Ballard Power Systems Inc.

(Ballard) is one of the worlds leading companies in hydrogen fuel cell technology, and is primarily concerned with continuing to lead the world in this technologys development. Ballards employees and managers are motivated to make hydrogen fuel cells commercially viable on a global scale (Business Focus). The companys head office and major manufacturing facilities are located in Burnaby, British Columbia (Facilities and Locations). The company has been specializing in the development, manufacturing, sales and service of hydrogen fuel cell stacks since 1983 (About Ballard). Ballard has developed a number of strategic alliances with corporations such as Daimler AG, Ebana, Ford Motor Company, Danthern Power and Power Plug, which integrate fuel cells into a number of different consumer products (Lead Customers). Ballards current operations focus around four main business activities: (1) hydrogen fuel cell stack research, development and manufacturing; (2) in-house testing capabilities; (3) applications engineering support to systems integrators and original equipment manufacturers (OEMs); and (4) customer support (Business Focus). Ballards fuel cell stack manufacturing facilities develop products for five specific markets including cogeneration, backup power, materials handling, buses and automotive (Product Portfolio). Not all of these products are feasible exports in all countries. Currently Ballard has experience exporting its products and services to markets in France, Germany, Japan, Sweden and the United States (ic.gc.ca). The global market for hydrogen fuel cells is growing exponentially. Global interest in hydrogen as a source of energy is a result of two incentives (1) a search for new sources of energy as the worlds supply of oil is depleted and the price of oil continues to skyrocket, and (2) increased awareness of global warming and pollution. These incentives are of real heightened concern in India. India has the worlds second-largest population and is one of the most polluted countries in the world. There is an estimated ten percent of Indians currently suffering from respiratory diseases such as asthma, making air pollution something that needs to be dealt with (Behi, 2007). India has recognized these issues and is implementing one of the worlds largest programs in renewable energy. Renewable resources already contribute to about 5% of the total power generating capacity in the country. In early 2006, the Indian government unveiled a National Hydrogen Energy Road Map (NHERM). This road map has committed the Indian government to having one million hydrogen fuelled vehicles on Indias roads by year 2020. Addressing oil consumption and pollution by vehicles on the road is a prime target for Indias goals because over 50% of Indias energy needs are related to transportation. Further, India is expected to launch its first hydrogen filling station in 2008. These facts, when coupled with Indias NHERM initiative, make the Indian transportation and automobile industries a prime target market for Ballards fuel cells. Approximately 84% of the 6.3 million vehicles sold per year in India are two and three wheelers which are used primarily for public transportation. Banaras Hindu University (BHU) has had success in developing and testing scooters and two, three, and four wheel vehicles that run on hydrogen. Hydrogen bus technology is also available. Companies such as Daimler Chrysler and Renault have initiated plans to begin manufacturing hybrid fuel cell cars in Ind by as early as 2010. More recently, Tata Motors, an Indian automobile manufacturer, teamed up with the Indian Space Research Organization (ISRO) to produce Indias first hydrogen fuel cell car. As these developments show, the market for hydrogen fuel cells in the Indian transportation and automobile industry is growing at an increasingly high rate. Indias biggest hurdle is going to be capacity: being able to produce the necessary amount of hydrogen for hydrogen fuelled vehicles as they begin to appear on the Indian roads. It is exactly this hurdle that creates the export opportunity for Ballard. Ballard can export its fuel cells to India in order to help the country meet its demand as hydrogen vehicles begin to populate Indian roads. Not only can Ballard export its stand alone fuel cell stacks and engineer support to OEMs in India, they can also leverage their current strategic alliances with companies such as Daimler and Ford to export fuel cells through final consumer goods. Additionally, Ballard will be able to export its expertise to provide customer support for importers of the hydrogen fuel cell technology. Given that an export opportunity exists, the next issue of concern is whether it is a good export opportunity for Ballard. Whether an export opportunity is good depends on several factors, including but not limited to, (1) exporters competitive/comparative advantages, (2) national borders and distance, (3) international trade rules and tariff policies, and (4) monetary foreign exchange. Competitive advantage: Indias weak infrastructure for Hydrogen production provides a competitive advantage for Canada. As mentioned above, India will have capacity problems in being able to produce hydrogen. It is for this reason that the majority of the US $6.3 billion being invested in hydrogen projects under NHERM will go towards infrastructure. This is where Canadas first comparative advantage lies. As a world leader in hydrogen technology development, Canada already has an established infrastructure comprising facilities for hydrogen production, purification, storage and distribution; take for example Ballards production of fuel cells. Canada has been leading in this area because of the sharing of knowledge and experience that occurs within the Canadian hydrogen and fuel cell industry. Sharing of knowledge is facilitated by relationships with organizations such as Hydrogen and Fuel Cells Canada. This organization provides strategic, research, financial, promotional and consulting support to the Canadian fuel cell industry (REFERENCE). These support systems are what allow Canadian companies maintain their advantage over other nations.

Sim

The C

To Sin

Challe Indus

Amer

Absol

Growt

Rober

Powe

Marke

Plan

Econo

Shade

The Canadian government also provides the industry with a competitive advantage by forming a valuable partnership with companies. The federal government has provided financial support in excess of $200 million in the past 20 years (REFERENCE). This is important funding which has helped Canadian companies in the hydrogen industry stay ahead of competing companies in other countries. Canadas hydrogen industry is expanding and the resulting technology and expertise that has developed is recognized globally (REFERENCE). This reputation gives Canadian companies credibility and provides a competitive advantage by building trust and loyalty with customers. Expenditure of over $1 billion between 2000 and 2005 have helped Canada maintain its position at the top and continue to build credibility (REFERENCE). Competitive advantages can also be gained through the presence of supporting industries, as Michael Porter indicated in his article The Competitive Advantage of Nations (year). QuestAir Technologies, Inc. provides this kind of support to Ballard by supplying gas purification systems which help improve the efficiency of fuel cell systems (REFERENCE). The CCS Global Group, Inc. is a second example of a supporting industry. CCS helps companies in the hydrogen industry develop products which meet national and international standards and certifications (REFERENCE). These positive relationships help Canada stay at the forefront of the hydrogen technology industry. In addition to the competitive advantages of the Canadian industry, Ballard has also developed some of its own. Ballard was the first company in the world to construct a manufacturing facility for mass producing hydrogen fuel cells (REFERENCE). This provided a competitive advantage by allow Ballard to meet the demand of existing and emerging markets. With this leading experience and knowledge in infrastructure, research, and development, Ballard can either invest in further facilities in Canada or set up shop in India. Either way, Ballard will be much quicker to mobilize the necessary facilities for hydrogen production. Although India has invested in the manufacturing infrastructure, Ballard has a competitive advantage because of its relationship with companies like Daimler AG, and Ford Motor Company. The relationship with Daimler Chrysler will be key, as mentioned earlier, since Daimler is currently involved in a project to produce a hydrogen fuel celled car for India by 2010. This and other competitive advantages will help Ballard in both developing and retaining a market for its products in India. National borders and distance: As Pankaj Ghemawat indicated in his article Distance Still Matters, the Hard Reality of Global Expansion (2001), distance between two countries can manifest itself along four basic dimensions: cultural, administrative, geographic, and economic. Moreover, the national boarders between Indian and Canada also effectively inhibit the trade flow in terms of educational, cultural, historical, political, emotional and geographical Ties (Helliwell and McCallum, 1995). Though India and Canada exhibit hugely different culture, considering the industrial nature of the exporting product, the negative cultural influences of these differences are weaker than that of consumer products. After India went independent in 1947, its Constitution allows for the continuation of use of the English language for official purposes. Up to date, India has an English speaking population of 350 million (Daily Mail, 2008)1, most of whom are congregated in the economical developed regions. The language factor is not likely to affect the trade flow in any negative manners. India and Canada are both common wealth countries, the common inheritance of the common law, literature and British systems of administration all underpin the sibling-like atmosphere between the two countries. However the geographical and economical distances still affect the trade between India and Canada. The physical remoteness and lack of common boarders lead to high transportation cost and long lead time. The freight rate has gone up by 10% to 50% by Jan 2008; reaching level of 1,200 dollar per container (The Financial Express, 2008)2. The economical distance is demonstrated by the differences in cost and quality in consumer income, natural resources, financial resources and human resources. One suggested way to address these potential trading barriers is to form joint venture or strategic alliances with local companies. Just as Ballard developed joint venture with Ebara Corporation to introduce residential fuel cell into Japanese market, it is more necessary to develop strategic alliance in the more segmented India domestic market. The strategic alliance will enable Ballard to leverage on the distribution channel and facilitate the market penetration. The following corporate are the potential candidates for the strategic alliance: Tata Motors, India's largest private sector company with an annual turnover of Rs. 101.3 billion. It is also India's largest commercial vehicle manufacturer with a market share of 31.2% in the multi-utility vehicles segment and 6.4% in the luxury car segment. Tata Motors has the leading position in the mini-vehicle market with its recently announced Nano brand. The low weight nature of Nano makes it more suitable model to be transformed into hydrogen power. Ashok Leyland, the Hinduja Group flagship in India, is the second largest player in the Indian commercial vehicle market with a market share of 27%. The Company's main activity is to manufacture commercial vehicles and spare parts, including buses. The Company also specializes in manufacturing special purpose vehicles and engines for industrial, genset, marine requirements and other automobile spare parts. With this specialization, Ashok outstand other industrial players in the ability to integrate hydrogen power into commercial vehicles. (Indian Auto Industry)3 International trade rules and tariff policies: As the members of WTO, India and Canada trade under the principle of Mostfavoured Nation (MFN) principle. The current Indian tariff rate for electricity generating devices is 36%.

Langu

Tale O

Charle

According to India Custom Duty Chapter 85 Section XVI, the importing tariff of electric generating devices is as follows (in %):4 Addl Duty(CVD): 16 Spl Addl Duty(Spl.CVD): 4 Excise Cess 3 Customs Cess 3 Basic Duty:Appendix-I 10 Total tariff: 36 The total tariff is 36% while, the Chinas custom tariff rate for the same product category is 12%5. The high tariff is no doubt harmful for exporting Ballards product to India. The two governments can negotiate new bilateral trading agreement under WTO guideline to reduce the tariff barrier to a no-harm level. The alternative strategy to avoid the tariff barrier is to set up the fuel cell manufacturing plant and hydrogen refill station in India. Ballard can leverage on the low fixed and variable cost of Indian market and provide capital and all the required technical support. The total cost will be much lower than manufacturing the product in Canada and export to India. Therefore a high profit margin can maintain competitiveness of this export opportunity. Monetary foreign exchange: Indian rupee has been weakening against US dollar since March 2007. The exchange rate has decline from44.1:1 to 39.1: 1 since then (Yahoo Finance) (see historic change in exchange rate in Appendix 1). The declining exchange rate decreases the attractiveness of the exporting opportunity and increase the risk of the investment. To address this issue, Ballard can either set up a price that can absorb the fluctuation of the exchange rate or use a forward exchange contract to avoid future risk. Considering 1) the steep weakening trend of rupee and 2) the nature of the B2B business, Ballard is advised to choose the forward exchange contract and use a fixed future exchange rate, which is acceptable to both importer and exporter to reduce the risk for both parties. Conclusion: Indias energy and pollution concerns have translated into swift action by the Indian Government to invest in renewable sources of energy, most notably hydrogen fuel capabilities. In the coming years, the Indian automobile industry will have a need for the supply of hydrogen fuel cells, and this is the perfect export opportunity for Ballard Power Systems hydrogen fuel cells. Ballard has significant competitive advantages that make this a good export opportunity. Further, both India and Canada are part of the WTO, providing the benefits of the international multilateral trade organization. Although there are some challenges to this export relating to tariffs and national borders, they can be overcome with suitable business strategies. 1.http://www.dailymail.co.uk/pages/live/articles/news/worldnews.html? in_article_id=508885&in_page_id=1811&ito=1490 2. http://www.financialexpress.com/news/Freight-rates-bring-Indias-coffee-exports-down-by-11/256452/ 3. http://auto.indiamart.com/auto-industry/ 4. http://www.customsgujarat.nic.in/chap-85.pdf 5. http://www.china-customs.com/customs-tax/85/07/ APPENDIX 1: Historic Change in exchange rates USD-Rupees

Get Better Grades Today

Join Essays24.com and get instant access to over 30,000 Papers and Essays

Donate paper | Join now! | Login | Support 2010 2011 Essays24.com