THE QUESTION IS : What are the pros and cons of expanding an electrometer company in these two countries? Which entry mode should the company use? What marketing strategy should it pursue? PRESENT PESTEL AND SWOT ANALYSIS FOR EACH COUNTRY

AUSTRALIA Australia had a very strong economy that was based on its retail industry, including houses, department stores, schools, hospitals etc. According to Australian Bureau of Statistics, all industry groups increased their production in January 2010. The largest increase was in cafes, restaurants and takeaway food services (0.7%) followed by department stores (0.4%), clothing, footwear and personal accessory retailing (0.4%), household good retailing (0.3%), food retailing (0.3%) and other retailing (0.3%). These trends indicated the possibility of high demand for electrometer as the economy was on the rise. After the financial crisis of late 2000s, the government tightened the monetary policy, decreasing the prices across the board. After the financial crisis recovery prices should increase which could lead to increased profits. On the other hand, the economy had a low inflation rate and a tight labor market. Energy Sector in Australia The Australian Energy Market Operator (AEMO) required customers to install equipment to record their energy consumption. The AEMO registered, accredited and audited a range of metering services provided by local network service providers. These service providers were responsible for measuring the volume of electricity supplied, validating the data from the meters, and forwarding the information to AEMO. Consumers had the right to choose their own supplier and accordingly AEMO was responsible for providing the system and processes to support competition and choice for all end-users in the retail electricity market. In 2009, around 6.3 million customers transferred from one retailer to another. The competition between retailers helped in creating new and unique products.12 Market Size and Segments The electricity consumption varied according to the business sector (Exhibit 3). The highest electricity consumption was in the residential sector (27.7%), followed by the commercial sector (22.8%). The Australian electricity market was dominated by individual domestic customers (88%) followed by the business (12%). The average demand for different geographical areas in Australia between 2008 and 2009 is presented in Exhibit 4. As indicated in the graph, New South Wales had the highest electricity demand followed by Queensland. 13 In 2008 the final electricity consumption was 212.1TWh, the peak load was 42.58 GW and the total capacity was 55.51 GW (Exhibit 5).14 Exhibit 6 indicated the sizes of the retail market in 2006. New South Wales had 3.9 million customers in the electricity retail market followed by Victoria 3.6 million customers and South Australia 0.7 million customers. Victorias major electricity retailers and their market share in the domestic and business customers was presented in Exhibit 7.15 Electricity Pricing The Australian National Electricity Market indicated that price elasticity was higher for industrial customers than for commercial residences. Industrial customers were more likely to gain from shifting load, due to their large consumption volume, compared to residential customers. Accordingly, large users were more likely to have metering infrastructure and more flexible supply arrangements required to support a more flexible response as opposed to smaller commercial and residential users. Price elasticity differed by region(Exhibit 8).16 Electrometers Industry in Australia The demand for electricity had increased tremendously in Australia due to the growing use of power appliances such as air conditioners. Accordingly the government was considering other options to reduce the overload of the power systems that were already struggling to cope. Moreover, customers needed to understand the changes in prices of electricity during peak and off-peak periods. Therefore using an efficient electricity metering could act as an integrated system that would help in the overall power supply and management during peak load conditions.17 Accordingly, the use of smart meter, a type of interval meter, had increased recently in Australia. As mentioned earlier, smart meters allowed energy-users to self-manage their demand in response to price signals. Moreover, smart meter also reduced carbon dioxide emission and thus supported the Australian government environment friendly projects. In 2007, the Council of Australian Governments agreed on a national implement strategy for the use of smart meters whenever a benefit was expected. The implementation was expected to take 5 years. In Victoria a program was initiated in 2008 to install smart meters to all small customers over 4 to 5 years. In New South Wales, Energy Australia committed to a rollout of interval meters to customers who consume more than 15 MWh of electricity a year, while Country Energy was installing interval meters on new and replacement basis for all customers.18 Between 1995 and 2005, the Australian government owned key electricity industry stakeholder such as network service providers, electricity retailers, and the network regulatory body. However, now each of these entities had become independent increasing flexibility and thus competition.19 Competition The competition in the metering service in Australia had been very limited, which caused the prices of meters to increase. Citizens in Victoria, an Australian state, paid four times what their7 neighboring countrys citizens in New Zealand pay. This caused the metering services in Australia to become a nice little earner for distribution companies. The cost of metering service in Victoria was 40% the cost of the underlying electricity itself. In New Zealand, the meter could be owned by the power distributor, retailer, or someone else entirely. The household owner would pay a fee to use the meter $NZ 50 a year for old style ones and $NZ 75 a year for one that can be remotely read. In Australia however, the direct cost was $NZ 220 per household for smart meters.20 Accordingly in 2012, there were trends to open the market for competition in order to have a better pricing structure and more market innovation. According to the Australian Energy Market Commission, Reforms to the present metering arrangements are necessary to promote investment in better metering technology and consumer choice." The commission had put forward a model where metering services are open to competition and can be provided to residential and small business consumers by any approved metering service provider."21 Australia had several electrical companies both private and public enterprises that distribute electrometers. The Victorian Electricity Supply Industry comprised five distribution networks namelyCitiPower, Powercor,SP AusNet, Jemena and United Energy. Also, Switzerlands Landis+Gyr electrical company operated in Australia. The electrometer industry was competitive with various local and international companies.

CZECH REPUBLIC Czech Republics economy was transitioning from a centrally planned to a free market economy to be more stable and prosperous. The transitional phase caused investments to increase and the country to flourish, therefore indirectly demanding electrometers. Czech Republic was located in the middle of Europe which could be an opportunity to facilitate any movement within the European countries. Moreover, the country had low labor costs which made Czech republic an attraction for foreign investment seeking resource efficiency. Energy Sector in Czech Republic OECD mentioned that the electricity share in Czech was 11.7% in 1990 and grew to 17% in 2003.22In 2006, the Czech electricity market was liberated and customers were allowed to choose between different suppliers. The transmission system operator was established as a separate state-owned company.23 The electricity market had revenues of $11.3 billion in 2011, which was considered 6.7% increase from 2007. Between 2007 and 2011, the electricity consumption decreased by 1.3% to reach a total of 58.6TWh in 2011. It was forecasted that in 2016, the electricity market revenues will reach $13.1 billion.24 The electricity market consisted of different segments such as industrial, commercial, households, transportation, and other end users such as agriculture.25 Electricity Prices The electricity prices for households had been increasing since 2000; however it was still 23% below the average of other European countries. The prices for industrial users were also increasing but they were 3% lower than the European averages. Generally the industrial electricity prices were lower than the household prices.26 Electrometers Industry in Czech Republic Being a member in the European Union, Czech Republic was forced to follow the EU regulation regarding the use of metering. The EU forced all member countries to deploy smart meters to 80% of its customers by 2020 if it was economically feasible. Moreover the EU provided guidelines to help member countries in "setting road maps, creating interoperability standards, ensuring data protection, and establishing costs and benefits for all stakeholders."27 Most Central and Eastern Europe (CEE) countries found positive benefits of this requirement based on their cost benefit analysis. Since electricity had the highest prices in CEE compared to the rest of the world, many customers could benefit from controlling their electricity consumption. Moreover CEE countries were concerned with renewable source of energy, accordingly upgraded grids were required. CEE was considered the most advanced region among emerging market countries for the deployment of smart grids and smart meters. Smart meter spending in the CEE region was expected to reach $10.3 billion by 2023(exchange rate $1 = 19.97 CZK).28 Czech Republic started deploying smart meters to customers; however the results were not satisfying. Although customers were equipped with electricity smart meters, they were not interested to change their consumption patterns even though they had accurate consumption data and were offered financial incentives through a reduced electricity tariff. Although Czech Republic was obliged to follow the EU regulations, many still struggle to sell the concept of smart meter to their customers. Accordingly major players in the market such as CEZ decided to focus on ripple control, a successful mechanism that was used in the country which was considered an alternative to smart meters. Ripple system allowed the utilities to switch on or off certain electrical appliances on consumer's premises. On the other hand, smart metering allowed customers to make better consumption decisions based on more reliable metering data .30 Major Competitors The electricity industry was dominated by three major players in the market; CEZ, E.ON, and PRE. These vertically integrated companies used to supply and distribute electricity. These three players had a market share of 95% of final customers' total consumption (99% share for small customers). There were 10 suppliers of electricity in the retail market. These suppliers offered electricity that was initially bought from small generators or imported from other countries. CEZ was controlling 73% of national production capacity of generators, and the rest of the market was held by small companies that had 3% share each.31 REACHING A DECISION The Research and Development team of El-Sewedy Electrometers was composed of experts that studied and analyzed any international expansion project. After assessing the country attractiveness, the company assessed the feasibility of the project and investigated different options in order to determine which region was more qualified for international expansion. Once the company had done the on-site visits and decided the place and mode of entry, ESE would start assessing its marketing and sales strategy. In fact, having a good marketing campaign was the priority for the project. Therefore, ESE started doing preliminary analysis of political, economic, societal and technological factors in Australia and Czech Republic in order to evaluate overall country attractiveness and chose one of them. Once the preferred country was selected, they had to decide on an appropriate mode of entry and develop sales forecast and a marketing strategy. The main choices of entry mode usually were either a wholly owned subsidiary (usually an acquired local company) or a joint venture. Another option might be direct export. These steps were fundamental in order to determine the optimum solution which would include the types of equipment, the modes of meters production and the team evaluation.32 The project team, on the other hand was responsible to follow up the business development of the project abroad. The team was assigned to start installing the project equipment, to test them and to introduce technological enhancement or to provide the employees with training courses. ESE was not aiming to sell electrometers only, but to ensure their effective use by the customers. Thus, an efficient customer support would be programmed in the chosen country to ensure that client were able to use the meter software in order to use all its beneficial features. The after-sale service was also important in order to provide a high degree of reliability for the clients and the businesses. In fact, it had the facility to upgrade the meters software throughout 29Petr Stabrawa Consequently, once the software was updated, it would be instantly distributed to the clients in order to benefit from it. ESE offered a 2 years warranty and training for the clients in order to provide the customers with the best maintenance possible. All ESE meters were made according to international standards which would ease the international implementation in any countries as all software used the highest secure encryption (DES). The global demand for enhanced meters was expected to increase by 56% in the next five years.33 It was predicted that with the privatization move in the Eastern Europe, the old mechanical electro meters would be replaced with the basic electric meters. ESE ( Egyptian sewedy electrometer) team visited different factories in Czech Republic which ESE might be interested to acquire.