organisation. This means that materials can be easily and cost effectively distributed from location to location with minimal loses in the distribution value chain. Therefore, the main addition of value for this product is in the manufacturing process, with the core product value being derived in the final outcome ready to ship to location.
Once the final product has been produced, it is easily transported to Auckland International Airport, which has a regular and direct air link to the Cook Islands. This is the most expensive part of the value chain, because value is lost in air freight expenses. Because the Cook Islands are only three hours flight time from Auckland however, expenses not likely to be as significant compared to shipping a product of this magnitude to a Northern Hemisphere destination.
Once the product is at the Cook Islands, then it requires transport to location. This is not arduous, because the islands are small, and easily reachable by boat/small ship and unloaded with a team of individuals. Assembly, training, and maintenance costs are another loses of product value. Because of the nature of the product, value is likely to remain fairly consistent throughout its lifecycle. Maintenance, training and transportation costs present the largest proportion of value lost in the product.
The location of production, with a basic value chain in terms of revenue and expenses is expressed in the chart below:
9.6: The Action Plan:
Action 1: Develop and implement a successful product concept that is both strategic and highlights key features of the product in both an informative and communicative way.
Action 2: Recognise and develop strategic operation product lifespan procedures that take into account cultural and technological aspects as well as changes in the market structure. Develop and implement government and international funding schemes.
Action 3: Develop and implement dynamic branding and packaging of the product to create a distinctive identity of the uniqueness of this product, and its clean, green image.
Action 4: Allow for the packaging of the product to become another integral product (product within a product). Minimise environmental waste, and maximise utilisation of all packaging products to allow for a high level of user interaction.
Action 5: Develop strategies to best target the product to its target market.
Action 6: Indentify and employ dynamic and strategic placement of core company infrastructure to help maximise revenue in the value chain and minimise loses.
9.7: Continuous Improvement:
The most useful concepts have been identifying locations that help minimise revenue loses within the value chain. On a personal basis, I have extensive knowledge, as well as access to key personal as we have undertaken a similar project in our home. This has helped shape this assignments organisational procedure, by allowing insight into real world processes.
In terms of weaknesses, I am not from a manufacturing background, so inconsistencies and lack of insight into these processes may have resulted in some degree of inaccuracy.
In terms of future projects of this nature, the ability to look at and reflect on similarly natured projects is likely to be of mutual benefit to the development and overall product enhancement.
9.8: Supplemental Activity:
Please see the enclosed CD, and the A3 poster for the supplemental activity.
10.1: Promotional Goals:
Promotional goals of this product are significant. Because of the unique and cutting-edge nature of the product, it is important to communicate these needs to the end user, as well as potential sources of funding, for example government agencies and international aid organisations.
• Create awareness with both the end user as well as sources of funding of the significance of energy demand in the Cook Islands, and the ability of solar energy to meet these demands as opposed to older technology.
• Highlight the fact that solar energy is much cheaper than it was a few years ago, and is now a viable and significant contender as a source of energy.
• Recognise and develop promotional strategy regarding and based around the clean and green nature of this product, and its long term environmental benefits.
• Establish rigid communications practices across the company, as well as locally in the Cook Islands. Recognise the significance of language barriers and adjust marketing regimes to suit this critical requirement.
• Research and target the product to the demographic price range and ensure that the product is within the reach of communities and the population at large.
• Market how solar energy can lead to the betterment of society by allowing the ability to run communications and infrastructural equipment that is critical to life in the digital age.
10.2: Business Environment:
The business environment of the Cook Islands is one that is very similar to that of New Zealand at face value (Cook Islands Government). However, there are some fundamental differences that need to be recognised.
Transportation facilities on the island include a major international airport, with the capability of serving wide body aircraft. Therefore, transporting the product to the islands from New Zealand will be relatively straightforward. Distributing the product to the islands where required will also be uncomplicated, because islands are small, with the majority of the population living in low lying areas by the sea. The pallets are easily transportable by small boat, and then lifted to location by a group of people.
Cultural, legal and political hurdles are limited, which is in part due to New Zealand’s close relationship with the Cook Islands and include standard customs regulations. The government of the Islands actually provides incentives to investment in infrastructure, so this project will be encouraged by the local business environment (Cook Islands Government).
In terms of product promotion, the product will require certain cultural changes. These include the translation of core information into the local language, and because most communities receive information from one influential body within their society, this factor will need to be taken into account.
10.3: Distribution Channel:
The nature of this product is that it is produced in the factory, and shipped directly to location where and when required. As a result, there is no need to have a wholesaler, as this will incur additional expense, something that needs to be minimised.
The product will be distributed direct from the factory by an international airfreight organisation, as this is the most efficient manner in which to transport. It should also be noted that the possibility of establishing a distribution partnership with Air New Zealand may arise, as the product can fit within the hold of a commercial aircraft, and this particular airline serves the Cook Islands on a regular basis.
Because the project will involve the Cook Islands government directly specifying what is needed, there is also no need for retail channels. Instead, all organisation and distribution is conducted through the organisation in co-operation with the Cook Islands government and international aid agencies when and where required. This has several advantages in that it reduces complexity of having to wholesale the goods through a retailer, and helps reduce costs to the end user as well as to the company.
10.4: Media Plan:
The Cook Islands has a limited degree of media availability (Hunt, E., Keller, N.). Most people on the islands do not have televisions. Instead, information is transmitted via radio from the main islands. However, this is something that most villages do not have the ability to use easily due to distance or technological means. Instead, news and events is told to the community by an elder in society on a regular basis in meetings within villages. (Hunt E., Keller, N.). As such, communication is likely to be focused on this particular channel, as well as simple, and easy to read billboards and leaflets in the local language distributed around communities. This will ensure maximum coverage with the limited media means available.
10.5: Promotional Strategy:
Promotional Means Advantages/Disadvantages
Push: Makes use of the company’s sales force and promotional activity to create demand for a product.
Tries to sell directly to the consumer (as is the situation in this case), bypassing other means of distribution that could be potentially expensive.
Pull: Requires high spending on advertising marketing to try and build up demand for a product.
Could be very expensive to try and develop large scale marketing material for this particular product.
Deals with retailers, and wholesalers, something that is basically eliminated in this particular product scenario.
Source: Lecture Notes and Study Material.
Therefore, the best type of promotional strategy for this product is the “push” method. The product is being sold directly to the consumer, bypassing other distribution channels. The company is also going to sell the product base on its sales force, and driving promotional factors such as environmental and economic benefits. The “push” method is also best suited when international aid and government organisations are involved as it means dealing directly with people who need the service most rather than dealing with a wholesaler or other distribution channels.
10.6: The Action Plan:
Action 1: Develop and implement marketing and promotional objectives that are specifically targeted towards the host countries cultural, legal and political attributes.
Action 2: Highlight the benefits of solar energy, how it can benefit the local economy at large, and what it could achieve within the community.
Action 3: Market the product to international aid agencies and government as well as the end user to help obtain developmental funding within the organisation.
Action 4: Develop an efficient means of distribution within the organisation that helps reduce overall costs and increases levels of efficiencies by dealing directly with the government and society of the Cook Islands.
Action 6: Recognise the media availability within the Cook Islands, and adjust promotional strategy to suit the required cultural conditions and attributes to help maximise product exposure within a constrained media environment.
Action 7: Use promotional procedures that successfully “push” the good nature of the product being produced, and it’s clean, reliable and environmentally sound nature as part of the company’s key sales and marketing force when marketing the product to the Cook Islands.
10.7: Continuous Improvement:
The most useful concepts were identifying which particular marketing methods are best suited to the cultural needs of the Cook Islands. Without identifying these, it makes it very difficult to market the product successful to an unusual market situation, with such areas as language barriers and cultural differences.
One of the weaknesses in marketing the product is that I have never been to the Cook Island. This makes it a bit more difficult, as I have not seen the consumer culture first hand. I believe that going to the Cook Islands and exposing oneself to the business and marketing environment is the best way to improve in these areas. Insight is always a very good tool when it comes to marketing and promotional activities.
10.8: Supplemental Activity:
Please see Section 10.8, the PowerPoint presentation enclosed on the CD.
11.1: Revenue Sources:
This product has several revenue sources of varying levels of income. These are represented in the table below.
Revenue Source Expected Level of Total Revenue Contribution (%)
Cook Islands Government: 30% net (reducing as required).
New Zealand Government Package:
(N.B. Package already in use by New Zealand as annual contribution to the Cook Islands.) 25% net (reducing as required).
International Aid Agencies (UN, UNDF): 20-25% net (reducing as required).
Cook Island Communities (Consumers): 10% net (rising to at least 20+% once established).
Cook Island Businesses and Industry: 15% net (rising to at least 25-30+% once established).
As can be revealed, the majority of revenue is sourced from New Zealand and foreign aid packages (totalling 45%) and from the Cook Island government, leading to a total contribution from these sources of 75%.
The reason for such a low community and domestic business revenue level is because this is an aid or development based project. Business and consumer may not have the money to spend on solar products initially. So, in order to reduce the burden on these areas, funding will come from government and foreign aid.
Once development levels take off, and microenterprise and new industry schemes have developed, then it is likely that business and consumer revenues will double to a point where government aid and foreign contribution can be reduced.
11.2: Operating Costs:
Annual operating costs are listed below, and take into account the fact that the organisation is producing revenue, and has manufacturing facilities and distribution chains established. All costs quoted in $NZD.
Operations Expenses
Producing/manufacturing products annually to meet local levels of demand. (Represented as 10 full setups* each year) Including training costs:
* Full setup of <10-15 panels and all electrical requirements in a turnkey package ready to run for a village of up to 400 people.
*Also includes estimated labour costs. 1x unit cost at $10,000 each.
Total (est.) of $300,000 max per annum production and manufacturing costs. Includes all labour and additional production charges such as training and development within the Cook Islands. This represents, as expected the greatest proportion of expenses.
Storage Costs: < $1,000 annually as product is manufactured and shipped when required, so can be stored within manufacturing building.
Marketing Costs: < $25,000 annually. Includes all advertising services such as poster and printed/promotional material.
Distribution Costs: < $50,000 annually taking into account current international airfreight charges (2x pallets at $5000 each). Includes costs of transport to location within the Cook islands.
11.3: Start-Up Costs:
No revisions required in start-up costs compared to section 7.1 documenting start-up costs.
11.4: Profitability:
The profitability over a five year period is likely to be similar to most start-up companies in that negative profit occurs in the first few years. This is to be even further pronounced by current economic conditions. The diagram below details these facts.
Year Profit/Revenue Margin
One Operation established, small precedence, negative profit est. at -$100,000
Two Operation small, still limited precedence, negative profit est. at -$50,000
Three Operations developing. Increased precedence and uptake. Breakeven profit levels est. at $0.
Four Established operations. Stating Pacific Island expansion. Positive profit est. at +$40,000.
Five Fully established operations within the Cook Islands. Starting Pacific Island Expansion. Positive profit est. at +$70,000 - $100,000.
11.5: Economic Benefits:
The economic benefits to the Cook Islands are huge. Solar energy would significantly improve the levels of infrastructure within communities, and allow for the creation of many jobs with the establishment of microenterprise based techniques. The introduction of solar energy will have huge positive implications on the tourist market. Increasingly, people are becoming more and more attracted to “green” destinations. This has been dubbed as ecotourism. By establishing itself as a destination that is clean and green by employing solar infrastructure, the Cook Islands has real potential to market itself to the world as a destination that is unspoilt by heavy industry, and that is clean and environmentally friendly. This will have huge positive effects on the country’s economy at large.
11.6: Social Benefits:
Again, the product has many positive social effects. These include the creation of jobs and the development of microenterprise – bringing in much needed income to communities. Telecommunications and other infrastructure can also operated reliably, and cheaply connecting individuals across the Cook Islands. Water pumping, sanitation and lighting/electrical services can also be developed, as well as refrigeration techniques improving the health and wellbeing of community groups, as well as allowing perishable items to be stored longer without the threat of breakdowns in unreliable, polluting diesel and petrol generators, which are mainstream in Cook Island communities at the moment.
11.7: Social Costs:
This project does not have any real social costs. It is a development project with the aim of improving society. However, some very traditional communities may not want such systems introduced, as they are happy with a traditional way of life. The general consensus in the Cook Islands however is that the demand for energy is rising, and therefore there is a huge demand for energy and infrastructural based projects.
11.8: Future Direction:
Ultimately if the company was successful in the Cook Islands, then the next step to take would be to expand to other markets (there are plenty) within the Pacific. The aim for the future in this case would to be the leading supplier of solar based energy products to Pacific Island Nations in the world.
11.9: The Action Plan:
Action 1: Successfully identify and target various marketing areas in order to help maximise exposure and maximise revenue.
Action 2: Reduce operating costs by employing excellent industrial practices such as reusing material during manufacture.
Action 3: Provide and help realise the social and economic gains that the Cook Islands hope to achieve by implementing this solar infrastructure project.
Action 4: Realise the significant potential this product has in other Pacific Nations similar to the Cook Islands, and if successful, target these markets to become a leader within the Pacific Islands in providing solar infrastructure.
11.10: Continuous Improvement:
In terms of improvements to overall processes, it is very similar to section 10.7. (I am keeping this brief).
Only time will tell how successful this product is, and one of key issues faced today is the recession that is limiting economic growth.
Some of my strengths with regard to this business opportunity have been my knowledge of solar based infrastructure, and its implementation as a major source of energy.
In terms of doing better in the future, it would be great to one day travel to the Cook Islands to get a first hand view at society. I believe that this would help improve the overall level of knowledge of this business opportunity, and will allow for a greater level of analysis into the business environment.
Below is a basic schematic of a standard solar energy package to be produced by the company:
With help from Engineering Fundamentals Lectures and Prasad. D., Snow. M.
Anderson, T., Doig, A., Khennas, S. Rees, D. (1999). Rural energy services: A handbook for sustainable energy development. Exeter: SRP.
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Burlingame, T. (Ed). (2007). Energy outlook until 2030. New York: Nova Science Publishers.
Byers, Y.P. (1997). Organizational communication: Theory and behaviour. Needham Heights, Massachusetts: Allyn and Bacon.
Cassedy, E. (2000). Prospects for sustainable energy: A critical assessment. Cambridge: Cambridge University Press.
Central Intelligence Agency (2009). The world fact book – The Cook Islands. Retrieved 20 March 2009, from https://www.cia.gov/library/publications/the-world-factbook/geos/cw.html.
Cook Islands Government (2008). Investment and residence in the Cook Islands: Business opportunities. Retrieved March 15, 2009 from http://www.ck/invest.htm.
Davis, K. (2002). Organizational behaviour: Human behaviour at work. New York: McGraw-Hill.
Diesendorf, M. (2007). Greenhouse solutions with sustainable energy. Sydney, Australia: University of New South Wales Press Ltd.
Fiji Trade and Investment Board (1998). An investor’s guide to Fiji: Government Publications.
Flavin, C., Mastny, L, Chiu.A. (2008). Worldwatch report 178: Low-carbon energy: A roadmap. Washington DC: WorldWatch Institute.
Hill, C.W.L., Cronk, T., and Wickramasekera (2008). Global business today: An Asia-Pacific perspective. North Ryde, NSW: McGraw-Hill Australia Pty Ltd.
Hislop, D. (Ed.). (2002). Energy options: An introduction to small-scale renewable energy technologies. London: ITDG Publishing.
Hunt, E., Keller, N. (2003). Lonely Planet: Rarotonga & the Cook Islands: China: The Bookmaker International Ltd.
OECD & International Energy Agency (1997). Energy technologies for the 21st century.
Paris: OECD Publications.
Prasad, D., Snow, M. (2005). Designing with solar power: A source book for building integrated photovoltaics. Mulgrave, Victoria, Australia: The Images Publishing Group Pty Ltd.
Reserve Bank of New Zealand (2009). Interest and Inflation Rates. Retrieved May 20, 2009 from http://www.rbnz.govt.nz.
Seeger, M. W., Sellnow, T. L., Ulmer, R. R. (2003). Communication and organisational crisis. Westport, Connecticut: Praeger Publishers.
Solar Aid (2009). Generalised Information about solar projects in Africa. Retrieved 25 March 2009, from http://www.solar-aid.org.
Statistics New Zealand (2009). Various figures relating to the employment economy. Retrieved 20 May, 2009 from http://www.stats.govt.nz.
Tyson, S. (1997). The practice of human resource strategy. London: Pearson Professional Limited.
Yorks, L. (2005). Strategic human resource development. Colombia University: Thomson South-Western.
The Earth receives more energy from the sun in just one hour than the whole world combined uses in one year. - Solar Aid
Solar energy technology is a rapidly developing field, and is employed in many countries around the world as a means of energy. The product presented in this business plan is based around micro-solar infrastructure being used to generate electricity for small Pacific Island communities, in this case, the Cook Islands.
The idea is to setup a company that specialises in the development of these products for Cook Island society from within New Zealand, and to allow the eventual establishment of micro-enterprise within communities. Hence, one of the major aims is to produce these solar products for the future development and positive associative impacts on the communities of the Cook Islands.
The main difference in micro-generation solar infrastructure which will be used in this case is the scale and size of operation. In this case, the product is used to generate energy for communities of a few hundred people. As such, the scope of the actual physical product used to generate the electricity (including batteries and equipment) is up to the size of a tennis court. This is made up of 15 or so 2m x 3m sized solar panel arrays. These are then angled in an appropriate direction on a mount to maximise sun exposure throughout the day.
Source: UN.org
The benefits to the communities are obvious. Energy can be used to power anything, from lighting, refrigeration equipment and water pumps to cell phones and radios. The product life cycle is up to 25 years, so the return of investment and benefits for these communities are huge. (Hislop, 2002).
1.2: Business Opportunity Analysis:
The small islands states of the Pacific are faced with enormous development problems Their small size, lack of resources and isolation mean that it is difficult to provide a high standard of living that their citizens increasingly demand (Bailey, 1993). Most communities on the Cook Islands are only a few hundred people at the very most. Their energy demands at the moment are met by diesel or petrol generators that are noisy, polluting, unreliable and costly to run, with no guarantees of electricity output when it is required. (Cook Islands Government, 2008). As such, communities are demanding more and more energy to run equipment, such as refrigerators that require a permanent current supply to store commodities and resources such as food and vaccines.
This is where the idea of solar steps in. The Cook Islands are perfectly positioned near the equator, with high sunshine hours to ensure high operational energy yields from solar panels. Solar energy is non-polluting, requires limited maintenance, and can provide a reliable source of power for critical devices such as radios, refrigerators, lighting beacons and telecommunications.
1.3: The Action Plan:
Action 1: The manufacture and distribution of solar based energy infrastructure for the Cook Islands based on community demand to provide energy for several (10+) communities.
Action 2: Provide a cost effect method of producing electricity over existing measures such as diesel generators and alternators, that is reliable and with a long lifespan leading to a high return of investment for communities.
Action 3: Encourage the development of microenterprise amongst the Cook Island communities to help establish continual economic growth and prosperity in the area.
1.4: Continuous Improvement:
Some limitations in this report are that the scope mealy focuses on the Cook Islands. It would be appropriate to consider options in other Pacific nations in the future.
I have an extensive engineering knowledge of solar infrastructure, so this will come in mutual benefit to this particular assignment.
2.1: Identify Potential Competitors:
In terms of solar energy infrastructure being used to help developing communities in the Cook Islands meet their energy needs (or even other small Pacific Islands such as Kiribati), there are no existing potential competitors, as there is currently no infrastructure or development organisations that specialise in this field within this particular region. Solar energy is employed to power very small items such as weather stations (Cassedy, 2000), but not on a scale like the one presented in this proposal that will be used to help power whole communities.
As such, this is a first mover based business incentive, with intended backing of foreign development agencies such as the United Nations and the New Zealand Government, as well as local and region governing bodies within the Cook Islands. This provides some form of protection from outside competition.
2.2: Competitive Advantage:
Manufacturing and the research and development of solar panels already take place within New Zealand for other domestic applications such as home heating and small scale energy. (Flavin et al 2008). The main idea is to optimise price, and to minimise costs not only for the business, but for the communities on the Cook Islands.
This strategy is also used by another business - Solar Aid, based in the United Kingdom, who provides panels and solar equipment to underdeveloped African communities. By searching for the best prices on products on the international market, as well as provide locally produced products, they can pass the cost benefits on to the communities and allow them to also reap the benefits.
2.3: International Strategies:
Solar Aid in the United Kingdom, a similar incentive to this one uses a strategy that is specifically tailored for local responsiveness in the African market. This means that the product is specially adapted to meet local market conditions, some of which include cost and availability of materials. However, the innovation of this product means that similar incentives of this scale have not been tested in this particular marketplace (the Cook Islands/ other Pacific nations) yet.
2.4: Absolute and/or Comparative Advantages:
This business plan will have an absolute advantage in the Cook Islands, as it has never been done before in this particular market.
On a manufacturing front, the raw materials such as aluminium and steel are readily and cheaply available in the New Zealand market. This means that the product can be produced efficiently.
In terms of the Solar Aid example, they too have an absolute advantage in Africa. There is currently no other company setting up similar to them. This business at the moment is seeing record growth, and it is envisaged that a similar scenario will be realised in this project.
2.5: The Action Plan:
Action 1: Follow a similar innovative approach to that of Solar Aid, providing something completely different and unthought-of to a new market
Action 2: Establish the product/company as an innovator in its field. Allow the influence of foreign organisations and development funds to shape development and provide financial incentives.
Action 3: Continually strive to push the boundaries of development, innovate and allow the product to work in collaboration with the community, allowing them to reap the benefits.
2.6: Continuous Improvement:
In this scenario, because something of this scale has never been really looked at, it is difficult to make assumptions. The weakness here is that it is simply so difficult to predict what the likely outcome in this specific market will be.
2.7: Supplemental Activity:
Solar Aid is a UK based organisation that provides solar based infrastructure and equipment to impoverished African communities. Their aim is to basically allow for the setup of micro based enterprises within the communities to allow for economic development and vitality through trade and the setup of basic enterprise. So far, Solar Aid is having a huge success in Africa with a high up-take rate. In email correspondence with them, they stated that they were extremely busy working on projects and development which just goes to show this fact.
3.1: Country Information (Hunt, Keller 2003):
• Official Name: Cook Islands.
• Land Area: 240 sq km.
• Capital: Avarua, Rarotonga.
• Population: 19, 569 (2006 census).
• Demographics: Population is spread across ten islands, most living in small villages.
• Major Centres: Most towns and villages have a population of fewer than 4000 inhabitants.
• Currency/Exchange Rate: New Zealand Dollar. $1NZD ≈ $0.56USD.
Map of the Cook Islands: Source: Pacific Travel Guides.
Rarotonga International Airport is situated outside of Avarua, the main centre of the Cook Islands. Regular flights operate by Air New Zealand and Air Tahiti Nui to Auckland, Christchurch, Los Angeles, Fiji and Tahiti.
Main seaport located in Avatiu. This handles shipping to other island groups both internationally and domestically. The nature of the islands means that they are all easily accessible by boat or yacht (Hunt, Keller, 2003).
Roading infrastructure on the islands is primitive, with only the main islands such as Rarotonga having some sealed roads. As such, the most popular way of travelling on the main islands is by moped.
3.2: Geographical Influences:
The nature of the Cook Islands is that of small, volcanic landmasses and coral atolls. In this sense, most of the land is low lying, with the highest points on some islands only a few meters above sea level (Cook Islands Government, 2008). The effect this will have on the business opportunity is minimal, as the majority of island communities that are being targeted are on flat, low lying islands that are easily accessible by boat.
The region being near the equator in the tropics enjoys a year round tropical climate, with warm temperatures and high sunshine hours making the location perfect for solar energy. However, the Cook Islands are located in a cyclone zone, which means that tropical storms are a usual occurrence throughout the summer months. This means that in terms of setting up the solar infrastructure, the season will need to be chosen that is at lowest risk – usually winter. It also means that the product will have to be durable and able to withstand the forces imposed by cyclones.
3.3: Major Products and Industries:
The major natural resources of the Cook Islands include fishing and aquacultural industries (CIA, 2009). These are two of the islands main primary industries in terms of products. However, they are only small ventures with limited product processing capabilities, and as such, restricted ability to cope with highly perishable products.
The major industry in the Cook Islands is however tourism, providing a significant contribution to the economy (Cook Islands Government, 2008). Hotels, resorts, restaurants and cultural attractions are all popular with foreign tourists, many of whom are from New Zealand, Australia and the United States.
3.4: Government and Politics:
The Cook Islands are in free association with the New Zealand constitutional system, and as such are a democratic state. The Islands are self governing with their own parliamentary system in place. (Cook Island Government, 2008). As a result of New Zealand’s close relationship with the island, we have several programmes in place to encourage sustainable economic development as well as strengthen social services and infrastructure.
3.5: Current Economic Conditions:
Current economic conditions in the islands are reasonably stable admist the global recession, which is in part due to the close ties of the New Zealand government and the adoption of the New Zealand dollar as the standard form of currency. Consequently, the Cook Islands have a high GDP per capita compared to many of the other Pacific Island nations (Hunt, Keller 2003).
Foreign investment in the Cook Islands is mainly from large international hotel and resort chains that are attracted to the area because of its location in the tropics. As a result, investment is made to the economy from foreign tourists and tourism based industries.
3.6: Social Facts and Conditions
The majority of Cook Island society lives in tight-knit communities. As such, society is very stable with low crime rates, and a high degree of morality and cooperation rates between individuals. Religious values are highly respected, with church attended every Sunday, with this particular day being a day of rest. Society is generally very relaxed, enjoying a high level of freedom.
One of the major problems however has been the net migration losses of Cook Islanders to New Zealand and Australia, especially in the mid 1990’s. This is in part due to the better level of employment opportunity that is enjoyed in these countries, as well as educational aspects. As such, the local population has a high proportion of middle aged individuals. (Cook Islands Government, 2008).
As a result, projects such as solar energy development are encouraged by local government. This is because they provide a source of income and employment, as well as allowing the local economy to enter the “digital age” and play a part in the information age.
3.7: Technology and Infrastructure:
Infrastructure on the main island in the Cook Islands, such as Rarotonga is reasonably well developed with good roads, telecommunications, and internet and cellphone coverage. (Hunt, Keller, 2003). The main international airport has a sealed runway and is capable of serving large aircraft, and has regular international services to Australia, New Zealand, and Fiji, Tahiti and the United States as well as local domestic services to other islands.
The establishment of company based communications on these main islands is easy, with services and infrastructure maintenance being handled by Telecom New Zealand.
On the outer islands however, infrastructure is generally lacking, with unsealed roads, poor communications and telecommunications facilities and limited amounts of energy, with the majority being generated by small, unreliable and expensive to operate diesel and petrol generators.
3.8: Legal:
The Cook Islands government adopts and uses the New Zealand constitutional legal system. Therefore, commercial contracts are honoured, as well as intellectual copyright and patent/property protection laws as they are basically governed by the New Zealand judicial system (Fiji Trade and Investment Board, 1998). Consequently, the legal system is also effective, with disputes being resolved in a timely manner. There is no organised crime in the country. The legal system is going to have limited impact.
3.9: Environmental:
Environmental conditions on the Cook Islands are some of the most un-polluted and tranquil on earth. (Hunt, Keller, 2003). The islands are unspoilt by urbanisation and development that are experienced in western countries. Levels of pollution are very low, with the main forms coming from such areas as diesel powered generators and automobiles. The Cook Islands is governed by New Zealand’s Kyoto agreement signatory. This presents an attractive opportunity for this project, with the ability to cash in on carbon credits and international grants for environmentally friendly energy projects such as this (Flavin, 2008).
The Cook Islands has a very good record on environmental protection. However, it and many other Pacific nations are threatened by the acts of other nations. Greenhouse gas emissions from industrialised countries such as the United States are believed to be behind the melting of the polar ice caps. (OECD, 1997). This is raising sea levels, which threatens the very nature of the islands.
3.10: Formal Trade Barriers
Because of the aid based package and development guise of this business project, there are no formal trade barriers that are going to be of concern, other than those domestically imposed. Infrastructure projects with the aim of increasing the vitality of society are encouraged.
3.11: International Business Incentives:
Foreign investment is dealt with by the Cook Islands government (www.cook-islands.gov.ck). Foreign investment, especially of this nature is encouraged by the Cook Islands government with such aid as tax incentives and funding for aid based projects. This is the same for New Zealand, with our aid based contribution package. The UN also provides extensive funding for development projects such as this. This means that funding will be available for this business plan from a multitude of sources, both local and international, and because it is an aid based project with the help of multinational organisations, risk is minimised.
3.12: The Action Plan:
Action 1: Because of the Cook Islands close association with New Zealand and that manufacturing is going to be done offshore there is really not much that is required to be done in terms of the product and business environment. Basic understanding of the cultural and geographical environment at hand I believe is already present everyday on a New Zealand business basis.
3.13: Continuous Improvement:
This business plan only targeted one specific country. In these terms, it would be best in a future business plan to widen the scope somewhat to look at the broader context of the Pacific Islands.
4.1: Business Culture:
Business culture in the Cook Islands is of a casual New Zealand and is generally very similar to that of New Zealand. A typical working week is 8:30am to 4:30pm. Monday - Friday. Unlike New Zealand however, the weekends are very relaxed and business is not usually conducted, especially on Sunday which is a religious day of rest.
The language of business in the Cook Islands is English; however islanders may talk to each other in Cook Island Maori to clarify understanding when discussing projects and proposals. This should not be taken as offence by foreign parties.
When greeting a business partner, it is important to understand local customs and traditions. Usually, before at the beginning and end of a meeting a prayer is given, and it is important to respect this.
Because the Cook Islanders have a great respect deal of affiliation with New Zealanders, and because our cultures are similar in many ways, entertaining is usually very similar to that of New Zealand. In terms of giving gifts, Cook Islanders generally prefer gifts such as food (tropical fruits).
4.2: Cultural Analysis:
Cook Islands culture is very similar to what we experience in New Zealand, but on a much smaller scale. Beliefs and traditions are similar to that of the New Zealand Maori.
As such, in terms of any impacts on the business opportunity to sell solar based infrastructure, there is unlikely to be any major problems from a cultural perspective.
Cook Island society is not capitalist. Therefore, the location is not suitable for business that requires a quick return of profit. Because this business plan is centred on a long term aid based project with local and international funding from major organisations, this is not going to be a problem.
4.3: Social Institutions:
Social institutions such as family life do play a significant role in conducting business in the Cook Islands. Because of the nation’s small size and low population, communities and villages tend to be very close meaning that people communicate and conduct themselves with wider society in mind. (Cook Islands Government).
From a business perspective, family play an important role. Land cannot be bought, but can only be rented (with exceptional circumstances however). Knowledge of a particular trade is passed down from generation to generation meaning that traditional values plays and acknowledgement of one’s past plays an important role in a business environment.
4.4: Business Ethics:
The Cook Islands is a very ethical nation is terms of the way it conducts business. This is in part due to its close relations to New Zealand, which is known to be a very ethical business and organisational environment. There are currently no human rights issues such as sweatshops or discrimination that affects the labour and business market in the Cook Islands. Therefore, there is not going to be any significant ethical dilemmas faced by this business opportunity.
4.5: Informal Trade Barriers:
The Cook Islands at the moment is very encouraging of foreign based infrastructure projects such as that presented in this business plan. Island society also takes an optimistic viewpoint on any project that is likely to result in an increase in their overall livelihood. As such, social and administrative barriers are limited in the context of this business plan.
One of the main issues to this project however is because Cook Islanders do not know a great deal about the technology involved in maintaining this sort of infrastructural, training and educational programmes will need to be introduced. This will help them understand what needs to be done to ensure the reliable operation of the equipment.
4.6: The Action Plan:
Action 1: Similarly to section 3, the business environment is very similar to New Zealand.
Action 2: Realise however that cultural and language barriers are slightly less formal than New Zealand, and that this will need to be taken into account.
4.7: Continuous Improvement:
The scope of this assignment was very narrow, and as such could not look into wider matters with regard to the overall business culture.
4.8: Supplemental Activity:
As stated above, the culture of the Cook Islands is diverse, however similar to that we experience in New Zealand.
5.1: Strategic Planning:
The best option in terms of international strategy for this business plan is localisation strategy. This is when the products, in this case solar infrastructure is adapted to suit national conditions; in this case that of the Cook Islands. This will allow for a high level of local responsiveness, to meet the needs of society.
The major goal is to adapt these solar technologies for high energy and electricity yields in the realm of 80+ percentage cost to energy ratio. Consequently, the target market anticipated for this product is the local and business population of the Cook Islands. The excepted uptake of this infrastructure is aiming for a 70+ percentage usage rate among the population. Customer benefits are obvious; with the aim of maximising local responsiveness, the product is tailored to meet specific needs. The effects are lasting, such as meeting long term demands for energy and providing much needed electricity for resources such as lighting and refrigeration equipment.
Because this business proposal is unique, it aims for a 100% (total) share of the market. A return of investment is likely to be made within 5-7 years of initial uptake. Due to the aid based nature of the project, returns will not be instant, however, the benefits and return of investment for local communities are huge, not to mention the easy adaptability of the product for other markets.
5.2: Entry Modes:
Entry Mode Benefits Costs/Risks
Exporting No manufacturing costs at the destination, help reduce costs
Cook Islands has limited infrastructure for developing and producing solar technology – would otherwise be expensive to set up.
The ability to realize and take advantage of experience curve in terms of allocating production to the most efficient location as well as location economies. Risk of damaging the inherently fragile nature of solar panels that are made of glass.
Cost of transport to location could be expensive; however because of the location of the Cook Islands, this is a necessary cost.
Joint Venture The ability to share costs with a local partner, i.e. a local business or organisation.
The ability to bypass certain regulations, such as land ownership tenures in the Cook Islands. Loss of control over specialised solar technology.
Potential conflicts of interest.
Turnkey The ability to tap into specific know-how, i.e. specialising in production of micro solar infrastructure.
Lower risks of political and economic instability.
Easier setup times, as the product is already ready to go.
Return on investment for a local community is much faster, product ready to use. Valid only for a large scale project such as this.
Possibility may arise in the future that a competitor enters a similar market and undercuts (unlikely however).
The best option for this particular project is to sell a turn-key base d package that is customised for the local environment. The solar based products are exported from the manufacturing base, and then set up to begin producing energy immediately. This helps maximise local responsiveness and allows the communities to experience a quick return of investment.
5.3: Strategic Alliances:
This product has the intention of setting up strategic alliances with organisations such as the United Nations, and local government development agencies, especially from a New Zealand perspective as part of our yearly development fund for support. This helps provide funding for initial setup.
Another area of alliances will be with manufacturers of electronic equipment (i.e. distributors and wholesalers). They will be able to provide the required manufacturing base of products for development into a finished product.
5.4: The Action Plan:
Action 1: Setup strategic alliances with New Zealand and foreign aid base agencies that specialise in funding for the development of energy based infrastructure.
Action 2: Tap into specific market potential within New Zealand energy industry that specialises in the development of solar based products, and potentially exploit/employ and use some of the developments.
Action 3:Collaborate with Cook Islands government agencies on the ways to best market and efficiently get the product to market, targeting communities in need.
5.5: Continuous Improvement:
Sections 5 and section 6 have similar evaluative properties.
6.1: Strategic Planning:
To establish solar based infrastructure to be used for the benefit of the community basis as a whole, with a 20% uptake at the end of year 1 and a 70+ percent uptake and usage of the technology within 5 to 7 years on the Cook Island. To eventually expand the development of this product market into other Pacific Island nations.
6.2: Strategic Objectives:
• To develop and introduce a high quality solar energy infrastructure to Cook Island communities that provides high yields and low maintenance.
• Minimise costs with funding from national and overseas interests such as the United Nations.
• To maximise coverage and government uptake of solar energy projects in the Cook Islands to achieve a 70+ percent uptake within 5-7 years.
• To pass on the benefit solar based energy projects have to help communities with their growing demands for electricity.
• To encourage the development of micro enterprise amongst Cook Island communities, and to instantiate this in their best interests.
6.3: Centralisation:
The business will largely follow a centralised structure, due to the specialised type of equipment being used. The equipment being produced largely remains the same; it is just the size and scope of the infrastructure product that varies from community to community depending on the requirement
6.4: Organisational Structure:
Due to the specialised and direct approach on a specific market it is envisaged that this business will adopt a worldwide area structure, in line with the specific targeting of individual regions. The main advantages of this structure are that it facilitates local responsiveness, and the fact that there is low diversification of the product required.
Basic Worldwide Area Structure in Context – (Hill, 2007).
6.5: Integrating and Control Systems:
Using a worldwide area structure means that local responsiveness of the product is of utmost importance. This will mean that the company will need to liaise closely with local government and community groups in the Cook Islands throughout the product development lifecycle to ensure that it meets requirements for specific regions.
6.6: Location of Value Chain:
Due to the service nature of this product, the manufacturing of the product is likely to take place offshore from the Cook Islands in New Zealand. The value chain can be represented below:
As can be seen, the location of the majority of the value chain in the product (manufacturing, outside funding) is located offshore. The end product however is located in the Cook Islands.
6.7: The Action Plan:
Action 1: Develop an effective market entry strategy to take best advantage of the first mover strategic advantage that this project represents.
Action 2: Develop and respond to the needs of the local community environment. Ensure that the product is shaped around this and these aims.
Action 3: Communicate and effectively setup the infrastructure and allow for the eventual self management of the systems by communities.
6.8: Continuous Improvement:
The development of a value chain is important and will need to be considered throughout the organisation to optimise and allow for future development and cost reductions.
7.1: Start-Up Costs:
Below is a table of estimated start-up costs for this international business enterprise within New Zealand and overseas. Estimated from: Statistics New Zealand.
Manufacturing Costs:
Raw Materials:
Labour:
Research and Development:
Legal and Licensing:
Building (Rent):
Insurance:
Interest:
Technological/Communications
$50,000
$ 300,000
$20,000
$10,000
$20,000
$30,000
$15,000
$10,000
Distribution Costs:
Transportation:
Customs:
Material:
Legal:
Compliance:
$50,000
$2000
$10,000
$5000
$5000
Staff Costs:
Remuneration/Salaries/Wages:
Insurance/ACC:
Legal:
$300,000
$20,000
$5000
Business Costs:
Materials (office supplies)
Business Related Printing:
$5000
$2000
Advertising Costs:
Consultants
Printing
Legal
Research
Distribution
$15,000
$10,000
$5000
$5000
$5000
Discrepancy Cost: $25,000
TOTALS: $924,000
5 Year Return on Investment:
Selling 100 packages at $20,000 each* est. (subsidised by government and foreign aid).
Total = $2 million.
*All associated costs included and deducted to get this final figure.
7.2: Economic Environment:
The economic environment of the Cook Islands due to its close association to New Zealand is very similar. (Cook Island Government). However, the Cook Islands do have a high unemployment rate with most young people immigrating to New Zealand. This is due to the low levels of educational facilities on the Islands, lack of jobs and low levels of personal income.
Interest rate levels are the same as New Zealand at the moment, as with inflation. (RBNZ). There is a big potential with this project to help increase boost the local economy of the Cook Islands and help create much needed jobs to increase personal income levels. Interest rates are reasonably low, so the ability to gain finance for this project from banks should be straightforward.
7.3: Financing Sources:
The company structure for this organisation is likely to be that of a limited liability company. This means that there will be investors who buy shares. However, it is likely that the shareholders themselves will be from within the government or foreign aid agencies. It is an aid based organisation, so this will likely be a suitable choice.
Another source of finance is that of the Cook Island Government, New Zealand Government, and international aid and development organisations. This will allow for direct investment into the product, and as such a source of finance. This is a key stakeholder in financing the company and its development.
The use of loans, in particular, government loans will likely be used in the short term to help start the company up and it is envisaged these will not be used in the long term.
7.4: Economic and Financial Risks:
This is an innovative project that does have an aspect of risk that needs to be dealt with. These include the fact that a totally new infrastructure is being introduced into a country, and there is an element of uncertainty surrounding this. For example, uptake and cohesion rates may be much slower than expected. Another risk is that associated with the world recession in that markets are volatile and it is not a time that people want to be spending.
7.5: Social, Cultural and Ethical Risks:
There are very few demographic and ethical risks associated with this venture aside from normal operational risks.
One risk however could be local disagreement of foreigners establishing a business venture. Individuals on the Cook Island need to realise that this venture is aid based, and is for their ultimate benefit and that of their country.
7.6: Political and Legal Risks:
There are no/limited political and legal risks aside from associated company risks within the Cook Islands and New Zealand. The fact that both countries have a very close relationship helps to further exemplify this point.
7.7: Risk Management Techniques:
One of the key ways to reduce risk in this organisation is to spread the sources of potential revenue across several different areas (such as government and international aid revenue sources). That way, the organisation is not “putting all its eggs in one basket” meaning that if one source of revenue fails, there are more to fall back on.
Another way is to make strategic alliances with other producers, for example manufactures of complementary equipment such as electrical products. This also helps spread risk.
Finally, the employment of local managers of the organisation within the Cook Islands helps increase the level of organisational stability meaning there is less risk involved from potential grievances such as communications breakdown, employment disputes, and legal issues
7.8: The Action Plan:
Action 1: Realise that starting a new business is both risky and expensive.
Action 2: Find secure and stable sources of financing such as international aid organisations and government based funding incentives to help reduce liability to loans, and as such decrease risk.
Action 3: Realise that it is a new, unchartered market in which case there is an element of risk involved.
Action 4: Develop a comprehensive risk/benefit and mitigation plan within the organisation identifying potential sources of risk and their implications.
7.9: Continuous Improvement:
This was a rather difficult section. These are uncertain times in the recession, so it is difficult to predict what start-up costs are likely to be as they are constantly changing. This aspect has also increased the amount of applicable risk when starting a new organisation.
It would be interesting to see what this project would be like in a boom time in the economy, as I believe it could be very different.
7.10: Supplemental Activity:
Please see section 7.10, Exchange Rates Exercise located on the enclosed CD.
8.1: Staffing:
The actual development and production process of solar based equipment is a specialised job requiring training and relatively high tech infrastructure in an economy such as New Zealand with manufacturing experience. Company personal and the end user of the product based within the Cook Islands are anticipated to be taking a low tech approach, as the product is pre-built and only requires maintenance Below is a diagram representing different staffing approaches.
Staffing Approach Details Relating to this Company
Ethnocentric: This approach would involve a large proportion of the company’s workforce to be indigenous to the Cook Islands. Although some of the workforce will be located within the Cook Islands this approach is not ideal because this company has a high tech manufacturing base offshore, requiring educated personal that the Cook Islands do not have, additionally, taking this approach is likely to be expensive and complex.
Polycentric: Taking this approach would mean that key areas of the company are located within the Cook Islands (subsidiaries etc) and the main headquarters, parent company/manufacturing base located within New Zealand. This would be less expensive, and allow for the use of high tech manufacturing techniques within New Zealand, as well as permitting the ability of local distribution, maintenance and product setup channels to be situated on the Cook Islands, allowing for a degree of local responsiveness of the product to the local demographic which is important, because it would allow for the product to be tailored to local needs.
Geocentric: This type of approach would take employees most suited to the job no matter where they are located. Because the nature of this project is aid- based from within New Zealand, and because it is targeting a specific country with a low tech manufacturing base, this plan is unlikely to be effective, and would not allow for a degree of local responsiveness with local employees, something that is very important.
Based on information from: Class Lecture Notes and Yorks. L.
Based on the above, it is expected that this organisation will take a polycentric approach to its human resource management.
Key job positions are likely to be located within New Zealand, as our country has a strong manufacturing and educational basis for which to develop the product. However, the organisation also needs a strong human resource approach to the Cook Islands, in which the product will be sold. Company personal located within the Cook Islands are likely to be a mix of indigenous and foreign personal.
8.2: Training and Organisation:
Ongoing training and development is critical to an organisation of this nature that has a wide degree of cultural diversity (Shaun, T.). It is important that in a high tech organisation such as this that training on modern manufacturing and product development occurs so that the organisation remains at the forefront. Some of these are:
Cultural Training: To establish Cook Islands culture to employees who are unaware of this.
Interpersonal/Communication: Ensuring that the organisation communicates effectively from different levels within the organisation.
Technological: To ensure that the organisation remains at the forefront of innovation by utilising new engineering and product development skills and techniques.
8.3: Performance Appraisal:
In a high tech organisation like this, it is important to balance personal needs. (Davis. K.). Therefore, all staff no matter what level will be given comprehensive remuneration and leave packages. At the same time, they will be expected to operate in an effective manner. By combining these two incentives, staff within the organisation can work to the potential.
Also, for long serving or qualified staff that possess excellent engineering or interpersonal qualities are likely to gain key positions and have additional benefits such as working in tropical Pacific Islands. This is just part of the rewards package that all staff will aim for.
8.4: Compensation:
Staff will be given a comprehensive remuneration package that takes into account their level of skill and abilities, and is reflective of cultural factors. All take into account current economic conditions and are estimated in the current climate (all in $NZD).
Top Level Staff (Senior Engineers, Business Managers, CEO)
Comprehensive remuneration package of $70,000+ - $110,000 per annum. Generous leave entitlements.
Middle Management (Technicians, Managers)
Comprehensive remuneration package of $40,000 - $65,000 per annum. Generous leave entitlements. Possibility of promotion/advancement.
Ancillary Staff (Cleaners, Part Time Trainers, Basic Cook Island Staff)
Remuneration package of $15,000 – $35,000 per annum. Standard leave entitlements, with increase based on performance. Possibility of promotion/advancement.
Estimated from Statistics New Zealand.
8.5: Staff Turnover:
In order to minimise staff turnover, the organisation will provide a comprehensive remuneration package to its employees. A high tech organisation such as this one cannot afford to lose staff and employees, costs of replacement would simply be too high (Byers, P.Y.). As such, salary and wage packages for staff will be high, reflecting the technological nature of the product.
If employees do feel obliged to leave the organisation, then exit interviews will be conducted. This will help the organisation establish why an individual has left or resigned, and to help rectify any future problems.
8.6: The Action Plan:
Action 1: Develop a tactical staff base that reflects the needs of the organisation in the current economic climate.
Action 2: Recognise the importance of training, and implement comprehensive schemes within the organisation.
Action 3: Release the importance of staff appraisal in maintaining a balanced and efficient working environment.
Action 4: Attract staff into the organisation by offering comprehensive salary/wage packages and other remuneration benefits.
8.7: Continuous Improvement:
Human resources are crucial to an organisation. I feel that the most useful concepts were establishing salary and remuneration levels which gave a good idea as to the overall expenses.
Some difficulty was found in locating average salaries on the Cook Islands, especially in jobs such as engineering. I could have done better by interviewing or travelling to the Cook Islands to gain insight into employment conditions.
9.1: Product Concept:
The potential of solar energy products, especially to regions such as the Cook Islands is huge. There are many different and widespread aspects and attributes of the product being offered, as well as customer benefits, features and competitive advantages.
• The product being produced consists of solar (photovoltaic) panels that can be customised to suit the customers’ needs and requirements. As part of the product and its setup, batteries, wiring and inverters are included, and as such, is a turnkey package for the customer.
• The product will be marketed to the Cook Islands as a source of energy to replace existing infrastructure such as diesel and petrol generators that are obsolete and unreliable. It is expected that funding will be in part contributed from such sources as the United Nations Development Fund, as well as New Zealand’s own contribution package to the Cook Islands.
• Solar is one of the cheapest forms of energy production. It has an excellent reliability rate compared to other forms of generation (e.g. petrol and diesel), and can provide many years of trouble free operation, whilst delivering high energy yields throughout the product lifecycle.
• Development of solar infrastructure will allow for an abundant source of energy to meet the growing demand for energy and infrastructure on the Cook Islands.
• A major aim of the organisation is to help improve the lifestyle and ability of individuals and communities to meet the demands of the technological era we now live in.
• As part the solar investment package, training and the establishment of microenterprise type schemes will be setup to allow for the product to benefit the local economy in ways other than producing energy, for example trade and small enterprise.
• A competitive advantage of this product to potential investors, as well as company personal is that it is a “first mover” organisation.
• Develop and implement funding initiatives from the United Nations and the New Zealand Government to help reduce costs, lower company risk, and make the product more accessible to the end user.
9.2: Product Life Cycle:
The particularly innovative nature of this solar product being produced lends itself potentially to a long product lifespan (Prasad. D., Snow. M.). The introduction is likely to be a long term based project, taking several years. Maturity of development is likely to last several decades, as this also reflects on the durability and sustainability of the actual physical product. Decline will occur, however, it is not going to be significant. In fact, the future is likely to lead to spin offs and greater product introductions as technology become cheaper and more accessible. There is always going to be a demand for energy, so this again is another reflection of this factor.
9.3: Branding and Packaging:
The company name is anticipated as being SolarGen. This would create a distinctive identity, combining the terms “solar” and “gen” which implies the generation of solar energy. Because this particular term does not have any ambiguous anagrams or pseudonyms if the language is changed to Cook Islands Maori. Branding of the product has a core aim of exemplifying the products clean and green image.
Packaging of the product is likely to take the form of one or two aircraft sized pallets. The entire product can be easily packaged inside these, and once at location, easily unpackaged and assembled. Packaging will consist of environmentally friendly MDF wooden pallets that are cheap, strong, and can be recycled on the Cook Islands for other means (such as building materials). The whole product from packaging to the solar modules can all be used or recycled, making the product both environmentally friendly, minimising waste and increasing the net utilisation rate of all aspects of the product.
9.4: Target Market:
The target market for this product is inhabitants and consumers of the Cook Islands, in particular those in villages and small communities. Currently, society in the Cook Islands generally utilise a low level of technology, and are very traditional in the way that they live, with conservative, agricultural and subsistence based lifestyle patterns and activities. However, because of technology advancement in many different areas, there is an increasing demand for communications, infrastructural based services such as lighting and water pumping as well as general consumer items such as refrigeration equipment.
Through producing these solar based products for consumers and community groups on the Cook Islands, it will allow for the more reliable, cheaper and more cost effective production of energy to fulfil a variety of tasks (Anderson. T. et al.). Because energy is a resource that is increasing in demand, the reliable production of electricity by solar means will present itself as being very attractive compared to existing diesel and petrol powered generation means.
9.5: Production Location:
The optimal, or core production location for this product is likely to be Auckland, in particular, East Tamaki, New Zealand. Auckland is one of New Zealand’s chief product manufacturing locations (Statistics, New Zealand). It is an ideal place, because of the comprehensive distribution of supplemental and complementary industries (such as wiring and electrical based resources) within close proximity to this organisation. This means that materials can be easily and cost effectively distributed from location to location with minimal loses in the distribution value chain. Therefore, the main addition of value for this product is in the manufacturing process, with the core product value being derived in the final outcome ready to ship to location.
Once the final product has been produced, it is easily transported to Auckland International Airport, which has a regular and direct air link to the Cook Islands. This is the most expensive part of the value chain, because value is lost in air freight expenses. Because the Cook Islands are only three hours flight time from Auckland however, expenses not likely to be as significant compared to shipping a product of this magnitude to a Northern Hemisphere destination.
Once the product is at the Cook Islands, then it requires transport to location. This is not arduous, because the islands are small, and easily reachable by boat/small ship and unloaded with a team of individuals. Assembly, training, and maintenance costs are another loses of product value. Because of the nature of the product, value is likely to remain fairly consistent throughout its lifecycle. Maintenance, training and transportation costs present the largest proportion of value lost in the product.
The location of production, with a basic value chain in terms of revenue and expenses is expressed in the chart below:
9.6: The Action Plan:
Action 1: Develop and implement a successful product concept that is both strategic and highlights key features of the product in both an informative and communicative way.
Action 2: Recognise and develop strategic operation product lifespan procedures that take into account cultural and technological aspects as well as changes in the market structure. Develop and implement government and international funding schemes.
Action 3: Develop and implement dynamic branding and packaging of the product to create a distinctive identity of the uniqueness of this product, and its clean, green image.
Action 4: Allow for the packaging of the product to become another integral product (product within a product). Minimise environmental waste, and maximise utilisation of all packaging products to allow for a high level of user interaction.
Action 5: Develop strategies to best target the product to its target market.
Action 6: Indentify and employ dynamic and strategic placement of core company infrastructure to help maximise revenue in the value chain and minimise loses.
9.7: Continuous Improvement:
The most useful concepts have been identifying locations that help minimise revenue loses within the value chain. On a personal basis, I have extensive knowledge, as well as access to key personal as we have undertaken a similar project in our home. This has helped shape this assignments organisational procedure, by allowing insight into real world processes.
In terms of weaknesses, I am not from a manufacturing background, so inconsistencies and lack of insight into these processes may have resulted in some degree of inaccuracy.
In terms of future projects of this nature, the ability to look at and reflect on similarly natured projects is likely to be of mutual benefit to the development and overall product enhancement.
9.8: Supplemental Activity:
Please see the enclosed CD, and the A3 poster for the supplemental activity.
10.1: Promotional Goals:
Promotional goals of this product are significant. Because of the unique and cutting-edge nature of the product, it is important to communicate these needs to the end user, as well as potential sources of funding, for example government agencies and international aid organisations.
• Create awareness with both the end user as well as sources of funding of the significance of energy demand in the Cook Islands, and the ability of solar energy to meet these demands as opposed to older technology.
• Highlight the fact that solar energy is much cheaper than it was a few years ago, and is now a viable and significant contender as a source of energy.
• Recognise and develop promotional strategy regarding and based around the clean and green nature of this product, and its long term environmental benefits.
• Establish rigid communications practices across the company, as well as locally in the Cook Islands. Recognise the significance of language barriers and adjust marketing regimes to suit this critical requirement.
• Research and target the product to the demographic price range and ensure that the product is within the reach of communities and the population at large.
• Market how solar energy can lead to the betterment of society by allowing the ability to run communications and infrastructural equipment that is critical to life in the digital age.
10.2: Business Environment:
The business environment of the Cook Islands is one that is very similar to that of New Zealand at face value (Cook Islands Government). However, there are some fundamental differences that need to be recognised.
Transportation facilities on the island include a major international airport, with the capability of serving wide body aircraft. Therefore, transporting the product to the islands from New Zealand will be relatively straightforward. Distributing the product to the islands where required will also be uncomplicated, because islands are small, with the majority of the population living in low lying areas by the sea. The pallets are easily transportable by small boat, and then lifted to location by a group of people.
Cultural, legal and political hurdles are limited, which is in part due to New Zealand’s close relationship with the Cook Islands and include standard customs regulations. The government of the Islands actually provides incentives to investment in infrastructure, so this project will be encouraged by the local business environment (Cook Islands Government).
In terms of product promotion, the product will require certain cultural changes. These include the translation of core information into the local language, and because most communities receive information from one influential body within their society, this factor will need to be taken into account.
10.3: Distribution Channel:
The nature of this product is that it is produced in the factory, and shipped directly to location where and when required. As a result, there is no need to have a wholesaler, as this will incur additional expense, something that needs to be minimised.
The product will be distributed direct from the factory by an international airfreight organisation, as this is the most efficient manner in which to transport. It should also be noted that the possibility of establishing a distribution partnership with Air New Zealand may arise, as the product can fit within the hold of a commercial aircraft, and this particular airline serves the Cook Islands on a regular basis.
Because the project will involve the Cook Islands government directly specifying what is needed, there is also no need for retail channels. Instead, all organisation and distribution is conducted through the organisation in co-operation with the Cook Islands government and international aid agencies when and where required. This has several advantages in that it reduces complexity of having to wholesale the goods through a retailer, and helps reduce costs to the end user as well as to the company.
10.4: Media Plan:
The Cook Islands has a limited degree of media availability (Hunt, E., Keller, N.). Most people on the islands do not have televisions. Instead, information is transmitted via radio from the main islands. However, this is something that most villages do not have the ability to use easily due to distance or technological means. Instead, news and events is told to the community by an elder in society on a regular basis in meetings within villages. (Hunt E., Keller, N.). As such, communication is likely to be focused on this particular channel, as well as simple, and easy to read billboards and leaflets in the local language distributed around communities. This will ensure maximum coverage with the limited media means available.
10.5: Promotional Strategy:
Promotional Means Advantages/Disadvantages
Push: Makes use of the company’s sales force and promotional activity to create demand for a product.
Tries to sell directly to the consumer (as is the situation in this case), bypassing other means of distribution that could be potentially expensive.
Pull: Requires high spending on advertising marketing to try and build up demand for a product.
Could be very expensive to try and develop large scale marketing material for this particular product.
Deals with retailers, and wholesalers, something that is basically eliminated in this particular product scenario.
Source: Lecture Notes and Study Material.
Therefore, the best type of promotional strategy for this product is the “push” method. The product is being sold directly to the consumer, bypassing other distribution channels. The company is also going to sell the product base on its sales force, and driving promotional factors such as environmental and economic benefits. The “push” method is also best suited when international aid and government organisations are involved as it means dealing directly with people who need the service most rather than dealing with a wholesaler or other distribution channels.
10.6: The Action Plan:
Action 1: Develop and implement marketing and promotional objectives that are specifically targeted towards the host countries cultural, legal and political attributes.
Action 2: Highlight the benefits of solar energy, how it can benefit the local economy at large, and what it could achieve within the community.
Action 3: Market the product to international aid agencies and government as well as the end user to help obtain developmental funding within the organisation.
Action 4: Develop an efficient means of distribution within the organisation that helps reduce overall costs and increases levels of efficiencies by dealing directly with the government and society of the Cook Islands.
Action 6: Recognise the media availability within the Cook Islands, and adjust promotional strategy to suit the required cultural conditions and attributes to help maximise product exposure within a constrained media environment.
Action 7: Use promotional procedures that successfully “push” the good nature of the product being produced, and it’s clean, reliable and environmentally sound nature as part of the company’s key sales and marketing force when marketing the product to the Cook Islands.
10.7: Continuous Improvement:
The most useful concepts were identifying which particular marketing methods are best suited to the cultural needs of the Cook Islands. Without identifying these, it makes it very difficult to market the product successful to an unusual market situation, with such areas as language barriers and cultural differences.
One of the weaknesses in marketing the product is that I have never been to the Cook Island. This makes it a bit more difficult, as I have not seen the consumer culture first hand. I believe that going to the Cook Islands and exposing oneself to the business and marketing environment is the best way to improve in these areas. Insight is always a very good tool when it comes to marketing and promotional activities.
10.8: Supplemental Activity:
Please see Section 10.8, the PowerPoint presentation enclosed on the CD.
11.1: Revenue Sources:
This product has several revenue sources of varying levels of income. These are represented in the table below.
Revenue Source Expected Level of Total Revenue Contribution (%)
Cook Islands Government: 30% net (reducing as required).
New Zealand Government Package:
(N.B. Package already in use by New Zealand as annual contribution to the Cook Islands.) 25% net (reducing as required).
International Aid Agencies (UN, UNDF): 20-25% net (reducing as required).
Cook Island Communities (Consumers): 10% net (rising to at least 20+% once established).
Cook Island Businesses and Industry: 15% net (rising to at least 25-30+% once established).
As can be revealed, the majority of revenue is sourced from New Zealand and foreign aid packages (totalling 45%) and from the Cook Island government, leading to a total contribution from these sources of 75%.
The reason for such a low community and domestic business revenue level is because this is an aid or development based project. Business and consumer may not have the money to spend on solar products initially. So, in order to reduce the burden on these areas, funding will come from government and foreign aid.
Once development levels take off, and microenterprise and new industry schemes have developed, then it is likely that business and consumer revenues will double to a point where government aid and foreign contribution can be reduced.
11.2: Operating Costs:
Annual operating costs are listed below, and take into account the fact that the organisation is producing revenue, and has manufacturing facilities and distribution chains established. All costs quoted in $NZD.
Operations Expenses
Producing/manufacturing products annually to meet local levels of demand. (Represented as 10 full setups* each year) Including training costs:
* Full setup of <10-15 panels and all electrical requirements in a turnkey package ready to run for a village of up to 400 people.
*Also includes estimated labour costs. 1x unit cost at $10,000 each.
Total (est.) of $300,000 max per annum production and manufacturing costs. Includes all labour and additional production charges such as training and development within the Cook Islands. This represents, as expected the greatest proportion of expenses.
Storage Costs: < $1,000 annually as product is manufactured and shipped when required, so can be stored within manufacturing building.
Marketing Costs: < $25,000 annually. Includes all advertising services such as poster and printed/promotional material.
Distribution Costs: < $50,000 annually taking into account current international airfreight charges (2x pallets at $5000 each). Includes costs of transport to location within the Cook islands.
11.3: Start-Up Costs:
No revisions required in start-up costs compared to section 7.1 documenting start-up costs.
11.4: Profitability:
The profitability over a five year period is likely to be similar to most start-up companies in that negative profit occurs in the first few years. This is to be even further pronounced by current economic conditions. The diagram below details these facts.
Year Profit/Revenue Margin
One Operation established, small precedence, negative profit est. at -$100,000
Two Operation small, still limited precedence, negative profit est. at -$50,000
Three Operations developing. Increased precedence and uptake. Breakeven profit levels est. at $0.
Four Established operations. Stating Pacific Island expansion. Positive profit est. at +$40,000.
Five Fully established operations within the Cook Islands. Starting Pacific Island Expansion. Positive profit est. at +$70,000 - $100,000.
11.5: Economic Benefits:
The economic benefits to the Cook Islands are huge. Solar energy would significantly improve the levels of infrastructure within communities, and allow for the creation of many jobs with the establishment of microenterprise based techniques. The introduction of solar energy will have huge positive implications on the tourist market. Increasingly, people are becoming more and more attracted to “green” destinations. This has been dubbed as ecotourism. By establishing itself as a destination that is clean and green by employing solar infrastructure, the Cook Islands has real potential to market itself to the world as a destination that is unspoilt by heavy industry, and that is clean and environmentally friendly. This will have huge positive effects on the country’s economy at large.
11.6: Social Benefits:
Again, the product has many positive social effects. These include the creation of jobs and the development of microenterprise – bringing in much needed income to communities. Telecommunications and other infrastructure can also operated reliably, and cheaply connecting individuals across the Cook Islands. Water pumping, sanitation and lighting/electrical services can also be developed, as well as refrigeration techniques improving the health and wellbeing of community groups, as well as allowing perishable items to be stored longer without the threat of breakdowns in unreliable, polluting diesel and petrol generators, which are mainstream in Cook Island communities at the moment.
11.7: Social Costs:
This project does not have any real social costs. It is a development project with the aim of improving society. However, some very traditional communities may not want such systems introduced, as they are happy with a traditional way of life. The general consensus in the Cook Islands however is that the demand for energy is rising, and therefore there is a huge demand for energy and infrastructural based projects.
11.8: Future Direction:
Ultimately if the company was successful in the Cook Islands, then the next step to take would be to expand to other markets (there are plenty) within the Pacific. The aim for the future in this case would to be the leading supplier of solar based energy products to Pacific Island Nations in the world.
11.9: The Action Plan:
Action 1: Successfully identify and target various marketing areas in order to help maximise exposure and maximise revenue.
Action 2: Reduce operating costs by employing excellent industrial practices such as reusing material during manufacture.
Action 3: Provide and help realise the social and economic gains that the Cook Islands hope to achieve by implementing this solar infrastructure project.
Action 4: Realise the significant potential this product has in other Pacific Nations similar to the Cook Islands, and if successful, target these markets to become a leader within the Pacific Islands in providing solar infrastructure.
11.10: Continuous Improvement:
In terms of improvements to overall processes, it is very similar to section 10.7. (I am keeping this brief).
Only time will tell how successful this product is, and one of key issues faced today is the recession that is limiting economic growth.
Some of my strengths with regard to this business opportunity have been my knowledge of solar based infrastructure, and its implementation as a major source of energy.
In terms of doing better in the future, it would be great to one day travel to the Cook Islands to get a first hand view at society. I believe that this would help improve the overall level of knowledge of this business opportunity, and will allow for a greater level of analysis into the business environment.
Below is a basic schematic of a standard solar energy package to be produced by the company:
With help from Engineering Fundamentals Lectures and Prasad. D., Snow. M.
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