Opening Case: Q-Cells Q-Cells exemplifies the successes and challenges of global importing and exporting. Founded in German (1) in 1999, the company became the largest manufacturer of solar cells worldwide. By 2010, however, it was experiencing losses due, in part, to mistiming some of the entry strategies that are covered in Sectic 9.1 "What is Importing and Exporting?". First, it's important to know that Germany is a high-cost manufacturing country compared to China or Southeast Asia. On the other hand, Germany is known for its engineering prowess. Q-Cells gambled tha customers would be willing to pay a premium for German-made solar panels. (You'll learn more about this "country of origin" factor in Chapter 14 "Competing Effectively through Global Marketing, Distribution, and Supply-Chain Management".) The trouble was that solar cells aren't that sophisticated or complex to manufacture, and Asian competitors were able to provide reliable products at 30 percent less cost than Q-Cells. The Cost Advantage Q-Cells recognized the Asian cost advantage–not only are labor and utility costs lower in Asia, but so ar the selling, general, and administrative (SG&A) costs. What's more, governments like China provide significant tax breaks to attract solar companies to their countries. So, Q-Cells opened a manufacturing plant in Malaysia. Once the Malaysian plant is fully ramped up, the costs to manufacture solar cells ther will be 30 percent less than at the Q-Cells plant in Germany. Then, Q-Cells entered into a joint venture with China-based LDK, in which Q-Cells used LDK silicon wafers to make its solar cells. The two companies also used each other's respective expertise to market their products in China and Europe. 2 Although the joint venture gave Q-Cells local knowledge of the
Opening Case: Q-Cells Q-Cells exemplifies the successes and challenges of global importing and exporting. Founded in German (1) in 1999, the company became the largest manufacturer of solar cells worldwide. By 2010, however, it was experiencing losses due, in part, to mistiming some of the entry strategies that are covered in Sectic 9.1 "What is Importing and Exporting?". First, it's important to know that Germany is a high-cost manufacturing country compared to China or Southeast Asia. On the other hand, Germany is known for its engineering prowess. Q-Cells gambled tha customers would be willing to pay a premium for German-made solar panels. (You'll learn more about this "country of origin" factor in Chapter 14 "Competing Effectively through Global Marketing, Distribution, and Supply-Chain Management".) The trouble was that solar cells aren't that sophisticated or complex to manufacture, and Asian competitors were able to provide reliable products at 30 percent less cost than Q-Cells. The Cost Advantage Q-Cells recognized the Asian cost advantage–not only are labor and utility costs lower in Asia, but so ar the selling, general, and administrative (SG&A) costs. What's more, governments like China provide significant tax breaks to attract solar companies to their countries. So, Q-Cells opened a manufacturing plant in Malaysia. Once the Malaysian plant is fully ramped up, the costs to manufacture solar cells ther will be 30 percent less than at the Q-Cells plant in Germany. Then, Q-Cells entered into a joint venture with China-based LDK, in which Q-Cells used LDK silicon wafers to make its solar cells. The two companies also used each other's respective expertise to market their products in China and Europe. 2 Although the joint venture gave Q-Cells local knowledge of the
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter34: Globalization And Protectionism
Section: Chapter Questions
Problem 18SCQ: How does competition, whether domestic or foreign, harm businesses?
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1.Do you think Q-Cells could have avoided its current financial troubles? What could they have done differently?
2. Do you see import or export opportunities for entrepreneurs or small businesses in the solar industry? What advice would you give them?
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