Power Electronics in the African Market
Power Electronics are the Electronics in charge of the development of devices, circuits, systems and procedures for processing, control and conversion of electric power. Its application in multiple sectors, such as the industrial, energy, transport, or even consumption, is increasing, solving questions concerning power supplies, battery chargers, temperature, variable speed motors, etc.
From the image above, we can affirm that there is a significant increase in the consumer market of power electronics, because of the growing demand of low consumption devices power supply and batteries, along with the need to provide a power source and above all, the need to maximize energy resources. To this the need to design electronic power converters (AC / DC, AC / AC, DC / DC and DC / AC), what leads to the necessity of a software that facilitates the design of these converters by facilitating the work of the engineers, reducing time of development and design and that is also useful in the field of learning.
While it is true that the presence of power electronics has grown exponentially in recent years, we must consider that there are still territories where the industry has not yet expanded, being relevant for its eventual exploitation.
Following this, Africa and Asia are the continents that show a great future projection as regards as the investment of this type of industry, confirming what it was indicated in the report published by the World Economic Outlook and published in The Economist, which African continent as, “Ten of the twenty economies with the greatest growth potential until 2017 “. Therefore, given the scarce presence of companies that distribute this type of software, make Africa one of the best options to continue the expansion.
Analysis of the 5 Porter Forces
Threat of substitute products: In the case of power electronic software converters, being a software with a specific field of application, there are no direct substitutes, and the substitutes that can be found do not cover the needs covered by this type of software.
Substitutes would be other CAD applications that help to reduce time in design, facilitating complex calculations, or calculating margins of error or power losses, …
There are other products at different cost but their functionalities do not provide a design software.
Rivalry between competitors: Within the software market dedicated to power electronics, and more specifically to the control and design of the electronic power converters, we find a little rivalry, since there are hardly any applications dedicated to this field in particular. The programs that we can find are very diverse.
The different functions needed to design a power are: general mathematical programs like Mathcad, Matlab – Simulink, with a high cost; more specific design programs with different costs, differentiating focusing on the design of small power converters, such as Poweresim and the ones with a wider field of converter design, such as Power 4-5-6; Programs that create a control code to digital platforms, such as QDESYS or ELGM, this also much more expensive: programs with an analogic or digital control: simulation programs such as PSIM, PSPICE, PSCAD.
Threat of new entrants: Firstly, it will be necessary to consider the patents and licenses necessary according to the legislation of each country, seeking the exclusive use to sell the product, during a certain period. For example, as we have focused on Africa, in the case of Tanzania, all companies that want to establish themselves there, must register in the Business Registration and Licensing Agency (BRELA). To this end, the so-called Tanzania Investment Center (TIC) facilitates registration and incentives for foreign investors.
On the other hand, in the power electronics software industry, companies have to be aware of the need for a significant initial investment in R & D, so product differentiation is an angular issue in the sector, since the highest expenditure of the companies competing in the market is destined to the development of products that differ in their characteristics with the rest of products competing in the market. However, once the product has already been developed and established in a first market, the cost of integrating it into a new market doesn’t represent a great barrier to entry.
Bargaining power of suppliers: In this kind of business, it’s necessary to rely on suppliers of power electronics products that includes the sale of specialized software among their products.
On the African continent there are practically no suppliers to which you can go to sell the product in question, so the bargaining power is high, opting for exclusive distribution.
Bargaining power of buyers:
Power electronics software is a very exclusive product designed to:
– Companies that generate products for other industries or sectors
– Universities and training centers
– Research Centers
Being such an exclusive product where there is no competition in the market, customers have a low bargaining power, so you can choose the price at which you want to sell it.
Therefore, we can say that expanding in the African market would be a wise choice for a company dedicated to power electronics because of the few barriers to entry that the industry would face. This is due to the low rivalry and threat of substitute products as it does not have direct substitutes, making the industry reach the monopoly position.
At the same time, the bargaining power of consumers is low because there is not much competition and there is a great cost of change that they can face if they decide to change supplier.
However, the company interested in establishing itself in the African market must take into account the need to obtain the necessary patents to develop and sell the product, as well as a significant initial investment in R & D.