Running head: PORTER’S FIVE FORCES MODEL 1

Analysis of Revenue and Development of China's New energy Industry and Application of

Porter's Five Forces Model

December 21,2021
PORTER’S FIVE FORCES MODEL 2

Analysis of Revenue and Development of China's New energy Industry and Application of

Porter's Five Forces Model

Executive Summary

In the current years, China has evolved as the leading new energy consumer globally.

Due to China's Increased development in the economy, the nation has instilled government

policies that are favorable to facilitate continuous improvement of the new energy sector. For

example, China’s government is said to increase investment in the overall restructuring of the

new energy industries. In the current years, China has been facing problems such as inadequate

supplies of new energy. As a result, China put effort into investing sectors of renewable new

energy; these include; wind, solar new energy, geothermal power, and tidal power. The Chinese

industry of new energy is expected to be the biggest in the coming years, for it has been the

largest market of new energy in the globe over the past decades. The analysis of Michael's

Porter's Five Forces can describe the Chinese new energy industry. Porter's Five Forces uses

concepts derived from the economics of Industrial Organization (IO), and it is used to determine

the intensity of market competition used to analyze the market attractiveness. Porter refers to the

Five Forces Analysis as the microenvironment and contrasts the Forces to the other general term

in business; macroeconomics. Porter's analysis consists of those forces linked to an organization

that interferes with its operations of providing clients with goods and services and making

profits. An organization that wishes to change any of Porter's Five Forces Analysis must

reexamine the marketplace situation.

PORTER’S FIVE FORCES MODEL 3

Introduction to the Industry

The People's Republic of China (PRC) is mainly referred to as the Red Dragon home,

often considered auspicious, prosperity sign, and a wealth storehouse in oriental terms. The PRC

never recognized its self-dependant resources until it developed further than the Russian

dependence and learned how to extract and use its resources. For example, the PRC has made oil

one of its main sources of new energy. Additionally, it has developed to capitalize on its natural

resources, including coal, gas, and nuclear new energy. The PRC has incurred various concerns

about the environment due to overreliance on sources of energy such as coal and oil that pollute

the atmosphere. In addressing the issue of environmental pollution, the PRC invested in making

effective measures of policy change that will enhance the protection of the environment. The

PRC has also developed the necessary technical support that is needed in implementing new

energy that is clean, efficient, and sustainable from the sources of new energy. In the efforts of

transitioning from old energy sources, China has invested in establishing renewable new energy

sources such as; solar, geothermal biomass, and wind energy and hydro power. The Porter Five

Forces Analysis is a strategic management tool for analyzing industries and understanding the

fundamental levers of profitability. Managers at China New energy Limited may use the Porter

Five Forces model to understand how the five competing forces affect profitability and design a

strategy for improving China New energy Limited's competitive edge and long-term profitability

in building up renewable new energy industry. Michael Porter identified five forces that have a

substantial impact on a firm's profitability in its industry in his book Five Forces that Shape

Strategy. These five forces analyses are now referred to as Porter Five Forces Analysis in the

corporate world. The Porter Five Forces are the following: threat of new entrants, bargaining
PORTER’S FIVE FORCES MODEL 4

power of suppliers, bargaining power of buyers, threat form substitute products, and rivalry

among the existing buyers.

Industry Definition

Under the pressure of the highly developing capacity of new energy production that is needed to

deal with the increasing demand of new energy use, challenges related to new energy use, and

improve efficient development in the economy, most of the China provinces are rapidly

establishing development projects that will facilitate providence of sustainable new energy.

Although solar new energy is reliable only on a small portion of the efficient flow of renewable

new energy, the government of Chinese is presently focusing on its economic capability in the

global market (Zhao et al., 2016). For example, in July 2021, during the nation's 14th Five-Year

Plan (2021-2025), most of the Chinese provinces announced their targets in their new energy

strategies and projects. Sixteen of the Chinese provinces still publicly revealed a rise in the scale

of the solar power, wind energy, geothermal power, and tidal power plan during the same 14th

Five Year Plan event. This clearly shows that the government of Chinese highly recognizes the

effectiveness of developing the solar power industry, wind energy, geothermal power, and tidal

power; for example, solar power new energy, wind energy, geothermal power, and tidal power

will help solve the challenge of new energy supply scarcity in most Chinese industries. The solar

new energy sector involves activities such as the mining of Silicon, purification of crystalline

Silicon, production technology, cutting of wafer, production of battery installation of the module,

and generation of new energy. In most of the local governments of China, solar power, wind

energy, geothermal power, and tidal power is an effective source of new energy as well as a

virtual new energy channel for facilitating the increased production of technologies that are

innovative around the globe. The increasing reliance on renewable sources of energy for
PORTER’S FIVE FORCES MODEL 5

example, solar new energy since 2013-2018 is illustrated in the graph below (newsecuritybeat,

2019).

Diagram 1

New installed solar power capacity in China from 2013-2018

https://www.newsecuritybeat.org/2019/03/chinese-solar-shines-home-road/

Industry Profile

In transforming China into the system of Global clean new energy, the government of China has

been increasingly improving the development of solar power new energy. The Chinese

government has also innovated a favorable environment for the development of solar new energy

in the new energy industry. Most of the world's attention is currently focused on renewable new

energy sources such as hydropower from flowing water and solar new energy. This significantly

improves global market competitiveness and a safe and convenient transition of the electricity

market (Hafezi et al., 2020). Below is an example diagram illustrating increase in dependance

rate of renewable new energy sources such as; solar and wind new energy over gas and coal new

energy sources (Hanley, 2017).

Diagram 2
PORTER’S FIVE FORCES MODEL 6

Solar leads the way as renewables grow faster than expected

https://cleantechnica.com/2017/10/05/solar-leads-way-renewables-grow-faster-expected/

Comprehending the competition determinants in the solar power industries of China and

focusing on the relative impacts of these determinants grants an opportunity to the federal

policymakers to prioritize policies and actions. The rate of development of the solar power

industry in China is increasing. The industry's practitioners have shown interest in facilitating the

efficiency of several factors that can help improve the attractiveness of the new energy sector

(Hafezi et al., 2017). In the diagram below, the growth trend of renewable new energy by

technology is revealed since 1994-2022 in bar graphs. It is visible how the renewable new energy

sources such as; solar, wind, and hydropower experience tremendous growth every 4-5 years as

measured in gigawatts (Hanley, 2017).

Diagram 3

Renewable new energy capacity growth by technology

https://cleantechnica.com/2017/10/05/solar-leads-way-renewables-grow-faster-expected/
PORTER’S FIVE FORCES MODEL 7

However, according to Yiqiong (2020), there still exists a shortage of studies that confirm the

relative impacts of the solar power industry's competitiveness. Most of the current studies use

Porter's Five Forces Analysis to search for essential competition determinants. For example, Wei

et al. (2021) examine Taiwan's solar power industry competitiveness based on the Five Forces of

Porter's Analysis; this includes; the bargaining power of buyers, bargaining power of suppliers,

competitive rivalry in the industry, the threat of new entrants, and the threat of substitutes. Hou

et al. (2020) examine the solar power industry and its influencing factors using Porter's Five

Forces Analysis. In the diagram below, the cumulative growth of solar new energy since 2017-

2022 is illustrated in the developing sectors of Asian continent and the sub-Saharan Africa

(Hanley, 2017). Among the Asian nations, China is the leading nation in the application of solar

new energy uses as the country has the highest population in Asia and thus, many of the world’s

top solar generators are imported from the country.

Diagram 4

Cumulative growth of off-grid solar PV applications

https://cleantechnica.com/2017/10/05/solar-leads-way-renewables-grow-faster-expected/
PORTER’S FIVE FORCES MODEL 8

Renewable New energy

China stands out in the international ranking of new energy use demand. The nation is the global

hungriest new energy consumer as its new energy use demand adds up to almost 3.3 billion oil

tons each year (Wee, 2017). China has burnt more coal compared to all the other global nations

when combined. Due to the high rates of China's dependence on fossil fuels, the nation emits the

largest share of pollutant gases, which is approximately one-quarter of the global greenhouse

gases. However, China still exists as the largest and most prolific producer of wind new energy.

It can make exceedingly double the new energy produced by the U. S’s second-largest generator

(Wu & Xue, 2017). In the diagram below, the annual additions of renewable new energy power

capacity by technology since 2012-2018 is illustrated. In the diagram, solar power new energy

has the highest new energy capacity, followed by wind power, hydropower, and bio-power,

geothermal power, and ocean power (Hanley, 2017).

Diagram 5

Annual additions of renewable power capacity, by technology and total,2012-2018

https://cleantechnica.com/2017/10/05/solar-leads-way-renewables-grow-faster-expected/
PORTER’S FIVE FORCES MODEL 9

China also has approximately one-third of the capacity to generate global solar new energy as the

nation more solar new energy systems over the past year compared to other nations. In addition,

China has genuinely shown interest in being at the top of the world's one major sector of

renewable new energy deployment and investment. In 2016, four of the five largest deals of new

energy in the world were organized by Chinese new energy industries. In 2017, five of the six

biggest manufacturing industries of solar-module and the biggest manufacturer of wind turbines

were owned by China. As per Wang & Zhan (2019), China is already leading in producing

renewable new energy. For example, despite China existing as the largest producer of wind new

energy, it also exists as the largest producer of solar new energy; thus, the nation has made its

name as the largest domestic overseas investor in renewable new energy.

Industry Structure

The demand for new energy is growing increasingly in China due to the nation's economic

development. The new energy transformation has become imminent due to the traditional non-

renewable new energy. The development of renewable new energy sources might be obstructed

by cost and market constraints; however, China's new energy industry structure will gradually
PORTER’S FIVE FORCES MODEL 10

reverse to be comprehensive and diverse (Alizadeh et al., 2016). Thus, the main form of

domestic new energy consumption still remains to be the traditional high-carbon new energy for

the past long time. The costs and regulation of imports and exports in the new energy industry

can be reduced through enhancing technology development and using macro-control. The

reduction of costs and regulation of imports and exports facilitates sustainable development of

transitioning from relying on high carbon new energy to low carbon new energy. According to

Isabelle et al. (2020), coal and oil production in China accounts for the biggest share, whereby

70.4% represents its coal production, 19.9% account for oil, and 3.9% represents the production

of natural gas. In addition, the new energy production rate in hydropower, nuclear power, and

wind power sectors was relatively slow as it accounted for up to 7.8%. In 2009, there was an

evident gap between the consumption and demand of new energy as the total new energy

production in China was approximately 2.74618 tons while the consumption of new energy

counted to a total of 3.06647 billion tons (Fang et al., 2018). Based on the given results of

China's new energy industry account structure, the government of China has implemented

several reform policies to improve new energy investment; these include reforms of foreign

exchange, reforms of pricing, legal reforms, and reforms of the enterprise. In the diagram below,

(Hanley, 2017). various nations that will account for two thirds of global renewable expansion

from 2011 to 2022 are indicated. China is the leading nation having a capacity growth of up to

470 gigawatts in the solar renewable new energy sector.

Diagram 6

Countries that will account for two thirds of global renewable expansion from 2011 to 2022
PORTER’S FIVE FORCES MODEL 11

https://cleantechnica.com/2017/10/05/solar-leads-way-renewables-grow-faster-expected/

Porter's Five Forces Analysis

Porter's Five Forces is a holistic analysis framework that takes planned decisions away by

just drawing a strategy of the current competition in the market. Porter's Five Forces can be

illustrated using the China New energy Limitedand and Goldwind company. Using the

mentioned industries, the description of how the new energy industries can develop a

competitive and sustainable competitive environment in the market is provided. These

PORTER’S FIVE FORCES MODEL 12

companies can use Porter's Five Forces to implement new energy industry strategic position and

find profitable chances in the sector of renewable new energy industry. The diagram below

illustrates the competition of oil and gas industries to the renewable new energy industries

among various global nations. In the diagram, the companies illustrate the high threat of new

entrants to the new energy industry in the Five Forces model. The Exxon Mobil in U.S followed

by the PetroChina in China both having a market value of $356.5 and $329.7 billion respectively

(statista, 2021). The high revenue ranking of China oil and gas indicates how far oil and gas

industry act as a threat of new entrant to new energy industries.

Diagram 7

Top oil and gas companies by revenue 2015 ranking

http://www.statista.com/statistics/272710/top-10-oil-and-gas-companies-worldwide-based-on-

revenue/

Bargaining power of Buyers

PORTER’S FIVE FORCES MODEL 13

Buyers occur to be demanding. Through bargaining, buyers’ quest to purchase the best

offerings available in the market using the minimum price possible. In the long run, the

bargaining power of buyers has put pressure on the profitability of renewable new energy

industry. The lesser and more robust the base of customers is in the new energy industry, the

greater the bargaining power of customers (Yiqiong, 2020). Greater bargaining power of

customers enables them to have a good ability to seek significant discounts and offers on the

products they require. The China energy Limited can handle the bargaining power of customers

by taking the following measures. One, China energy Limited can build an extensive customer

base. This reduces the bargaining power of customers by granting the firm a chance to streamline

its processes of production and make sales (Wei et al., 2021). Two, China energy Limited can

increasingly innovate its products. Customers tend to search for discounts and offerings on

products that have a long-term foundation; therefore, if China energy limited continues to invent

new products in the market industry, the bargaining power of customers will be limited (Hou et

al., 2020). Lastly, the defection of the existing customers in the China energy Limited to its

prospective competitors can be reduced by introducing brand new products. Below is a diagram

illustrating an increase in the consumption of new energy in China due to effective ability of

buyers to bargain hydropower provided to them (ceic data, n.d.).

Diagram 8

China’s new energy consumption

https://www.ceicdata.com/en/china/energy-production
PORTER’S FIVE FORCES MODEL 14

Bargaining power of Suppliers

  Many of the companies that operate in the energy industry purchase their raw materials

from a range of suppliers. The Goldwind company, is one of the country's leading wind power

producers in terms of consolidated income and the largest in terms of production volume. With

more than $392 billion in consolidated revenue, the corporation was rated fourth on the Fortune

500 Global list. The margins which the Goldwind company can earn in the market can be

decreased by suppliers who have taken the dominant position. Strong suppliers operating in the

sectors of wind power can extract higher prices from the field firms of wind new energy using

their power of negotiation. The higher supplier bargaining power resulting impact decreases the

potential profitability in the production of wind new energy (Irfan et al., 2019). Goldwind can

handle the bargaining power of suppliers through the following methods. The company can use

many suppliers to build a more effective supply chain. In addition, the company can use varying

materials to experiment with new designs of products to ensure that it shifts to the sale of another

raw material if the prices of a particular product rise (Anastasiu et al., 2020). Lastly, the

company can improve suppliers that are dedicated, mainly whose continuity of their enterprise

relies upon the functionality of the firm. Goldwind can learn an operational skill from Walmart
PORTER’S FIVE FORCES MODEL 15

and the Nike companies that is; third party manufactures were implemented, and their business

entirely depended on the functionality of the two companies; thus, a scenario is developed where

the third-party manufacturers acquire less bargaining power just like in the incident of Walmart

and Nike companies. The diagram below illustrates the rate of new energy consumption from

1990 to 2020. Despite the Covid epidemic, total energy consumption increased by 2.2 percent in

2020 (compared to 3.6 percent per year between 2017 and 2019). Consumption growth has

previously dropped to 1.7 percent each year between 2012 and 2017. However, this is far lower

than historical levels (7% per year between 2000 and 2012) (Enerdata, 2021).

Diagram 9

China’s new energy consumption

https://www.enerdata.net/estore/energy-market/china/
PORTER’S FIVE FORCES MODEL 16

Competitive Rivalry in the Industry

Environmental regulations that are ahead of their time in the United States may foster the growth

of new eco-industries. These industries may be able to obtain a competitive edge in the global

market. The influence of domestic renewable energy policy on renewable energy export

performance (wind and solar PV) is analyzed. A gravity model of international trade with a

balanced dataset of 49 (wind) and 40 (photovoltaic) nations for the period 1995–2013 is

employed. Renewable energy legislation's rigor is measured by installed capacity. Econometric

model reveals evidence of competitive advantage in the wind sector, which is positively related

to domestic renewable energy policies, but only for a brief period in the solar PV industry. The
PORTER’S FIVE FORCES MODEL 17

underlying technology utilized in the two businesses, explains the dynamic difference.

Renewable energy competitiveness research is a key application in the field of energy

competitiveness research, where competitiveness refers to a country's international

competitiveness in renewable energy sources such as wind, hydropower, photovoltaic (PV), and

biomass energy, as well as related industries. All essential measuring variables include

renewable energy resource, investment, technological innovation index, staff count, total

installed capacity, Constant Market Share Model (CMS), TradeCompetitiveness Index (TCI),

and Revealed Comparative AdvantageIndex (RCA) (Song et al., 2018). The diagram below

illustrates the competitive rivalry between China’s renewable new energy sources as of 2018

(Haugan, 2020).

Diagram 10

China’s energy mix statistics

https://norwegianscitechnews.com/2020/02/chinas-rapid-development-of-solar-and-wind-power/
PORTER’S FIVE FORCES MODEL 18

Lastly, the company can increase its market size by collaborating with other competitors

in the same market instead of just competing for a small market. According to Zhang et al.

(2020), profitability with operating companies suffers due to significant rivalry between existing

competitors. As a result, this may drive organizations to take measures such as price discounting,

implementing new sales items, campaign advertising, and improving service providence

activities.

Threat of New Entrants

Wind energy is a key renewable energy source that is being researched all over the world

right now. In the previous five years, China has dramatically grown its total installed wind

energy capacity, becoming the world leader with 34.03 percent of total installed capacity

(Wellner, & Lakotta, 2020). Meanwhile, China's power grid is unable to connect a large amount
PORTER’S FIVE FORCES MODEL 19

of wind energy, resulting in massive wind energy rejection. The word "rejection" refers to the

inability of wind farms to generate electricity due to a range of undesirable circumstances, such

as grid safety and a lack of available transmission lines. China's total wind energy rejection rate

topped 10% between 2010 and 2016. In the first half of 2016, the problem of wind energy

rejection becomes increasingly significant. The overall rejection rate for wind energy in China is

21%, which is 6% higher than the rate in 2015. (Wellner, & Lakotta, 2020). Wind energy

rejection is a concern in ten provinces (or comparable cities) out of thirty-two, with nine of them

having a rejection rate of more than 10%. Surprisingly, the rejection rate for wind energy is 47

percent in Gansu province and 45 percent in the Xinjiang Autonomous Region, respectively. As

a result, for the expansion of wind energy in China and throughout the world, a detailed analysis

of the reasons of the aforementioned occurrence is necessary (Bruijl, 2018).

Threat of Substitutes

The profitability of the market industry suffers when a new product or service meets

similar needs of a client in varying methods. For example, Dropbox and Google Drive services

are a substitute to storage devices that are hardware products. If the substitute product or service

offers a proposition of value that mainly varies the current industry offerings in a sector, then the

threat of the substitute is considerably high (Kirabo, & Jinzhao, 2017). For example, the

following sources of new energy can be used to illustrate the threat of substitutes to the China

new energy industry.

Oil

Three state-owned oil companies responsible for improving China's domestic services have

dominated China's sector of oil production. These three companies are also responsible for

building and managing pipeline networks, managing the downstream of China that is
PORTER’S FIVE FORCES MODEL 20

increasingly becoming sophisticated, and filling its strategic petroleum reserves (SPR) (Irfan et

al., 2019). The diagram below illustrates oil production and consumption in China. The diagram

illustrates that since 1980-2020, China consumes thousands of oil barrels every day, increasing

the environmental impact pollution (ResearchGate, 2021). This rampant pollution creates the

need for adopting new energy sources of new energy as they provide clean new energy that is

harmless to individuals and the environment. During the previous years, the demand for China's

oil has outstripped production, and thus the three main oil manufacturing companies are the

major investors in the world's oil upstream. Therefore, the companies have implemented their

sector in the world's oil refining and trading activities. For instance, the three companies

currently rank among the top ten oil companies in the world.

Diagram 11

China’s Oil Production and Consumption

https://www.researchgate.net/figure/Chinas-Oil-Production-and-Consumption_fig4_319332873
PORTER’S FIVE FORCES MODEL 21

The Chinese state still heavily dominates and controls the oil sector despite having a

developing global reach. In most oil companies' stakeholders, the Chinese government maintains

important influence concerning its commercial decisions by price-setting techniques and offering

diplomatic support in outbound investments. In addition, the oil companies are offered an

essential responsibility of making trading policies by the National Oil Companies (NOCs)

technical know-how and market expertise (Anastasiu et al., 2020). The relation between the oil

companies and the NOCs cannot be comprehended, but it has currently been set to improve

further as the Chinese government is gradually making efforts of liberalizing the sectors of new

energy to transition its state-owned oil production giants. Therefore, in the industry of the new

energy transition, China will evolve to play a definitive role, but the NOCs might experience an

uncertain future in their performance as the nation continues with its processes of reorienting

new energy industry plans.

Natural Gas

Over the last decade, the demand for natural gas has increased rapidly in China.

According to Zhang et al. (2020), the demand for natural gas in China has increased much more

significantly compared to its capacity of domestic production because the gas usage rate has

grown in both sectors of production industries and power generation. China is also among the list

of the most significant gas importers having a 45% of its supply of natural gas in 2018 and a

15% increase in natural gas supply in 2010 (Bruijl, 2018). The global largest importer of natural

gas occurs to be China. It has 36% of natural gas transported through pipelines and 64% of

natural gas imported in liquified form as per 2019 data (Wellner, & Lakotta, 2020). Following

the slowdown of the COVID-19 pandemic in the previous year, China's natural gas demand

rapidly increased than ever before. In 2021, the supply of China's gas ranged a year-on-year
PORTER’S FIVE FORCES MODEL 22

increase of 16%, followed by the massive demand for strong power and industrial new energy.

The generation of gas-fired power caused the poor performance of hydropower generated in

Southwest China, tight supply of coal combined with increased prices of coal within the nation,

and high temperatures in summer. The nation's economic growth was brought about by favorable

rates of exports, and the overall demand for new energy such as that of natural gas was benefited

by the recovery of domestic consumption. In the long run, the demand for China's new energy

exceeds the analyzed expectations, and currently the gas demand is expected to increase by 13%,

which is equal to 42 cubic meters (bcm) during the year-on-year 2021 analysis.

The Chinese government has focused on new energy-saving emission reductions and

increased environmental protection initiatives over the last ten years. China's natural gas industry

has continued to grow at a rapid pace, with natural gas consumption rising from 39.7 billion

cubic meters in 2004 to 185.5 billion cubic meters in 2014, representing a 14 percent annual

compound growth rate (gasex, 2018). Natural gas was used by more than 250 million people, and

the primary new energy ratio was 5.8%.

Diagram 12

China’s natural gas consumption status

http://gasex2020.org.cn/new/about.html
PORTER’S FIVE FORCES MODEL 23

Coal

Coal is one of the most fossil fuels that are carbon-intensive and has since faced

increased pressure towards its use decline from the campaigners of climate and societies affected

by air pollution from the production industry. In present years, more than 100 big banks such as

the World Bank, Inter-American Development, and the European Investment Bank happened to

divest from operations that entail coal mining power plants that are coal-fired (Kirabo, &

Jinzhao, 2017). However, despite many of the mentioned financial institutions declining to lend a

hand in coal mining activities, other nations stepped in to fill the void, including South Korea,

Japan, and China. The developing nation that depends on China for industrial and structural

development can find their policies of new energy turned ion their head. During the UN General

Assembly that happened in September, Xi Jinping, the Chinese president, announced strategies

of declining the operations of building new power plants of coal in abroad nations (Öneren et al.,

2017). As a result, the president's announcement has been viewed by new energy industry

analysts as the "death knell" for abroad activities of funding coal mining, which might evolve to

huge ramifications.
PORTER’S FIVE FORCES MODEL 24

Between 2013 and 2018, China played a significant role in the coal mining industry as

the nation granted the coal-fired power plants with half of the overseas public (ResearchGate,

2021b). The massive foreign investment of China in coal mining has granted it the last resort

lender reputation in most of the African and Asian nations that aim at promoting the capacity of

power to the economic growth of fuel.

Diagram 13

China coal production scenarios.

https://www.researchgate.net/figure/China-Coal-Production-Scenarios-1980-

2025_fig19_255212711
PORTER’S FIVE FORCES MODEL 25

Because they influence the external circumstances of operations and consumer behavior, policy

and economic uncertainties have an impact on business decision-making. Businesses are

encouraged to save money, reduce emissions, and engage in wind energy development as a result

of government policies. Furthermore, industrial policies or comparable remedies can help the

industry overcome impediments to low-carbon energy production, resulting in a low-carbon

economy and long-term growth. Businesses, on the other hand, are at risk from economic policy

uncertainty because they are unable to predict the timing and scope of policy implementation

(Gulen and Ion, 2015). Economic policies have a significant impact on Chinese enterprises, and

some strategic emerging industries require government policy support during the development

process. However, policy support and specific implementation times are ambiguous, and some

policies may even restrict development for a period of time, posing challenges to wind power

decision-making. Policies encourage businesses to save costs, decrease emissions, and invest in

wind energy development. In addition, industrial policies or similar remedies can assist the

industry in overcoming barriers to the development of low-carbon energy, resulting in a low-

carbon economy and long-term growth. However, economic policy uncertainty poses a danger to

businesses since they are unable to foresee the timing and extent of policy execution. Economic

policies have a significant impact on enterprises in the Chinese market, and some strategic

emerging industries require government policy support during the development process, but

policy support and specific implementation times are ambiguous; further, some policies may

even restrict development for a period of time, posing challenges to wind power decision-

making.

Industry Outlook
PORTER’S FIVE FORCES MODEL 26

In 1978, the government of China adopted the open-door policy; as a result, the economic

development of the nation has driven an increased new energy demand. There has been a

remarkable expansion in China's new energy sector. The nation's government managed to attract

foreign investment in the new energy sector introducing structural reforms, market reforms, and

policies of decentralization. For the electric power industry to be in place until 2020, the

government of China implemented a four-step- restructuring framework. The solar, geothermal,

and biomass new energy manufacturing industries were also restructured in 1998 (Zhao et al.,

2016). In present China's (2001-2005) 10th five-year plan that is under the name "Developing the

West," a lot of emphases has been put on those new energy resources that are improving (these

includes hydropower, wind new energy, and solar new energy) mainly in the parts of West China

and their delivery to the coastal regions has also been facilitated (Hafezi et al., 2020) The biggest

and the second biggest solar and electricity producer respectively is China. According to Hafezi

et al. (2020), China is also one of the major nations that has the largest market for solar thermal

new energy. The sector of new energy plays an essential role in developing the economy in areas

of employment creation and increasing industrial output. The biggest State-Owned Enterprises

(SOEs) consists of the leading enterprises of power and oil (Hafezi et al., 2017). The Porter Five

Forces model is a holistic strategy paradigm that decouples strategic decision-making from a

simple analysis of the current competition. The Porter Five Forces analysis looks at how new

energy in China can get a long-term competitive edge in the solar power and wind new energy

market. The policy makers in the new energy industry if China can use Porter Five Forces to not

only create a strategic position in the solar and wind power new energy industry, but also to

identify profitable opportunities within the industry. The Porter Five Forces Analysis is a

strategic management method for analyzing industries and understanding the fundamental levers
PORTER’S FIVE FORCES MODEL 27

of profitability. Managers at China New Energy Limited may utilize Porter Five Forces to better

understand how the five competing forces affect profitability and design a plan for strengthening

the company's competitive edge and long-term profitability in the wind, solar, hydropower, and

geothermal industries.

China remains to starve for new energy despite experiencing the incredible development

in the sector of new energy production because the new energy supply and demand balance is

achieved at a low range of per-capita consumption (Forrest, 2019). This is as illustrated in the

diagram below, the increasing demand for new energy consumption has been evaluated

depending on the increasing population growth.

Diagram 14

China’s total energy demand vs population

https://www.arcenergyinstitute.com/snapchart-world-energy-and-economy-still-made-in-china/
PORTER’S FIVE FORCES MODEL 28

Conclusion

Porter's Five Forces Analysis is an influential and clear framework used to recognize

certain powers in line with certain business conditions utilizing the perspective of outside-in. The

Porter Five Forces model is a comprehensive strategy paradigm that decouples strategic

decision-making from a simple analysis of the current competition. The Porter Five Forces

analysis focuses on how China New Energy Limited may achieve a long-term competitive

advantage in the renewable energy business. Managers at China New Energy Limited may utilize

Porter Five Forces to create a strategic position not just in the wind, solar, hydropower, and

geothermal energy industries, but also in the whole new energy sector.The industrial economics,

also known as the industrial organization (IO) approach, bases the origin of Porter's Five Forces
PORTER’S FIVE FORCES MODEL 29

Analysis. According to the (IO), the market structure describes the industry attraction within

which a particular company operates due to the fact that the behavior of market contributors is

affected by the market structure. As a result, the strategic behavior of organizations is usually in

return affected by the market structure. For instance, the competitive strategy determines the

market success of an organization. As the government policies and macroeconomic and

environmental conditions transition, the individual market forces, on the other hand, transition.

The Five Forces Analysis can be viewed as a structure that can be used to analyze an operating

industry. The Five Forces Analysis also enables the Chinese new energy industry to understand

how earned profit is divided among the five forces in a particular sector. China New Energy

Limited strategists may acquire a thorough view of what effects the organization's profitability

by examining all five competitive factors in the wind, solar, hydropower, and geothermal

industries. They have the ability to spot game-changing trends early on and move quickly to

seize the chance. Managers at China New Energy Limited may mould the Porter Five Forces in

their favor by fully comprehending them. China has become one of the world's largest energy

users in recent years. In reality, in tandem with its fast economic growth, China has implemented

advantageous regulations to encourage investment in its energy sector, including a

comprehensive reorganization of the industry. Due to a lack of energy resources in recent years,

China has focused on developing renewable energy sources such as wind, solar, geothermal, and

tidal power. There is no doubt that China's energy business is one of the world's largest, and it is

projected to continue to be so in the future years.

PORTER’S FIVE FORCES MODEL 30

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