Proposal for "Own Production in the USA (OPIU)"

Transcription

1 Mikael Hougs/Michael Viberg Pedersen Proposal for "Own Production in the USA (OPIU)" December, 2010 Copenhagen/New York

2 Introduction DIBD is part of Confederation of Danish Industry (DI), supporting Danish companies in their international business development. Having been active within the wind industry for several years, DI has identified a need among the companies for support in setting up production in the US. This proposal describes the suggested road-map to establishing a joint production facility in the US, and the specific output for participating companies. The idea is to establish a shared production area for small and medium sized enterprises, who benefit from a flexible and cost effective production platform, allowing them to focus on their core business. DIBD's documented best practices ensure a well structured approach to market entry in the US, and provide the participating companies with a reliable and impartial foundation for strategic decision making. DIBD has the tools, the practical experience, and the network to develop a Business Plan for the participating companies for the US market entry. DIBD will be able to ensure that this happens at low cost, within a short time frame, and at a high confidence level.

3 Market Situation The global wind energy industry is expanding rapidly, with key players establishing production facilities in the largest markets. Currently USA leads the world wind power industry with more than 36 GW installed, growing rapidly with almost 10 GW additional capacity installed in 2009, and 7 GW under construction. The number of jobs in the American wind industry has grown to 85,000, up from 50,000 in The US wind market is currently the second-largest in the world with the second-highest growth rates globally and a strong presence of the world s largest turbine producers. Vestas has significant manufacturing facilities located in Colorado, while Siemens Wind Power is setting up plant in Hutchinson, Kansas. Other turbine producers are located in other US states, primarily in the mid-west. Danish companies currently supply both Danish and international wind turbine producers in Denmark and internationally with various parts for the wind mills. The range of products can cover all products for the production of a wind turbine. In some cases, the turbine manufacturers openly request their suppliers to manufacture and service them locally. In other cases, it is not an explicit requirement, but rather an implicit understanding that it strengthens the value proposition of a sub-supplier if they are able to service the turbine manufacturer locally in the US. The low exchange rate for the USD makes investments in the US attractive. Combined with the investment incentives forming part of the American Re-investment and Recovery Act (ARRA), now is an excellent timing for establishment in the US.

4 Own Production in USA - Concept Target To be able to invite 5-6 companies to start US production in a shared-use facility with services administered by DI, including facility management, administration, accounting, HR support, warehousing/shipping, and toilets/shower and canteen. Warehouse (raw materials) The invited companies are offered A flexible, cost efficient, quick access, low risk approach to establishing a US manufacturing. The low initial investment allows focus on manufacturing/assembly and sales. Sparring and network access through DIBD. Local employees and other participating companies help companies seize opportunities. Reception Administration Meeting facilities Company 1 Company 2 Company 3 Company 4 Company 5 Company 6 Targeted program for better, quicker integration of Danish expats and their families. Warehouse (finished goods)

5 Initial Feedback: Summary On 16 September, a round table discussion was held in DI's offices in Copenhagen where the concept was presented to an audience of six interested companies. A number of other interested companies were not able to participate due to their preparations for Husum Wind. The following represents the main points of the feedback : The concept was very well received. After the initial presentation all six present companies continued to be interested. The issue of competing companies was discussed. It was made clear that the concept cannot accommodate direct competitors under the same roof. First mover advantage will decide who gets to be in. The issue of location was discussed. The concept cannot accommodate six companies who are all manufacturing very large items or items that are difficult to ship, and who would be very focused on being next door to the customer. They may need more than one location on the US market. There was great interest in exploring all kinds of possible synergies in being together in a "mini-cluster". If the knowledge and information exchange that took place already at the round table discussion can be used as an indicator, there will be great synergies. There was a collective demand for integrating the individual business cases of the participating companies into the Feasibility Study and Business Plan development. At the end of the OPIU Feasibility Study process, each participating company should have a solid foundation for making an individual decision - not only based on the potential feasibility of the Joint Production Setup, but also based on the individual business case.

6 A Parallel 3 Step Process Individual Business Case Phase 1: Clarification of company specific needs Market Study and Opportunity Definition Benefit: Provides an overview and basis for decision on where to locate in US OPIU Business Case Phase 1: Choosing the right locations (Comparative analysis of selected regions/provinces/cities in US) Location analysis of the chosen city/region/province Benefit: Provides an overview and basis for decision on where to locate in US Phase 2: Feasibility Study (detailed strategy, business system, budget) Benefit: Provides basis for the final decision on entry strategy and establishment in the US Phase 2: Feasibility Study (detailed strategy, business system, budget) Benefit: Provides basis for the final decision on entry strategy and establishment in the US Phase 3: Establishment (implementation plan, registration, dialogue with local US authorities, final site selection etc.) Benefit: Implementation plan and guidance on physical establishment. Phase 3: Establishment (implementation plan, registration, dialogue with local US authorities, final site selection etc.) Benefit: Implementation plan and guidance on physical establishment.

7 Choosing the Right Location Process Identification of The Group and individual relevant key success factors Delimitation of geographical scope Examination of statistical data Procurement of other data Cost calculations and geographical assessment A comparative analysis Will provide a comparison of various US production/sourcing locations Will provide indications of the optimal location in US Will, coupled with a site selection, pinpoint the exact optimal location to establish a production Important note DIBD will gather information about key success factors for each participating company

8 The Feasibility Study - Content Market: Customers and competitors within the wind energy industry Business Strategy: Entry strategy, establishment, sales strategy, distribution Logistics: Inbound and outbound, infrastructure Organisation: Work force, costs, competences, recruitment Location: Investment climate, other companies, local incentives Investment: Build or lease, costs and availability of buildings, machinery, total investment Budget: Detailed financial analysis Risk Analysis Legal Setup

9 Feasibility Study - Approach The figure illustrates the study format with all participating companies influencing the feasibility study process. The figure also symbolizes the varied interests of participants. Each participant will apply different focus areas and will obtain different information. Company 5 Company 1 Company 6 Phase 1: Choosing the right locations (Comparative analysis of selected regions/provinces/cities in US) Phase 2: Feasibility Study (detailed strategy, business system, budget) Phase 3: Establishment (implementation plan, registration, dialogue with local US authorities, final site selection etc.) Company 2 Company 3 Company 4

10 Budget The total price for each participating company is: DKK This amount includes DIBD's travel costs in relation to research activities and representation/sales meetings.

11 Conditions and Benefits The feasibility study will be initiated under the following conditions Five partners have signed up by 1 February 2011 Each company partner will benefit from: Overview of the market and contact data on key target companies The right to influence heavily on the choice of location The right to be part of the shared facility from the beginning An individual evaluation of the match between the concrete market opportunities and the company's policies, resources, and strategies.

12 Presentation of DIBD DI International Business Development (DIBD) is a part of DI assisting Danish companies that seek international growth by developing their businesses in challenging markets in Asia, Eastern Europe, USA, Africa, and Latin America. Through our offices in Copenhagen, Shanghai, Moscow, Mumbai, Sao Paulo, and New York, DIBD offers individual solutions on strategy, establishment, export, market analyses, comparative analyses, business plans, feasibility studies, financing, partner searches, contract drafting, and the enhancement of local business environments through co-operation with numerous Business Membership Organizations. DIBD NYC offers on-market consulting services to Danish companies looking to get established or to improve their competitiveness on the US market. From the office in New York City, we offer a range of customized services, including Market Studies, Business Plans, Location Analyses, and Representation. "Our focus is to create results rather than reports. We work for our Danish clients to advance sales to their potential American customers from our first point of contact. " Mikael Hougs, General Manager, DIBD NYC

13 DIBD Project Team Mikael Hougs General Manager, DI USA Jacob Kjeldsen Director, DIBD Michael Viberg Pedersen Senior Consultant, DIBD Mikael is responsible for DIBD's office in New York. In addition to filling the position as General Manager, he assists Danish companies with market studies, strategic market segmentation, entry strategy development and business plans, feasibility analyses, and implementation support. Mikael helps companies avoid the pitfalls on the American market and thus ensures them a good start on an exciting, but also very challenging market. For the past three years, Mikael has served on the Board of Directors of the Danish American Chamber of Commerce in New York. Phone: Cell: mhs@di.dk In DIBD, Jacob focuses on assignments for clients in USA, Asia, Eastern Europe, and Middle East. Jacob has strong competences and substantial experience within strategy, management, and project implementation related to global business development, as well as project finance and partner search. Jacob is heavily involved in developing the DIBD clients' international strategies, business development, and project implementation. In addition, Jacob also has strong experience in negotiating with clients' foreign partners and securing external financing. Jacob has been actively involved in the establishment and management of DIBD's offices in Shanghai, Moscow, Mumbai, New York, and Sao Paulo that are all assisting a broad range of Danish companies in penetrating these markets. Hence, Jacob has been one of the main drivers behinds the DIBD activities in the BRICU countries. Phone: Cell: jak@di.dk Michael s working areas and primary areas of responsibility are business development and project structuring for Danish companies entering international markets. Michael provides consultancy on market entry strategy, business plans, market analyses, and partner search and selection in single or multi-country projects globally, specializing on renewable energy projects. Through direct work experience in renewables, Michael has good insight into the wind energy industry. Additionally, Michael partners with the heads of DIBD's international offices in Russia, China, India, Brazil, and USA on project structuring and implementation. Phone: Cell: mivp@di.dk