Challenges and Opportunities for Business
in the Emerging Biofuel Industry in the EU
Industrial Analysis and Four Cases from the EU Biofuel Industry.
Discussion Based on International Business Theories.
Master Thesis
Author:
Veselina Asparuhova,
Master of Science in International Business,
Exam nr. 287950
Supervisor:
Robson Silva Rocha,
Department of Business Administration – Management
1 March, 2013
Aarhus School of Business and Social Science,
Aarhus University
Acknowledgements
I would like to express my deep gratitude to my thesis advisor Robson Silva Rocha for his
time, continuous support and instructions. His guidance helped me to gather my ideas and
apply my knowledge in the present paper. This paper would not have been possible without
the support from my family and friends. Special thanks to Eli Tsvetanova for her patience
and motivation.
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Abstract
The purpose of the present paper is to extend the understanding of the conditions and
motives for biofuel trade in the European Union market and provide explanation of the
internationalization processes occurring there. For this purpose, international trade theories
have been employed to provide understanding of the macro-environment in which biofuel
traders operate and explain the expected internationalization behaviour of the employed
companies in this research. Methods for data collection and analysis have been explained,
market analysis has been done, and four cases from the biofuel market have been presented.
The paper discusses hypothesis elaboration in regards to the employed theories and
provides conclusion on the topic and suggestions for further research. The study answers
how biofuel producers expand their operations abroad in the emerging biofuel industry in
the European Union where macro pressures prevail.
The number of total characters in the present paper is:
Key words: internationalization, bioethanol, biodiesel, European Union, strategy, Diester
Industrie International, Crop Energies, Abengoa Bioenergy, Biopetrol Industries AG.
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Table of Contents:
Abstract .............................................................................................................................. - 3 Abbreviations..................................................................................................................... - 6 1.Introduction .................................................................................................................... - 8 1.1.Problem Statement .................................................................................................. - 9 1.2.Delimitations .......................................................................................................... - 9 1.3. Sructure ................................................................................................................ - 11 2.Theoretical Framework................................................................................................. - 32 2.1.Globalization, Internationalization and the Multinational Enterprise .................. - 35 2.2. The Macro-Environment ..................................................................................... - 37 Industry-Based Theory ......................................................................................... - 37 Institutional-Based Theory ................................................................................... - 32 PEST Analysis .......................................................................................... - 41 Porter’s Five Forces Analysis ................................................................... - 38 2.3.Internationalization of the Firm ............................................................................ - 41 Institutional-Economic Perspective .................................................................... - 41 Learning Perspective .......................................................................................... - 41 Born Global ........................................................................................................ - 41 Strategic Competition Perspective...................................................................... - 41 Inter-Organizational Perspective ........................................................................ - 41 Market Expansion Strategies .............................................................................. - 41 3.Methodology................................................................................................................. - 41 3.1. Ontological and Epistomological Assumptions .................................................. - 41 3.2. Systems Approach ............................................................................................... - 41 3.3. Research Design .................................................................................................. - 41 3.4. Data Collection .................................................................................................... - 41 3.5. Case Company Selection ..................................................................................... - 41 3.6. Validation and Reliability.................................................................................... - 41 4. Industry Analysis ......................................................................................................... - 41 4.1. Biofuel Consumption and Production in the EU ................................................. - 41 -
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4.1.1. Biofuel Consumption in the EU .................................................................. - 41 4.1.2. Biodiesel Production in the EU .................................................................. - 41 4.1.3. Bioethanol Production in the EU ................................................................. - 41 4.2 Pest Analysis.............................................................................................................. - 41 4.2.1. Political-Legal Factors ................................................................................. - 41 4.2.2. Economic Factors ........................................................................................ - 41 4.2.3. Socio-Cultural Environmental Factors ........................................................ - 41 4.2.4. Technological Factors.................................................................................. - 41 4.3. Porter’s Five Forces Analysis ................................................................................... - 41 4.3.1. Threat of New Competition ......................................................................... - 41 4.3.2. Threat of Substitute Products or Services.................................................... - 41 4.3.3. Bargaining Power of Customers .................................................................. - 41 4.3.4. Bargaining Power of Suppliers .................................................................... - 41 4.3.5. Rivalry ......................................................................................................... - 41 5. Biofuel Producers in the EU ........................................................................................ - 41 5.1. Diester Industrie and Diester Industrie International .......................................... - 41 5.2. Biopetrol Industries ............................................................................................. - 41 5.3. Abengoa Bioenergy ............................................................................................. - 41 5.4. Crop Energies ...................................................................................................... - 41 6. Discussion .................................................................................................................... - 41 Entry Modes and Business Network .......................................................................... - 41 Certification ................................................................................................................ - 41 Controversial Political Situation, Competition and Supplier/Buyer Uncertainties .... - 41 Strategic Location ....................................................................................................... - 41 Market Position........................................................................................................... - 41 7. Elaboration on Hypothesis........................................................................................... - 41 8. Conclusion ................................................................................................................... - 41 Appendix ......................................................................................................................... - 41 Endnotes .......................................................................................................................... - 41 Bibliography .................................................................................................................... - 41 -
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Abbreviations
ADEME – Agency for the Environment and Energy Management
AFME – animal fat methyl esters
AGQM – Working Group for the Quality Management of Biodiesel
B5 – biodiesel in diesel up to 5%
B7 – biodiesel in diesel up to 7%
B99 – biodiesel in diesel up to 99%
BP – British Petroleum
CEN – European Committee for Standardization
CCP – Climate Change Package
DI – Diester Industrie
DII – Diester Industrie International
DPFF – Danone France Fresh Products
EBB – European Biodiesel Board
EC – European Committee
EU – European Union
FDI – Foreign Direct Investment
FFV – Flexible Fuel Vehicle
E5 – Ethanol in gasoline up to 5%
E10 – Ethanol in gasoline up to 10%
E85 – Ethanol in gasoline up to 85%
ePURE – the European trade association that promotes renewable ethanol
GHG – Greenhouse Emissions
I+DEA – Research and Development of Ethanol for Automotive Applications
ISE – Solar Energy Systems
ISO – International Organization for Standardization
JRC – Joint Research Center
MS – Member States of the European Union
MNC – Multi-national Corporation
PSA – Peugeot-Citroën
R&D – Research and Design
RED – Renewable Energy Directive
REDcert – German Biofuel Sustainability Regulation
SME – Small Multinational Enterprise
TC – Transaction Cost
WOME – waste oil methyl esters
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Figures
Fig.1. Porter’s Five Forces Framework ......................................................................... - 41 Fig.2. Modes of Entry ..................................................................................................... - 41 Fig.3. EU Supply & Demand of Biodiesel and Bioethanol ............................................. - 41 Fig.4. Production and Production Capacity of Biodiesel in the EU by Country ............ - 41 Fig.5. Trend in EU Biodiesel Production 1998-2011 ..................................................... - 41 Fig.6. Production of Bioethanol in the EU in 2009......................................................... - 41 Fig.7. Abengoa Bioenergy’s Plants in the EU................................................................. - 41 -
Tables
Table 1. Theories Explaining the Internationalization Process of the Firm ................... - 41 Table 2. Data Collection Approach ................................................................................. - 41 Table 3. Case Companies’ Selection Criteria ................................................................. - 41 Table 4. Calculated GHG Emissions for Different Raw Materials ................................. - 41 Table 5. Macro-Environmental Factors for Biofuel Production ..................................... - 41 Table 6. Main Biodiesel Producers in the EU and Their Production Capacity .............. - 41 Table 7. Main Bioethanol Producers in the EU and Their Production Capacity ........... - 41 Table 8. Porter’s Five Forces and Attractiveness of Biofuel Industry in the EU............ - 41 Table 9. Partners of Diester 30% Partners ..................................................................... - 41 Table 10. Biopetrol Industries AG Structure ................................................................... - 41 Table 11. Abengoa Bioenergy Partnerships .................................................................... - 41 Table 12. Crop Energies Partners ................................................................................... - 41 Table 13. Summary of Results ......................................................................................... - 41 -
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1. Introduction
"The fuel of the future is going to come from fruit like that sumac out by the road, or from apples, weeds,
sawdust - almost anything. There is fuel in every bit of vegetable matter that can be fermented. There's
enough alcohol in one year's yield of an acre of potatoes to drive the machinery necessary to cultivate the
fields for a hundred years."
Henry Ford, 20 September 1925, New York Times
Increasing prices of gasoline1 and petroleum2, dependency on oil of some countries, climate
change and the introduction of policies for reduction of gas emissions became main factors
to set a new outlook towards fuel industry in the European Union. Moreover, the number of
cars on the road is expected to triple by 20503 and consequently the demand for fuel to
increase. In search for alternatives of green future in this area, one of the options identified
is fuel made of renewable sources. Some of the reasons for which biofuels are
advantageous over traditional fuels include greater energy security, reduced greenhouse
emissions, foreign exchange savings, and solutions to socioeconomic issues related to the
rural sector. Although, green future may sound desirable and attractive for investors, it has
its obstacles. The emerging industry of bio-fuels has its challenges such as uncertainty in
supply amounts, market demands, market prices, and processing technologies (Demirbas,
2009). This paper investigates what are the essential macro-environmental pressures in the
biofuel industry, how biofuel producers expand their operations within the borders of the
European Union, and how they can proceed to do business in near future.
In addition, the interest of conducting the present research was driven by enormous
number of studies already available for both world largest biofuel producers, Brazil and
USA, and the lack of existing research papers from business perspective in the European
Union. On one side, it will be interesting to examine this topic since there are already
present policies and political discussions, and on other side, technology advances are
distinctive for the territory of the European Union. The purpose of this study is to build
knowledge on the biofuel market characteristics and the internationalization process of
biofuel producers based on market analysis and four cases.
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1.1. Problem Statement
The purpose of the present paper is to explore what kind of strategic choices biodiesel and
bioethanol producers take to expand in the EU market through market entry modes and
network relationships. It will be interesting to identify if there were any internal or external
factors to their internationalization decisions. Furthermore, based on the discussion of the
market analysis and the four cases, recommendations for future strategic actions will be
suggested. For these reasons, the problem statement can be formulated as:
How do biofuel traders internationalize in the EU in terms of entry decisions (market
expansion strategies, market entry modes and business relationships)?
The problem will be answered by addressing the following questions:
How the market of bio-diesel and bio-ethanol in the EU can be characterized?
What kind of entry modes and business relationships do biofuel producers prefer
and are there any reasons for their strategic choices?
What kind of internationalization strategies and business focus could biofuel
producers in the EU follow in future?
This paper aims to provide insight into the dynamics of how firms internationalize in the
biofuel industry in the EU and for this aim analysis of the market conditions and main
biofuel producers will be developed. To achieve theoretical understanding of the issue, two
main theories, industry-based and institutional-based theories, are used to explain the
industry and institutional environment of the market. To understand the internationalization
process, the four main internationalization theories are discussed. For this purpose Learning
perspective, Strategic competition perspective, Inter-Organizational perspective and
Institutional-economic perspective are chosen as underlying framework that includes a
dynamic element by focusing firm’s choice of market expansion, entry modes, and at last
the biofuel producers’ network of business relationships is discussed.
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1.2. Delimitations
The present paper reviews the industry only within the boundaries of the EU. This means
that legislation distinctive for regions outside of the EU is not included. The biofuels that
are on focus are liquid biofuels from first generation – biodiesel and bioethanol made from
all available food crops for biofuels in the EU. Second and next generations biofuels are not
discussed in details, however, this topic is discussed to certain extend in relation to the
industry analysis and the discussion of the four cases. The usage of biofuels can be for
generating electricity, heat or for transport (Unilever, 2007). The main focus of the present
paper is biofuels in the transport sector while biofuels for energy supply are excluded.
1.3. Structure
The present work starts with introduction of the topic and arguments why biofuels could be
relevant issue for further discussion. With defining the problem statement the following
sections come as supporting structure to provide answers to the posed questions.
Delimitations of the paper define the boundaries to which this topic is reviewed and what
matter is excluded of focus.
In the theoretical framework, several theories are discussed with reference to the
strategic behaviour of companies and what kind of expected strategic actions companies
take in their process of internationalization.
The methodology of the present work comprises of ontological and epistemological
assumptions, research approach, data collection method and analytical tools.
The industry analysis section is based on analysis of existing information about the
products, the raw materials, the customers, the competitors and the substitutes as well as the
analysis of the macro environmental factors influencing the business.
Four cases from the EU biofuel industry are explained in regards to proposed search
criteria in the Methodology section.
Discussion follows based on the gathered information and proposed theories. The
present paper finalizes with elaboration on hypotheses, conclusion and suggestions for
future research.
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2. Theoretical Framework
To understand the market conditions in which firms operate, their market expansion
strategies and their choice of market entry modes, first it is critical to gain knowledge on
the theoretical background of the topic of international business environment. This section
starts by clarifying the employed terminology and continues with the discussion of the
theories from international business strategy and the theoretical perspectives on the
internationalization of the firm.
Industry-based theory combined with institutional-based theory is discussed to
explain the industry characteristics in which firms operate. In addition, the main
internationalization perspectives are employed to build on the understanding of the
internationalization of the firm, discussing market expansion strategies, and entry modes.
The theoretical background aims to construct understanding about the market environment
and the determinants of international business strategy.
2.1. Globalization, Internalization and the Multinational Enterprise
As a starting point for the literature review, a clarification of the employed
terminology is necessary to ensure correct construction of the theory explained further. The
key terms in the present paper are globalization, internationalization and multinational
enterprise. Globalization can be defined as the process referring to the gradual integration
and increasing interdependence of national economies (Cavusgil, et.all 2008). The
interconnection of these economies leads to interdependence of buyers, producers,
suppliers, governments and non-government institutions in different countries (Hamilton &
Webster, 2009). Globalization also has its implications for businesses expanding at a global
scale and pushing them towards greater international competition. This is one of the reasons
why the focus of the present paper is on internalization of a firm’s worldwide activities,
which is one of the dimensions of international strategy. Globalization is a reason for
companies to locate their value-adding activities such as production, product development
(R&D), marketing, and servicing a product, in particular countries (Hollensen, 2008),
benefiting from cost advantages, achieving economies of scale and scope, spreading risk or
gaining closer access to customers and suppliers in order to maintain competitive advantage
(Cavusgil, et.al 2008).
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According to a business dictionary4 a multinational enterprise is an organization that
operates in more than one country, one that is governed from a home country and that
receives one fourth of its revenue from operations outside its home country. Additional
understanding of the term multinational enterprise is suggested by Dunning (1993) who
defines it as enterprise "that engages in foreign direct investment . . . and owns or controls
value-adding activities in more than one country" (p. 3). Beyond having operations in
large number of countries and having multinational capital, the Multi-national Corporation
(MNC) can serve the role of a good economic agent, meeting the requirements of the local
government in the country where they are established (Hulin-Cuypers, 1973) and creating
new job opportunities (UNIDO, 2011).
2.2. The Macro-Environment
Institutional-based view and industry-based view are employed to provide critical
comprehension of the macro-environment pressures that impact the strategic choices of
organizations
when
they
expand
their
operations
abroad.
Furthermore,
the
internationalization perspectives are discussed to provide understanding about these
companies’ strategic choices when expanding abroad.
Industry-based theory takes into account the interaction between companies and the
market. The industry structure conditions, such as the degree of competition, barriers to
enter and exit the industry as well as product homogeneity, define the extent to which a
company can achieve advantage (Porter, 1980). Industry-based theory is concerned with the
way firms compete with each other and emphasizes the strategies firms undertake in their
interaction with the market (Cabral, 2000). This theory focuses on imperfect competition,
particularly oligopoly5, where few firms compete on the market and according to this
theory the internationalization decisions of a company, are influenced by the degree of
competition and rivalry in a specific industry (Jiang, 2012). Industries vary in policy
environment and globalization potential, for instance, technological advances in particular
innovation including new product designs and new productions processes (Cavusgil, 2008).
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Institutional-based theory is used in addition to the industry-based theory to broaden the
picture of the business environment. This theory focuses on the context of institutions
particularly the influence of governmental and non-governmental organizations (Peng et.al
2008). In this paper such institutions will be considered with authority within the
boundaries of the EU with main focus on the European Union institutions. North (1989)
defines institutions as “rules, enforcement characteristics of rules, and norms of behavior
that structure repeated human interactions” that cause consequences for the choices
individuals make. Companies not only operate in a system of organizations involved in
both competitive and cooperative relations but also are affected by local and distant actors
and forces (Scott, 2008). Institutional-based theory argues that strategic choices of firms are
influenced by the interaction between institutions and firms (Jiang, 2012). Sometimes, to
compete internationally firms have to conform to institutional requirements. Institutions
such as United Nation and International Standards Organization seek to institutionalize on a
global level through the creation of norms, rules and standardized procedures called
certification (Brammer et. al 2012). Implementing such procedures, are considered as part
of firm’s standardization strategy that pursues to comply with international institutional
regulations to remain internationally competitive. In the present paper, institutional
pressures are incorporated in the market analysis and later in the discussion of firms’ efforts
to integrate institutional regulations into their strategies.
Industry-based and institutional based theories are incorporated in Porter’s Industry
Structure Analysis and PEST analysis which are employed as analytical tools
encompassing the industry structure conditions and industry attractiveness to bring forward
a clearer picture of the environment in which a firm operates. In this way it will be defined
how the characteristics across industry influences the internationalization decisions applied
further in particular to the biofuel industry in particular.
PEST analysis is a selected method for analysis of the macro-environment
conditions that are outside the control of an organization that affect firm’s strategic
decisions (Cadle et. al, 2010). The PEST checklist includes several factors6 such as (1)
political, the intervention of national government and the EU in the economy through laws
and taxations (Downey, 2007); (2) economic, investments needed for production and
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utilization; (3) socio-cultural shifts in values, culture and change in lifestyle, that can call
for certain products and service and environmental changes due to climate changes that
affect demand (Cardeal, 2008); (4) technological improvements that create new products
and processes, reduce costs, improve quality and lead to innovation (Lynch, 2009).
Porter’s Five Forces Analysis (see Fig.1.in Appendix) is also a method for external
environment analyses, however, it has slightly different focus than PEST analysis. It
examines the industry to identify business pressures that are brought to pertain to an
organization (Cadle et. al, 2010). This framework gives understanding about the
attractiveness of the industry. The sources of the business pressures are divided into five
categories: industry competitors, new entrants, substitutes, buyers, and suppliers (Cardeal,
2008). The level of the competition is considered by the number of competitors that hold
the power of the market. The rest of the factors include entry barriers in regards to initial
financial investments, extend of availability of current substitutes7, buyer’s preferences and
switching costs as well as who has the power in a buyer-supplier relationship (Cadle et. al,
2010). Critical review about Porter’s framework shows that this model is static while the
competitive environment in practice is constantly changing (Lynch, 2009). This is why the
gathered data and the analysis in the present paper are valid for the time the research is
conducted.
In summary, the industry-based and institutional-based theories can explain industry
structure conditions and the macro environment pressures as reasons that influence the
decision to internationalization of biofuel traders in the EU. Both theories will be applied
further in the market analysis and discussion.
2.3. Internationalization of the firm
Theories predict the internationalization behaviour of companies. It is important to
address the differences between the individual theories and identify the different issues they
examine and their limitation. Comparison of the four main internationalization theories Institutional-Economic
Perspective,
Learning
Perspective,
Strategic
Competition
Perspective, and Inter-Organizational Perspective, aims to present several perspectives and
a broader picture of the internationalization strategies.
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According to the Institutional-Economic Perspective, a company would choose a
cost-efficient way to transfer its actions abroad. According to the transaction cost theory,
which is one of the theories that explains the Institutional-Economic Perspective,
companies minimize their transaction cost1 (TC) through internalization. Eggertsson (1990,
p.14.) defines TC as, “the costs that arise when individuals exchange ownership rights to
economics assets and enforce their exclusive rights.” TC can be measured by two kinds of
costs, ex-ante and ex-post costs. Ex-ante costs are related to search and the contracting
costs, made prior to the transaction and ex-post costs are concerned with the costs that
occur after the transaction such as monitoring and enforcement costs. In other words, exante costs can be characterized as marketing costs necessary to establish communication
between the company and the potential seller or buyer and contract costs related to currency
flow exposure as well as costs concerning ownership issues. While ex-post costs are related
to monitoring costs such as logistics and administration. According to Coase (1937), these
transaction costs are minimized and even eliminated if they are performed within a firm.
Although, as a firm expands and becomes larger, the costs of organizing additional
transactions within the firm can rise. That is why the balance that needs to be reached is
when the costs of organizing an extra transaction are equal to the costs involved in carrying
out the transaction in the open market (Coase, 1937). Internalization, vertical integration,
can be a suitable situation when a company has a certain asset that provides their business
with competitive advantage such as intellectual property or patented technology. In this
case, a company would prefer to keep this kind of assets and “know-how” within the
organization and avoid opportunistic behaviour carrying out the transaction through
intermediaries.
Although, a sales subsidiary or an own production plant can allow the company to
maintain desirable degree of control, it could be a risky entry mode since it requires heavy
investment and market knowledge, and little flexibility in case reacting to market
uncertainties (Hollensen, 2008). The Learning Perspective, the second of the four
internationalization theories, sheds a light from a contrasting point of view to the
internationalization process. This underlying theory assumes that a firm seeks opportunities
to increase its long-term profit being at the same time risk averse in decision making
1
the cost of participating in a market
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(Johanson & Vahlne, 1977). This kind of internationalization model, known also as the
Uppsala model, is based on the theory of the growth of a firm and the assumption behind it
is that firms have imperfect access to information. Internationalization can be explained as
the process of gaining experiential knowledge and operation in an international market
(Eriksson et. al 1997). In this way experiential knowledge is acquired through experience,
and this kind of experience is essential for a company to gain market-specific knowledge
which provides knowledge about the characteristics of a particular national market
(Johanson & Vahlne, 1977; Weerawardena, 2007). In addition, this process of gaining
market-specific knowledge is referred as overcoming liability of outsidership. In the
learning perspective the firm first develops domestically and then it gradually develops
operations abroad. In this process the most important obstacle to internationalization are
lack of resources and knowledge (Johanson & Wiedersheim-Paul, 1975). This perspective
assumes that to overcome this obstacle and avoid high level of uncertainty about the
market, a company will start exporting to neighboring countries or countries with greater
psychic distance (Andersen, 1993). Psychic distance refers to the perceived differences,
such as culture, language or economic situation, between home country and target
countries, where a company is willing to expand business operations (Brewer, 2007). The
Uppsala internationalization school defines sequence of stages of internationalization,
establishment chain, and incremental commitment to another market starting with no
regular exporting activities (stage 1), selling abroad via independent representatives (stage
2) to establishing sales subsidiaries (stage 3) and own production plants (stage 4) (Johanson
& Wiedersheim-Paul, 1975). In this internationalization process the company increases
gradually through consecutive expansion modes. If a firm is risk averse, not well familiar
with the operating environment, they would prefer exporting modes and licensing, contract
manufacturing (intermediate modes) or even minority joint ventures because these modes
require low levels of financial and resource commitments (Hollensen, 2008; Ekeledo &
Sivakumar, 1998). However through these modes international operations are not likely to
be developed and this can result in loss of opportunity. The mode choice can be also
characterized with the degree of control over international operations which depends on the
level of resource commitment (see Fig.2. Modes of Entry in the Appendix). With low
resource commitment modes as exporting can not be obtained control over the way
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product/service is marketed and sold abroad. If a firm decided to pursue licensing and
contract manufacturing as entry modes, it must first comply with quality standards. Joint
ventures also limit the degree of management control over international operations and
conflict between different parties can become unavoidable. (Hollensen, 2008).
Studies critiqued Uppsala model because it was found that some companies do not
follow the deterministic incremental stages but take an accelerated and more proactive path
of internationalization (Knight & Cavusgil, 2004). Moreover, the companies that
internationalize early are known as Born Global and their success is rooted in the internal
capabilities of the firm (ibid). Born global is defined as “business organizations that from
inception, seek to derive significant competitive advantages from the use of resources and
the sale of outputs in multiple countries” (Oviatt & McDougal, 1994, p.49). Born globals
are firms that have market knowledge built over years of international operations
(Weerawardena, 2007). Knight and Cavusgil (2004) suggest explanation of the early
internationalization can be facilitated by innovation within the firm. Such companies also
directly enter global markets early with highly innovative products (Oviatt & McDougal,
1994). In the accelerated internationalization long-term goals are profitability, sales growth
and return on investment, but they cannot be obtained easily. Then, the short-term objective
of a born global is to establish presence in multiple markets overseas quickly
(Weerawardena, 2007). The case of Born Globals shows that companies do not necessarily
need to follow consecutive expansion modes, but instead expand rapidly due to unique
source of competitive advantage.
Moreover, a theory that explains the internationalization process of a company
based on resources from which they provide competitive advantage is the Strategic
Competition Perspective. In this perspective, however, company’s choices to expand
abroad are strongly influenced by the environmental conditions and carefully assessed
against the internal resources of the company. The main goal of the company is in survival
and financial earnings. The industry structure and the position of the business activities of
the company are decisive factors (Rask, et. al 2008). Especially, in emerging industries
where operating procedures and technology are in process of developing, a first mover
advantage could profit a company with stable leading position and strong market shares.
According to Porter’s Generic Strategies, competitive advantage could be achieved through
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differentiation strategy, when a company offers unique product or service, or through cost
leadership, when a company offers a product at a competitively low price. In the initial
phase of internalization, a firm seeks to leverage its domestic competitive position, to
diversify risk, and to extend economies of scale by establishing a presence in multiple
markets (Yip, 1989). The firm would have lack of experience in international operation but
will focus on tangible or intangible specific assets, such as innovative products or patented
process, to leverage internationally (Douglas et.al 1989). Once the firm has established its
position in number of markets it will begin to seek new directions for growth and move
toward the second stage of internationalization (ibid). The focus shifts toward penetrating
the markets more fully, building experience and knowledge. In this phase the aim of a
company is to achieve economies of scope and leverage assets and core competencies (Yip,
1989). Key decisions include development of products and product lines which offer
promise of market growth in each country and actions to stimulate local market
penetrations (Ghemewat, 2007). In the third phase, a company aims to achieve efficiency
and synergy from its global operations. To achieve this purpose, the organization has to
create infrastructure for knowledge sharing among headquarters and subsidiaries where
they can use the gained knowledge in different contexts.
However, a company is not only dependent on its internal resources since it is part
of a market where different market players put pressure and shape the business standards.
In such case, internal resources may not be sufficient to achieve competitive advantage and
global reach, and external resources from the business environment could be crucial not
only for the survival of the company, but also for achieving competitive advantage. The last
employed perspective to internationalization, Inter-Organizational Perspective, describes
the markets as networks of relationships between firms (Johanson & Mattson, 1988).
Business networks emerge in market where conditions are changing rapidly (Hollensen,
2008). This perspective, known also as the Network Model, considers the choices to
internationalization determined by political negotiations, internal and external coalitions
(Rask, et. al 2008). The unit of analysis here is the individual transaction and the network
relation among companies. Such kind of relation can be with the purpose of exchange of
different information such as technical relations, economic relations, social or legal
relations. The company analyzes the situations in which they can develop cooperation
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strategies towards foreign actors as competitors, suppliers, host-country authorities and
financial institutions (Johanson & Mattson, 1988). The company’s international
competitiveness depends on critical resources from the business environment and this is a
reason, the internationalization process to become a result of investment in relationships
between companies with complementary activities and resources (Hollensen, 2008). It can
be less costly for a company to acquire access to particular resources by establishing
dependant relationships that will lead to alternative solving problems to R&D or sales.
Moreover, such relationships would assist a company to overcome the liability of
outsidership (Johanson & Vahlne, 1977) and become part of important business network in
a new market.
Market expansion strategies refer to the timing of a market entry. This is a term that refers
to whether firm enters a number of new country markets simultaneously or sequentially
(Douglas, et. Al 1989). Market expansion strategies in this sense are two - market
diversification and market concentration. Market diversification is the strategy that is
related to fast penetration into a large number of countries while the second strategy is
based on concentration of resources in a few markets and gradual expansion into new
territories (Ayal et.al 1979). In the long run, a strategy of diversification will lead to a
reduction in the number of markets, as a result of consolidation and abandonment of less
profitable markets. The level of resources allocated to each market in a strategy of
diversification will be lower than with concentration when financial and managerial
resources are fixed (Douglas, et. Al 1989).
Small and medium-sized enterprises (SMEs)8 exploit domestic opportunities to
leverage resources which will be later used in international markets. The company strategy
for market expansion must focus on the product market segment where the company can
achieve competitive advantage (Hollensen, 2008 p.178). Then the company must decide
whether to concentrate resources on limited number of similar markets or to diversify
across number of different markets. A company can follow strategy of entering countries
similar in market characteristics and infrastructure to the home market or the company can
decide to follow a strategy to diversify risk by entering countries that differ in terms of
environmental or market characteristics, to spread operations over broad geographical base.
- 19 -
Entering market sequentially can require great resource commitment while
simultaneous entry will enable the firm to establish position in new markets ahead of their
competitors and potential scale of economies can arise (Douglas, et. al 1989).
The aim of the present paper is to examine what are the biofuel market conditions
decisive for the strategy of the biofuel producers in the EU. Furthermore, it will be
investigated which the preferable market expansion strategy by biofuel producers is and
how their internationalization process can be explained based on the discussed theories in
the present section in connection to the problem statement, which are summarized in Table
1 (see Appendix).
3. Methodology
This section elucidates how epistemology, ontology and methodology are related in
the present paper to provide answers of what information exists and how it will be
explored. Different methodological approaches make different assumptions about their
subject area. This means that when the different approaches are applied in practice, they
have to proceed differently when trying to understand, explain, and improve business,
depending on the approach being used (Arbnor & Bjerke, 1997, p.2).
3.1. Ontological and Epistemological Assumptions
According to Arbnor & Bjerke (1997), the choice of research approach depends on
two factors that are the assumptions of the researcher about the reality in which he or she
aspires to acquire knowledge, and the subject area on focus. There are two aspects of the
topic reality – the nature of reality, ontology, and the relationship between the mind and the
reality, epistemology.
Ontology is the study of being in the world and is concerned with the role
assessments play in determining one’s being in the world. The purpose of ontology is to
describe categories of reality and how they are interrelated. The explanation of the reality
of renewable fuels in categories can be considered in several ways.
- 20 -
First, they can be derived from biomass conversion, solid biomass (bio-char), liquid
fuels (ethanol, vegetable oil and bio-diesel) or bio gases (biogas, biosyngas and
biohydrogen). However, liquid biofuels are the main focus of study in the present paper
because they may offer a promising alternative in both transport and energy sector not only
in advanced countries but also in developing areas.
Second, biofuels can also be divided to different generations. First generation
biofuels can offer some CO2 benefits and can help to improve domestic energy security. A
‘first generation’ biofuel (i.e. biodiesel (bio-esters), bio-ethanol, and biogas) is
characterized either by its ability to be blended with petroleum-based fuels, combusted in
existing internal combustion engines, and distributed through existing infrastructure, or by
the use in existing alternative vehicle technology like FFVs (‘‘Flexible Fuel Vehicle’’) or
natural gas vehicles (Naik et. al 2010). However, the main disadvantages of this generation
of biofuels are the sourcing of feedstocks, including the impact it may have on biodiversity
and land use and competition with food crops. Second-generation biofuels produced from
‘plant biomass’ refers largely to lignocellulosic materials, as this makes up the majority of
the cheap and abundant nonfood materials available from plants (ibid, p.579). Although, the
production of such fuels is not cost effective because there are a number of technical
barriers that need to be overcome before their potential can be realized. It is anticipated
that, these second generation biofuels could significantly reduce CO2 production, do not
compete with food crops and some types can offer better engine performance. When
commercialized, the cost of second generation biofuels has the potential to be more
comparable with standard petrol, diesel, and would be most cost effective route to
renewable, low carbon energy for road transport. However, they are not widely
commercially available at the moment because their production technology is costly such as
the case of expensive enzymes. The next generations of biofuels as third generation is
based on improvements in the production of biomass and fourth generation biofuels are
aimed at not only producing sustainable energy but also a way of capturing and storing
CO29.
The focus of the present study is narrowed down to first generation biofuels, more
specifically bioethanol and biodiesel, however other fuels can be included in the market
analysis to the extend of explaining substitutes, strategic firm offerings, and competition
- 21 -
and further detailed analysis of this kind of fuels will be excluded. Biodiesel can be defined
as the most common biofuel in Europe. It is produced from oils or fats using
transesterification and its composition is close to traditional diesel. Biodiesel can be used in
any diesel engine in mixture with traditional diesel. Bioethanol is an alcohol fuel produced
by fermentation of sugars derived from wheat, maize, sugar beet and sugar cane. Ethanol
can be used in petrol engines as a replacement for gasoline or can be mixed with gasoline to
any percentage (Ahmad et. al 2007).
After defining which product will be in focus, it is critical to define which biofuel
market will be researched. This market can be defined by the producers of bioethanol and
biodiesel. The same market is reviewed within the boundaries of the EU, however, the
analysis of the strategy of the players and recommendations for their future options can
include global perspectives because the network of customers and raw materials
distributors as well as producers is globally interlinked.
Furthermore, the different assumptions regarding ontology define the assumptions
to epistemology. Epistemology questions what knowledge is, analyzing its nature and
relation to truth, belief and justification, and discusses the extent to which a subject can be
known. The objectivity of reality has its roots in epistemology. Reality can dependent on
mental and cultural factors such as perceptions and beliefs, which can be objective or
subjective. An objectivist view of the social world as a concrete structure encourages an
epistemological stance that emphasizes the importance of studying the nature of
relationships among the elements constituting that structure and this is a reason, the
objectivist to be the preferred view in the present study (Smircich & Morgan, 1980).
Reality is viewed as a world expressed itself in contingent relationships between its
elements. The world is seen as a struggle between various interests and influences where
individuals are seen as moving toward the achievement of desirable ends. Such world is
presented by the industry which is on focus with its elements, the buyers, suppliers, and
customers as well as other entities with their own interests and influences. Relationships
between individuals and environment express a pattern of activity necessary for survival
and well-being of the individual (ibid). In such epistemological position, phenomenon
changes over time in relation to its context. The present research is valid for the time it is
- 22 -
conducted since the relationships and context can change in future. These epistemological
assumptions define open system theory (Smircich & Morgan, 1980), where epistemology
reflects the conception of the world as an organism, an open system.
The employed scientific paradigm is realism where reality is seen as real but only
imperfectly. The ontological assumption behind reality is that the findings are true since
reality exists separate from the mind (Healy&Perry, 2000). The realism paradigm is
searching towards an understanding of the common reality of an economic system in which
many different players operate inter-dependently (Sobh & Perry, 2005). Any link are
strongly influenced by the context and this is why in the present research it is important to
observe and take into account the context in which the phenomena exist, particularly the
industry in which companies internationalize (Sobh & Perry, 2005). Realism researchers
enter the field with prior theories and can be viewed as additional evidence, that is,
perceptions, which can be used to clarify the imperfectly apprehensible external reality by
triangulating on that reality (ibid). Theory triangulation involves using more than one
theory in the interpretation of the phenomenon and provides different perceptions, but those
different perceptions should not be considered to be contrasting views of the same reality.
They should be considered to foster understanding of the reasons for the complexities of the
same reality (ibid).
The present study is explorative meaning that it does not start with the formulation
of hypotheses. On the contrary, the objective of the study is to formulate hypotheses. The
choice of research approach is influenced by the purpose of the present paper and the
central question of the study (Yin, 2003). Realism researchers do not say that theory testing
should not be done, they merely say that the theory has to be built, and confirmed or
disconfirmed, before its generalisability to a population is tested (Healy&Perry, 2000).
Grounded research method is also a systematic analytical method that does not start with
hypotheses formulation but with data analysis and based on its concepts, categories and
theory are formulated. However, the present research is traditional even though it does not
start with hypotheses formation but it follows the traditional research method where
theoretical framework is used in the beginning to support the findings.
- 23 -
3.2. Systems Approach
The chosen methodological approach in the present study is systems approach. The
systems approach assumes that reality of the investigation is objective. While analytical
approach also assumes objective reality, the difference in system reality is that it is
constructed of components which are mutually dependent (Arbnor & Bjerke, 2010).
Moreover, Arbnor and Bjerke (2010) argue that these components in the system function in
such way that they create a result not independently obtainable, known also as synergistic
effect. In order to explain the component it can not be studied in isolation because they are
parts of the system and are explained through the characteristics of the whole system. For
these reasons, systems approach is applied in the case of industry analysis and the four
cases. The interaction of the companies with their macro-environment and the vice versa
are interdependent relationships. Change in one of the factors, for example political
pressures on the market, affects other parts of the system (ibid), as the internationalization
process of a firm, firm’s production and sales volume. A number of factors of reality in the
present study are used to reproduce a systems model.
A reason the systems approach to be the preferred than analytical approach is
because it gives a model of reality that not only describes and explains but aims to create
understanding of that reality. Moreover, systems approach investigates not only the parts of
the system but also the relationship between the parts and the whole system. The system
(the biofuel industry in the EU) viewed in this research has components (rivalry, customers,
suppliers, institutions) and relations among them. Each company can be considered as a
subsystem, also part of the overall system, with their own capacity, resources, size,
network, and departments.
From a holistic perspective, the components in the context can be seen as an open
system, consisted of firms, suppliers, customers, and government engaged in the production
of an economic good, where they interact with the environment (dependent upon macro
pressures such as political, economic, technological and social aspects). In their interaction
with the overall system companies can possibly create synergies. For instance, an industry
can not exist without production of goods because demand would not be met and a
company can not exist on its own but it depends on external resources to create a good or
service and to supply it. In these interactions there is a synergy, an outcome that would not
- 24 -
be achievable without one of the factors – industry or companies. This discussion is applied
further in the next section Industry Analysis, incorporated in the PEST and Porter’s five
forces analytical tools. Companies’ resources will not be discussed in detail since the focus
of the present paper is mainly on external factors which influence internationalization of the
biofuel market in general.
The main theories used in this study have been internationalization theory and
international business perspectives focused on macro environment, more particularly on
industry and institutions. Some of the aspects of internationalization see the interaction of
different elements and causal relationships in a ceterus paribus perspective thus assuming
little synergy. While other factors such as the networking model, assumes synergies in the
interaction, and in this way the internationalization process is in line with a systems
perspective (Arbnor & Bjerke, 2010). The theoretical background in the present paper
outlines the reality in which the topic is studied and this reality is represented by
objectivity, interaction and synergies. As last systems approach is the employed method in
this study not only to define the tendency of internationalization on the biofuel market but
also to forecast what strategic actions can be taken on the market.
A suggestion for alternative methodological framework in the present research is
actors approach. If this approach is employed the focus of the study will be shifted. Then
the industry will be seen as consisted of different actors. Actors will be biofuel producers
and suppliers, fuel distributors and car manufacturers, institutions and organizations who
become involved in formal or informal networks. If the actor’s approach is employed, then
the main focus of the present paper, the correlation of players on the market such as
government and companies, and the synergetic relationships in which they engaged in, will
be disregarded.
3.3. Research Design
Based on the research proposition, the case study is the most appropriate strategy for
fulfilling the purpose of the present paper which is to understand the complex connections
and internationalization process of biofuel traders in the chosen market.
The chosen research design for the purpose of this paper is multiple case study. It is
characterized by depth because it probes beneath the surface of the investigation and
- 25 -
provides rich context of understanding under study (Zach, 2006). In the present paper
several companies are considered and multiple variables are investigated. The purpose is to
understand the internationalization process in terms of entry modes, network relationships
and expansion strategy. The case of each company will be described to become familiar
with them as a stand-alone entity. They will be analyzed with the searching for cross-case
patterns tactic in the present study through selecting categories to look for within-grouped
similarities coupled with intergroup differences. These categories are suggested by the
central problem statement and the existing literature on the topic of internationalization.
From the within-case analysis and the overall impression, concepts and relationships
between the variables are expected to emerge. If these concepts replicate in several cases
relationships will be confirmed and their validity will be enhanced. Cases that disconfirm
the relationships, moreover, would provide an opportunity for extension of the theory
(Eisenhardt, 1989). Theory development prior to the case study data is essential step in
doing case studies (Yin, 1994).
Multiple case studies within each category allowed findings to be replicated within
category (Eisenhardt 1989). In this way, differences or similarities among several units of
analysis can be observed. When findings are replicated in more than one case they become
more robust. For these reasons, “replication logic”, (Yin, 1994) concludes that multiplecase studies are more reliable than single case studies and allow higher quality of the
research.
3.4. Data Collection
The chosen method aims to bring reasonable answers to the questions formulated in the
problem statement in the theoretical background based on the industrial and institutional
based theories, the market expansion strategy, entry modes and network model.
Multiple case studies are designed with information found on archives and news
releases on the official websites of the companies. However, the information for the market
will be collected from several sources. Secondary materials will be used since the systems
approach deals with complex reality.
The collected data is both quantitative and qualitative. This combination of both
methods is also referred as triangulation and this combination of methods aims to provide a
- 26 -
better representation of the available information on the researched topic and provide
objective construction of reality. Objective understanding is expected since the employed
and analyzed data from official statistics and reports as well as information from the official
websites of companies is expected to be objectively presented and to allow the access of
current and correct data about the researched topic. Although this study is not going to be
based on empirical research, extensive research is conducted to collect information from
national statistics, official international sources, reports, business information databases and
libraries. This kind of research is referred as secondary data collection and it is a research
involving the collection and analysis of primary data, which is previously gathered data for
research and other purposes. The collection of data is strategically divided into two parts.
The first part of the collected information is about the industry structure conditions and
macro-environmental pressures and it is collected through journals, articles, books, and
official websites of authoritative institutions. The second part of the collected information
is about the sample, which is represented by several biodiesel and bioethanol traders with
operations in the European Union. Data is collected through their official websites and
news releases.
Secondary data collection has its advantage of providing access to large amount of
data that can be acquired easily and economically (Herron, 1989). Knowledge is generated
through reexamining the available data of the market and further investigation in particular
to the main players on the market, which by now has not been developed from similar
theoretical perspective. On the other side, to ensure to avoid some of the disadvantages of
this kind of research, reliability must be ensured. The research depends on the reliability of
original data. Reliability is ensured through the collection of data only through official
documents and taking into account original documents’ authenticity and credibility.
The above identified relevant sources are searched with key words to find the
necessary information and answer the proposed questions in the present work. Quantitative
data is used to the extent to define the biofuel production and production capacity.
Qualitative data such as information about the industry conditions of the biofuel market and
its macro-environmental pressures, the entry modes employed by the companies, their
expansion strategies and network relations. The proposed research aims to bring forward
answers to the central question in the thesis: How biofuel traders internationalize within the
- 27 -
EU in terms of entry decisions. This is why key dimensions can be formulated to data
collection approach as:
Internationalization
Market
Table. 2. Data Collection Approach
Dimension
Key terms
Industry structure
buyers, suppliers, new entrants, substitutes, rivalry
Macro-environmental pressures
Political,
economic,
technological
Market expansion strategies
Number of markets and resource commitment
Entry Mode
firm’s size; firm’s international experience;
product characteristics; sociocultural difference
between home and host market
Network
Company’s connections in foreign and domestic
markets
socio-environmental,
3.5. Case company selection
The problem formulation in the present study calls for deeper understanding of the
internationalization tendency and context of the biofuel industry in the EU, in which
selection of companies becomes inseparable part for the further analysis. Four companies
were chosen – two of them represent biodiesel traders and the other two are bioethanol
traders. The priority in the selection criteria is that these companies are chosen based on
their production capacity, units in the EU to provide international dimension of 1st
generation biofuel producers, and full access to news releases and archives. Since the
present study is multiple case study, Yin (1994) suggests each case to be carefully selected
to represent a specific purpose and in this study the cases are selected to create a picture of
the leading manufacturers in the biofuel sector in the EU. Analysis of the leaders on the
market is necessary to define the main tendency of internationalization in the sector. This is
why companies with not leading production capacity and less than three units in the EU are
not considered as the focus of the analysis. Most of the chosen companies have another
leading business activities and products, however, they also represent a considerable
production role of the biofuel in the EU. This issue is important to be clarified, to avoid
biases and to apply findings for the sector that is on focus.
- 28 -
The company cases have been chosen with purposeful selection and this is a
strategy “in which particular settings, persons, or activities are selected deliberately in
order to provide information that can’t be gotten as well from other choices” (Maxwell,
2005, p.88)
The cases in this study are chosen for theoretical reasons since this selection aims to
fill theoretical categories or extend further existing emergent theory (Eisenhardt, 1989,
p.537). The choice of the companies aims to provide understanding of the
internationalization tendency of the biofuel industry in the EU. The selection criteria can be
grouped as it follows:
Table 3. Case companies’ selection criteria
Category
Criterion
Explanation
Location
Within the EU
To look at companies within the political
and economical framework of the EU
Industry
Bioethanol and Biodiesel
They are the most spread and produced
st
Firm size
(1 generation biofuels)
products from the biofuels in the EU.
MNC with at least 3 international
To provide degree of internationalization
units
Firm’s Website
Access to news releases and archives
To gather correct and necessary data
Validity
4 different companies
To test the validity of one criteria within
several companies
3.6. Validation and Reliability
The validity of this study will be based on the validity criteria for case studies of
Yin (1994) - construct validity, internal validity, external validity, and reliability.
Construct validity can be increased through multiple sources and to ensure this kind
of validity in the present research information will be gathered from company publications
of 4 companies. It is assumed that the company’s publications may not be sufficient source
- 29 -
and this is a reason other official sources to be included. Since this study aims to identify
and explain the factors of the internationalization process, it is relevant internal validity to
be discussed. It is assumed that the provided information in the official website and
company’s publications is correct and objective. To increase the internal validity a table
with the summarized findings is designed and patterns are further identified and pattern
matching is used for the analysis in the following sections (Yin, 1994). External validity
refers to the generalization of the study findings and the present findings are valid only for
the biofuel industry in the EU and the same findings do not apply and imply any
conclusions for other industries. Reliability represents the replication validity of the study.
The researcher will represent the information from the official statistics and documents
citing them as closely as possible, avoiding research bias in this way. Replication is
essential to multiple case study analysis and the purpose of the replication is to find logic
across cases and in this way confirms, extends or sharpens theory (Eisenhardt, 1989).
4. Industry Analysis
In this section the market characteristics and issues of biodiesel and bioethanol in the EU
are reasoned. Biofuels are a renewable alternative to fossil fuels and it is expected that in
near future the demand for biofuels will grow (Scotia Capital, 2010). The main drivers
behind biofuels are energy independence, climate change remediation, sustainable green
economic development, and the search for alternative fuels that are lower in cost or in price
volatility. The employed figures in the present section are based on statistics of the
European Biodiesel Board (EBB), European Commission statistics, Eurostat, national
industry organizations and associations as well as governmental sources. PEST Analysis
and Porter’s Five Forces analysis are employed to allow understanding between the
collected data in the present research with the theoretical background explained earlier by
the Industry-based theory and the Institutional-Based theory.
4.1. Biofuel Production and Consumption in the Eropean Union
The biofuel production industry is defined by the trade of the alternative fuels biodiesel and
bioethanol. The economic and political boundaries of the analysed market are defined by
- 30 -
the European Union. The countries, taken into account for the analysis of the EU market
can be divided to Western Europe (Belgium, Denmark, France, Germany, Italy, the
Netherlands, Spain, Sweden) and Eastern Europe (Czech Republic, Hungary, Poland,
Romania).
4.1.1. Biofuel Consumption in the EU
The biodiesel and bioethanol consumption in the EU is already growing (see Fig 3 in
Appendix. EU Supply & Demand of Biodiesel and Bioethanol). Biofuels will grow from
2% up to 27% of world transportation fuel by 2050 according to the International Energy
Agency10. The consumption of bioethanol for 2012 is estimated to 5,843 million liters and
13,800 million of liters of biodiesel in the EU Transport Fuel Consumption. It is predicted
that in 2013 the consumption of biodiesel will decrease slightly, while the consumption of
bioethanol will increase with around 400 million liters even though the gasoline market is
shrinking (Flach et. al 2012).
4.1.2. Biodiesel Production
It is important to emphasize that the amount of biofuel production can be defined not only
by the demand but by the production capacity (Stoeglenher & Naradoslawsky 2009). The
production of biodiesel in the EU accounts for 17% in 2009 and 55-60% of the world
production and the European Union remains the major producer of biodiesel in the world11.
The actual production of biodiesel in 2010 is 9,570 tonnes and the actual capacity is twice
as much (see Appendix, Fig. 4. Production and Production Capacity of Biodiesel in the EU
by Country). According to the European Biodiesel Board (EBB), in 2009, biodiesel
production has been decreasing in number of EU Member States (see Fig.5. Trend in EU
Biodiesel Production 1998-2011), including Germany, Greece and the UK, but important
production expansions have been realized in other countries such as Austria, Belgium,
Finland, Italy, Netherlands, Poland and Spain.
The major feedstock for biodiesel production in the EU is rapeseed oil which
accounts for more than 60% of the total input in biodiesel production (Flach et. al 2012).
The use of soybean and palm oil is limited by the EU biodiesel standard DIN EN 14214
since the soybean-based biodiesel does not comply with the iodine value prescribed by this
standard and the palm oil-based biodiesel does not provide enough winter stability in
- 31 -
northern Europe (Gelder, 2008). However, this standard is possible to be met by using a
feedstock mixture of rapeseed oil, soybean oil, and palm oil.
4.1.3. Bioethanol Production
Bioethanol is the most produced biofuel worldwide with almost 74 billion litres in 2009.
With a production of 3.7 billion litres in 2009 (see Fig.6 Production of Bioethanol), the EU
ranks third behind United States (54%) and Brazil (34%)12. Total EU production in 2009
represents a significant increase of 31% compared to the previous year with bioethanol
production estimated for 2.8 billion litres. According to EBB in 2009, the biggest producer
is France, second largest producing country is Germany and the third biggest producer
remained Spain. The same year, two countries more than doubled their fuel ethanol output,
namely Austria (+102%) and Sweden (+124%), which are now ranking as fourth and fifth
largest producer respectively. In the last two years, and the first half of 2012, the EU
bioethanol industry faced the same problems as the EU biodiesel industry previously
experienced, namely an excess of production capacity on the market, slackening demand
and competitive imports, mainly from the United States (Flach et. al 2012, p.12). In the EU,
bioethanol is mainly produced from wheat, corn, rye, barley and sugar beet derivatives and
their adoption vary on country basis.
4.2. PEST analysis
4.2.1. Political-Legal Factors
Renewable energy replaces fossil fuels, diversifies the energy supply, reduce carbon
emissions and the oil dependence of the transport sector, which is one of the most serious
issues affecting energy supply security that the EU faces 13. The European Commission has
identified biofuels as a key future energy source for transport, concerned mainly by two
factors: first, the EU’s transport system was almost entirely dependent on oil from Russia
and second, the politically unstable regions of the Middle East and Central Asia. In 2001,
another problem facing the EU was not meeting its Kyoto Protocol GHG emissions
reduction target (Afionis & Stringer, 2012). The Protocol sets legally binding targets and
timetables for cutting developed country emissions and the convention encouraged these
countries to stabilise emissions. These are some of the primary reasons for which the EU
- 32 -
has decided to increase the use of renewable sources in transport and energy. To support
this initiative, EU had to adopt mandatory sustainability standards and regulations for
biofuels, and ensure their international alignment, market success and avoid acting as
barriers to trade.14
The EU Energy and Climate Change Package (CCP) was adopted by the European
Council and the Renewable Energy Directive (RED), known also as DIRECTIVE
2009/28/EC and is part of this package, entered into force on 23 April 2009 (Flach, et. al
2012). The directive states the sustainability criteria for biofuels that have to include
eligibility for financial support and satisfy the targets. The role of the Member States is to
accept the certification system set by the EU and they are not allowed to have higher or
lower sustainability criteria than those set by the EU (ibid). The EU's climate and energy
targets for the year 2020 can be summarized as15:
• 20% reduction in CO2 emissions16
• 20% of energy coming from renewable sources
• 20% improvement in energy efficiency
• 10% of renewable energy in transport.
These targets are total for the EU, however, they vary for each Member State since these
numbers are set by the European Commission (EC) depending on the current situation and
potential for growth in each country. Sweden, for example, will have to reach 49 percent,
while the target for Malta is only 10 percent (Flach et. al 2012, p.6). The targets for the four
largest economies of Europe: Germany, France, and Italy, are 18, 23, and 17 percent
respectively. Nevertheless, the 10 % of renewable energy in the transport sector of each
member state is obligatory (ibid).
Biofuels certification is necessary to ensure compliance with the EU sustainability
criteria. Some standardization organizations such as the European Committee for
Standardization (CEN) and the International Organization for Standardization (ISO) have
also developed their own sustainability certification schemes. In 2011, the European
Commission announced the first seven biofuel certification schemes (Afionis & Stringer,
2012).
- 33 -
Biodiesel can be used in pure form or blended in conventional diesel vehicles with
minor engine changes (Bomb, et. al 2007). Biofuels, however, are usually mixed with
conventional diesel and gasoline. The diesel standard (EN590), issued by the European
Committee of Standardization (CEN) in 2003 accepts up to 5% blending of biodiesel (B5),
which was changed to 10% in 2010 (Peckham, 2007). Biodiesel blends of 10% are
compatible with nearly all existing diesel vehicles and represent a great potential as
transport fuel17. The gasoline standard (EN228) limits the maximum amount of ethanol in
gasoline up to 5% (E5) (Turkscin et. al 2011) even though flexi-fuel vehicles can use
blends of 85% bioethanol (E85) (Bomb et. al 2007). This initiative also aims reducing
emissions of CO2 (carbon dioxide) and other harmful gases to human health and the
environment18. On one side, this initiative can open up the market, however, on the other
side, they limit it.
The biofuel production in the EU is also affected by the global biofuel market. An
explanation for the lower growth rate in EU biodiesel production in 2007 is given to the
persistence of unfair trade practices on the worldwide biodiesel market. The profitability of
EU biodiesel producers had been severely affected by heavily subsidized and dumped
biodiesel from the US (known as "B99") that has been sold in the EU with a considerable
discount. It was a reasonable action by the European Commission to impose anti-dumping
measures and protect consumers19. Moreover, there are other official institutions in the EU
as the European Biodiesel Board (EBB20) that addresses fraudulent practices related to
biofuels.
4.2.2. Economic Factors
Another requirement that biofuels have to satisfy to comply with the macro-environmental
pressures of the industry, is to be economically feasible. The main mechanisms that
governments employ to foster the development of their national biofuel industry are by
imposing tariffs and subsidizing (Afionis & Stringer, 2012).
The income from crop cultivation has to be nationally and internationally
competitive. To reduce the risk of financial loss, feedstock producers can diversify the
crops to different markets as food, animal feed and biofuels (Turcksin, 2011). According to
Council Regulation of the EC with No.1782/2003 crops supplied for the production of
biofuels can receive aid through agricultural subsidies (Grau et. al 2010). For biofuel
- 34 -
producers the economic issues are related to investments cost and production capacity.
Combined heat and power production is capital-intensive for farmers because of high
investment demand, big fluctuation in the rate of return on investments, and unpredictable
factors (Raslavicius & Bazaras, 2010). Unlike biodiesel production, bioethanol production
is only profitable in large plants due to economies of scale (Dautzenberg & Hanf, 2007).
However to achieve the desired profit large production plants and their accompanying high
costs necessitate securing investments (Flach et. al p.16). Moreover, biodiesel is more
expensive to manufacture in comparison to diesel (Turcksin, 2011). Because of this, there is
a significant price premium for biodiesel over diesel. Comparing both fuel products purely
on the basis of price, European oil companies have no financial incentive to use biodiesel
since diesel is significantly cheaper. However, on the back of regulation, the EU plays host
to a vast market for the biofuel21. Moreover, if producers enter a relationship with
commercial banks this can expose them to potential financial risks.
The fuel distributors’ profit will be determined by the potential of sustainable fuels
in the long run and the additional cost related to the adoption of refueling infrastructure or
converting of existing one. For the end users the ownership of a biofuel compatible car
should not be more expensive than traditional transport vehicle. If the price does not
promise potential savings, a sale of such green vehicle will be difficult (Turcksin, 2011, p.
204-205). Green technology cars, moreover, may become competitive advantage of car
manufacturers and be cost-efficient investments. Furthermore, biofuels can bring economic
growth in many rural areas.
All of these initiatives, nevertheless, require tax cuts and subsidies which would
impact the government. The European Commission, however, argues that in the period
after year 2020, biofuels must be subsidized only if they have great reduction importance of
the GHG (greenhouse gas) and are not produced of food crops (GreenTech, 2012).
4.2.3. Socio-Cultural and Environmental Factors
"It's a crime against humanity to convert agricultural productive soil into soil ... which will be burned into
biofuel... What has to be stopped is ... the growing catastrophe of the massacre hunger in the world."
Jean Ziegler, 26 October 2007, News Conference at the UN
- 35 -
UN, however, disagrees to the above quotations arguing that there were both opportunities
for international development as well as risks. The main issues of 1st generation biofuels
discussed below are the “food vs. fuel” controversy, the destruction of green lands and the
real reduction of GHG is questioned.
According to 2011 issue of OECD-FAO Agricultural Outlook, it is forecast that
13% of the world grain production, 15% of the vegetable oils and 30% of the sugar cane till
2020 will be used for the production of biofuels which is considerable threat of hunger, and
increasing food prices (European Environmental Bureau, 2009). It is arguable, however,
that the increasing food prices are less directly related to biofuels because food
consumption has also increased. For instance, rice and wheat, neither of which is used in
biofuel production, have been consumed faster than each crop has been produced in the
past few years (Baier et. al 2009). Moreover, food prices are influenced by many other
factors, including economic growth (i.e. crude oil prices, exchange rates, growing demand
for food and slowing growth in agricultural productivity), international trade, currency
markets, oil prices, government policies (i.e. agricultural, energy, and trade policy of other
nations) and bad weather. It can also be concluded that increased demand of food is largely
a result of population and income growth22. Furthermore, there is increasing debate that
grazing fields have been turned into crops fields for biofuel production and this leads to the
increase of food prices and decrease the territory for pasture. However, according to
economists23, biofuels play only 3% role in the increase of food prices. In addition,
according to the sustainability criteria of the RED, the produced biofuels must not be
produced from feedstock grown on lands with forests and grasslands or wetlands with high
carbon stocks (Hitchings & Monique, 2010).
A Canadian study published by the Global Renewable Fuels Alliance concluded
that world biofuels production in 2009 reduced global greenhouse gas (GHG) emissions by
123.5 million tonnes, a 57% reduction compared to equivalent petroleum fuels (Scotia
Capital, 2010). The European Commission’s Joint Research Center (JRC) calculated GHG
emissions for cultivation, processing, transport, and distribution for different raw materials
(see in Appendix in Table 4,). Typical GHG savings represents savings for a particular
biofuel production pathway (Flach et. al, 2012).
- 36 -
Cultivation should happen in a sustainable way (Turcksin et. al 2011). Moreover, if
biofuels are produced in sustainably harvested feedstocks using energy efficient production
processes, they can reduce greenhouse gas (GHG). If, however, they are not produced in
sustainable way, then the production process would have significant negative effect on the
environment causing increasing GHG emissions (Feld, 2011; Baier et. al 2009;
Poirer&Franco, 2009).
The conflict over using food crops for fuel, triggered by 1st generation biofuels such
as corn-based ethanol, has led scientists to search for “sustainable” next generation biofuels
based on grasses, plants, wood and residues that do not directly compete with food crops
and can be grown on marginal lands. (Pringle, 2011)
4.2.4. Technological factors
According to the European Association for Bioindustries, the production of 1st
generation biofuels uses technology that is well-known today and production methods are
not complicated. Biofuels are mainly needed for transport. For all other stationary energy
demands like low temperature heating, process energy and electricity other options can be
used. As long as the technology to run vehicles will not change, biofuels offer an option to
fossil fuel (Stoeglenher & Naradoslawsky, 2009). It is argued, moreover, that biofuels can
improve the performance of the engine. Biodiesel can enhance lubricity while the higher
octane number of the bioethanol improves combustion (Trucksin et. al 2011). The
discussion from the PEST analysis above can be summarized as current trends and their
impact on the industry.
Table 5. Macro-Environmental Factors for Biofuel Production
Context
Trend
Impact
Positive
Negative
Political-Legal
Political incentives supporting biofuel production
Economic
High Investment Costs and Future uncertainties
X
SocioEnvironmental
Can reduce greenhouse emission when produced sustainably,
however, main issue remains Food vs. Fuel controversy
X
Technological
Well-known production methods and Compatibility of biofuels
with traditional vehicles
- 37 -
X
X
To summarize, the advantages of biofuel production include the reduction of gas emissions
and other substances in the atmosphere which cause global warming, increasing the
independency of countries on importing petroleum from OPEC and positive impact on
employment in rural areas. First generation biofuels have also their disadvantages. Largescale production of first-generation biofuels cannot be seen as an alternative to fossil fuels
due to land requirements and competition with food (Grau et. al 2010). Furthermore, the
production of 1st generation biofules is related to usage of water resources in areas with
scarcity of it (Turcksin et. al 2011). This is a reason 2nd generation biofuels to be developed
to address the problems and potential issues of the 1st generation. However, this next
generation biofuels are not attractive alternative yet because their technology is not fully
commercialized (ibid).
4.3. Porter’s Five Forces Analysis
In this section Five Forces analysis is used to determine the competitive intensity and
therefore attractiveness of the biofuel consumption market in the European Union. The aim
is to find out what are the factors affecting the strength of competition in the European
biofuel production market, how the market performed and who the top competitors are. The
biofuel production market will be analyzed with biodiesel and bioethanol producers as main
players. Fuel and energy distributors are considered as key buyers, and suppliers of
feedstock as key suppliers.
The main biodiesel and bioethanol producers are summarized in Table 6. Main
Biodiesel Producers in the EU and Their Production Capacity and Table 7. Main
Bioethanol Producers in the EU and Their Production Capacity (in the Appendix.)
4.3.1. Threat of new competition
On one side, it can be argued that the biofuel production industry requires high investment
costs. Biofuel production requires large plants with specialized equipment (Datamonitor,
2011). This is not only an expensive initiative but also time consuming and requires
government licensing. Estimated biofuel production costs show significant differences
depending on factors such as scale of the plant, technology complexity and feedstock costs
- 38 -
(IEA, 2011). Such factors may impede the potential investors in this sector. Moreover,
according to EBB, Diester Industrie and Abengoa Bioenergy have already been two of the
main established players in biodiesel and biofuel production respectively and they are also
deterrent to new entrants.
On the other side, the industry is rapidly expanding and the EU institutions
intervene with initiatives and legal instruments to support industry growth (Hitchings &
Peckham, 2009). Moreover, patent is not required for the production process, products are
not differentiated and many strong brands do not exist internationally (Datamonitor, 2011).
The industry growth is not the same in all EU Member states as already discusses in section
Biofuel Production. This means in some countries biofuel production is still a niche and
could be an attractive target for new investors. All these factors represent favorable
conditions for new entrants.
It can be concluded that the existing barriers to entry may not stop new investors since the
market is expanding rapidly and is supported from the government. For these reasons it can
be concluded that the threat from new entrants is strong.
4.3.2. Threat of substitute products or services
According to the statistics of the European Biodiesel Board as well as Datamonitor (2011),
the biofuel production industry experiences a strong growth, however, it still moves slower
than in comparison to the petrol and the diesel that are the existing substitutes for
bioethanol and biodiesel respectively (Eurostat, 2012). The costs for switching from using
traditional fuels to biofuels is low since fuel distributers already have the installed
infrastructure and most cars can run on biofuel without major changes. On the other side,
without substantial fiscal support, biofuels would remain more expensive than their
substitutes (Motaal, 2008). It is a paradox, that even in biodiesel where the EU is the
world’s leading producer, costs are still higher compared to the US, not to mention Brazil
(Afionis & Stringer, 2012).
The EU plans to withdraw the subsidies for biofuels after certain period. As both
kinds of fuels are close substitutes the considerable difference between them is that fossil
fuels are still the cheaper option while biofuels are the environmental alternative
- 39 -
(Datamonitor, 2011). For these reasons, substitutes are considered a strong threat for the
biofuel market.
4.3.3. Bargaining power of customers (buyers)
The main buyers of biofuel products are the fuel and energy distributors, which are usually
large multinational companies. With the increasing fossil fuel prices and environmentally
conscious green users, the demand for renewable fuels is rising. Demand is met when
producer’s supplies are provided by fuel retailers to end consumers. However, this demand
is still lower than the demand for traditional fuels (Datamonitor, 2011). Biofuels are
available at some fuel stations, however, retailers do not buy them in large amount for stock
despite the existing infrastructure (ibid). For all these reasons it can be concluded that
retailers are able to exercise bargaining power over producers and buyer’s decisions are
considered as strong threat.
4.3.4. Bargaining power of suppliers
Biofuels are produced from sugar, corn, rapeseed, soy, and biomass. This is why main
suppliers are agro-food companies and farmers (Datamonitor, 2011). On one side, the
supplier power depends on the size of the supplier. The larger the farm or the more
independent the supplier, the more bargaining power they will have over the biofuel
producers who are the buyers in this case. The supplies for biofuel production come from
farms or agro-food companies with large areas of land where crops are grown mainly for
biofuel production and in this way such large entities would provide sufficient amount for
the production process.
On the other side, however, crop growing is not a specialized process so the existing
potential suppliers are many. This means that biofuels producers can switch supplier at a
low cost and in this way supplier bargaining power is reduced. Since biofuel producers can
diversify vertically, this also represents another threat to suppliers (Datamonitor, 2011). It
can be concluded that supplier’s bargaining power is low or average.
- 40 -
4.3.5. Rivalry
The biofuel market in the EU had strong growth in the last years and the growth is expected
to grow since society is becoming more environmentally conscious and the EU supports
this market. The existing biofuel producers already specialize in several areas and they not
always compete for the same product (Datamonitor, 2011). For instance, biodiesel
producers do not specialize necessarily in bioethanol products. It is also important to be
taken into account the fact that certain sectors are more competitive in particular countries.
The competition is not considered as intense. For these reasons and the strong growth of the
market, it can be concluded that the rivalry is average.
The emerging biofuel industry is attractive to many companies but it has many
uncertainties. The major factors affecting the industry profitability are costs of the
feedstock and technology, the regulation and the cost of the substitutes. If companies
decide to enter, they must diversify the risk and build relationships that could help them
reduce uncertainty (Ceasar et. al 2007).
The above discussion can be summarized in the table below.
Table 8. Porter’s Five Forces and Attractiveness of Biofuel Indusrty in the EU
Force
Note
Level
Threat of New Entrants
High investment costs but growing market
Strong
Threat of Substitutes
Low switching costs but cheaper substitutes
Strong
Bargaining power of suppliers
Crop growing is not a specialized process and there are
many suppliers
Moderate
Bargaining power of buyers
Lower demand for biofuels than traditional fuels
Strong
Rivalry
Strong growth of the market and not intense
competition
Moderate
Attractiveness
All the five forces drive to moderately to highly
attractive industry
Moderate to
High
- 41 -
5. Biofuel Producers in the EU
In this section several of the established players on the biofuel market in the EU are
analysed. The purpose of this section is to provide the necessary information on
internationalization strategies of those companies with great capacity production of first
generation biofuels that have plants abroad. The chosen biodiesel producers which fulfill
companies’ criteria from the Methodology section are Diester Industrie and Biopetrol
Industries. Despite the fact that Biopetrol Industries’ home country is Switzerland, which is
not part of the EU, it is included in the analysis since it has considerable operations in
countries, Member States of the EU. The bioethanol producers, answering the same criteria
are Abengoa Bioenergy and Crop Energies.
5.1. Diester Industrie and Diester Industrie International24
The information is quoted from press releases and facts provided at the official website of
the company25.
Diester Industrie (DI) was established in 1992 and is the leading producer and marketer of
biodiesel and plant glycerine in the EU26. DI is a subsidiary of the French agri-food group
Sofiproteol and operates a joint venture, Diester Industrie International (DII), together with
the American-based agro-company Bunge Limited (Datamonitor, 2011). DI is active on the
French market, but also on the European market through its subsidiary DII created in
200527. DII is owned 60% by Diester Industrie, 40% by KBBV, the European subsidiary of
Bunge Limited.28 Bunge is a global leader in the food industry and in the production of
vegetable oils.29 DII will develop its activities in Europe within the framework of the EU
directive promoting biofuel use. DI and DII’s biodiesel total output volume accounted for
2.1 million tonnes in 2011. This is combined biodiesel output produced across 7 sites in
France and 6 in Europe with total sales of 2.69 billion euros in 2011 which describes the
company as strongly profitable (EurObserv’er, 2011). The French sites are located in
Grand-Couronne, Venette, Le Mériot, Bassens, Sète, Montoir-de-Bretagne, and Cappellela-Grande. The other European sites are Marl (Germany), Mannheim (Germany), Livorno
- 42 -
(Italy), Porto Corsini (Italy), Bruck an der Leitha (Austria), and Ertvelde (Belgium) 30. DI
generates one third of its turnover of 2.3 billion Euro outside their home country.
Compared to a fossil product, Diester biodiesel reduces emissions of greenhouse gas
from 59% to 73% depending on the oils used, mainly rapeseed and sunflower, according to
the Agency for the Environment and Energy Management (ADEME) and 5 million tonnes
of CO2 were saved by the substitution of diesel by Diester in France in 2010. In this way,
biodiesel Diester surpasses the thresholds set by the EU directive on renewable energy
(February 9, 2011). Moreover, the produced Diester biodiesel complies with European
specification EN 14214 (Focus on Catalysts, 2004).
Internationalization process
According to Diester Industie, the creation of the joint venture, DII, is a step ahead to
satisfy the growing need for biofuels in Europe. In their internationalization process they
take into account the following important factors that could affect their business and
financial performance: their ability to complete, integrate and benefit from acquisitions,
divestitures, joint ventures and strategic alliances; change in the estimated demand for the
commodities and other products that they sell; industry conditions, including the cyclicality
of the agribusiness industry and unpredictability of the weather; agricultural, economic,
business, competitive and regulatory factors affecting their business in general31. An
example was the harsh competition from cheap Argentine and Indonesian imports that
influenced negatively DI financial results. DII experienced drop of 21% in production
volumes in 2011 since they suffered competition from animal fat methyl esters (AFME)
and waste oil methyl esters (WOME) which companies preferred rather than plant oil esters
(Sofiprotéol, 2011).
DII has the subsidiaries NAVAOL Italy, NAVAOL Austria, Mannheim Biofuel in
Germany, and 50% ownership of New Energy West in Germany and OLEON, Belgium32.
Romanian Expur is a subsidiary of Sofiproteol, but part of Expur activities is biodiesel
production. In 2011, Diester Industrie and Diester Industrie International complied with the
sustainability requirements imposed by the Energy Renewable European Directive. The
seven French sites and six European sites for biodiesel production were certified according
to the 2BSvs (Biomass, Biofuels, Sustainability Voluntary Scheme) in France and the ISCC
- 43 -
(International Sustainability & Carbon Certification) scheme in Germany (Sofiprotéol,
2011). Diester Industrie is commited to sustainable development. They site their plants
close to petroleum refineries so deliveries can be achieved by water or pipeline (ibid).
DII build in 2006 a new biodiesel plant next to Bunge’s existing facility in
Mannheim, Germany. The strategy of DII was to expand the capacity depending on the
market conditions.33 The Mannheim Bio Fuel Ltd. is a subsidiary of International Diester
Industrie SAS.34 Moreover, the European Commission approved the acquisition of
Mannheim Bio Fuel (MBF, Germany) and Novaol Austria by Diester Industrie
International.35
In 2008, Diester Industrie acquired Oleon Holding NV, a leading European
oleochemical company, in Belgium. A glycerine refining unit of 30.000 tons was built at
the Compiègne site of Diester Industrie. Glycerine is an important by-product of biodiesel
production.36 With this acquisition, the group Sofiprotéol strengthens its position in the
field of plant chemistry in which it is already present with its subsidiary Novance (owned
by Diester Industrie) based in Venette. This confirms the group strategy of developing
sustainable solutions from biomass, protecting the environment and fighting climate
change, while supplying food for humans and animals with priority (January 19, 2009).
Moreover, Oleon and Novance operate on 5 production sites in France, Germany, two
plants in Belgium, and Norway. They also own a network of 8 sales offices spread over 3
continents37.
Novaol Italy, a leader in the production and development of biodiesel, was founded
in 1991 and in 2001 it became subsidiary of Bunge and later was joined by DII. There are
two plants there, one in Livorno and one in Porto Corsini, Ravenna38.
Technip, a technological company, has a turnkey contract for a 160,000 ton-peryear biofuel production unit (CMR, 2004) with Diester Industrie for a new biodiesel unit,
based on the Axens process.39 French technology company, Axens, provided its Esterfip-H
biodiesel process, which offered significant benefits, to compatriot firm, Diester Industrie.
The new plant was built in Sète, France in 2005 (Gordon, 2004). The plant, reportedly the
first of a kind, uses heterogeneous catalyst technology.
Sofiprotéol acquired the Romanian subsidiary of Alimenta society Expur SA that
specializes in the processing and development of rapeseed and sunflower for animal feed,
- 44 -
refined oils and packaged for human consumption, and, since 2009, into biodiesel. (Press
Release, April 29, 2010). Expur has 2 industrial plants, in Slobozia and Urziceni, and 6
oilseed collection sites in the fertile Danube region, which provides a strategic location for
biodiesel production in Eastern Europe. Diester Industrie has an objective to maintain
global leadership in biodiesel production.40
Business Network41
The partnership Association of Diester is called “Diester 30% Partners” and it has
objectives to exchange information with its users, to promote the technical, economic and
environmental benefits with the optimal incorporation rate of 30% in diesel, and to
establish and sustain a dialogue between industrial partners (manufacturers, suppliers,
distribution oil), biodiesel users and public authorities in order to optimize the technical,
financial and economic use of Diester 30%. Some of the biggest partners of their
association are car manufacturers and oil companies.
PSA (Peugeot-Citroën) developed car engines that can use higher levels of biofuel
mixture. “Diester 30% Partners” engaged with the National Federation of Farmers' Unions
(FNSEA) to collaborate together on the development of biofuels to meet the objectives of
the EU directive on renewable energy. PSA already ensured that all diesel engines are
compatible with fuels containing up to 30% biodiesel (October 15, 2010).
Danone France Fresh Products (DPFF), who collects one billion liters of milk per
year, has joined "Diester Partners". Integrating the objective of Diester Partners, DPFF runs
28 trucks on Diester biodiesel 30% of total fleet of 68 trucks on the territory of France
(October 15, 2010a).
Diester Industrie has also partnership with BP, a British multinational oil and gas
company, since 2007 and BP intends to strengthen this partnership because the stakes will
be even more important in the future in the field of biofuels. Diester Industrie’s partnership
continues with Total, an oil group. Total began certification of biofuel chains. The French
oil group hopes that automakers will further strengthen in their use of biofuels. Peugeot and
Diester exist since 1997 (September 7, 2009). Moreover Diester Industrie organizes
agricultural events where farmers also contribute to the initiatives for energy independence
of France (May 24, 2010).
- 45 -
Diester Industrie Partnership association has more than sixty domestic partners (see
Table 9. Partners of Diester 30% Partners in the appendix). The partners can be described
as both types with community or enterprise roles. The community members are
municipalities, cities, general councils, and the state. The enterprise members are urban
public transport networks, transport networks of regular school, companies related to
construction activities and businesses related to agriculture42.
5.2. Biopetrol Industries43
The information is quoted from press releases and facts provided at the official website of
the company.
Founded in 2004, BIOPETROL INDUSTRIES AG is a Swiss company headquartered
currently in Baar, Switzerland. Their business is the manufacture and distribution of
biodiesel, produced from rapeseed, and pharmaceutical grade glycerol from vegetable oil.
Until 2011, the company had seven wholly owned subsidiaries: Biopetrol Schwarzheide
GmbH (Germany), Biopetrol Rostock GmbH (Germany), Biopetrol Rotterdam BV (the
Netherlands), Biopetrol Pernis BV (The Netherlands), Biopetrol The Netherlands BV,
Biotpetrol Marketing BV and Biopetrol Finance BV (see in the appendix Table 10.
Biopetrol Industries AG Structure).44 The Company has one production facility in Rostock,
and had one in Schwarzheide, Germany, and still has two in Rotterdam, the Netherlands.
Biopetrol Industries AG outsourced their financial and marketing operations to the
Netherlands. The biodiesel capacity of the plant in Schwarzheide was 150,000 tonnes per
year and in Rostock is 200,000 tonnes per year. In the Netherlands the biodiesel plants
capacity is 650,000 tonnes per year.
Biopetrol Industries AG aims to provide supreme quality products and have several
activities to ensure quality control. Assessment of suppliers is one of them and that is why
rapeseed is supplied by selected oil mills that are certified. Another quality control activity
is during the transesterification process of rapeseed and liquid catalysts, when biodiesel and
crude glycerol (a by-product) are produced, the biodiesel is washed in order to meet the
- 46 -
requirements of the EN 14214 standard of the EU. There is quality control of incoming and
outgoing goods, which is checked by sample and has to comply with the stringent quality
requirements of the Working Group for the Quality Management of Biodiesel (AGQM) and
the current standard EN 14214 as well. Biopetrol Industries are certified by ISCC for
International Sustainability & Carbon.
Internationalization process
Moreover some political decisions in regards to energy policies damaged the whole
biodiesel industry. One of those political debates over the biofuel quota delayed the
introduction of B7 by months that led to a situation where buyers in the market only accept
short term contracts or insist on contractual clauses, which make it impossible for producers
to plan purchase of materials. In addition to this the market for pure biodiesel (B100)
completely collapsed. Biodiesel industry suffered of severe competition from the fallen
prices of diesel. Then, the only possible way for biodiesel to remain competitive is trough
tax breaks.45
Although, the company achieved strong sales revenue increase from 127 million
EUR in 2009 to 616 million EUR in 201146, Biopetrol Industries AG experienced net loss
of EUR 61 million in the first half of 2012 compared to a net loss of EUR 15.8 million a
year ago. Aiming to strengthen the company’s financial position, Biopetrol announced the
launch of a restructuring of its balance sheet. The company discussed constantly
agreements with creditors.47
The turning point for Biopetrol Indutries AG came with the overcapacity in the
European biodiesel market in 2010 that led to pressure on margins and low utilization rates
across the industry. In these unfavorable market conditions, Biopetrol closed down its
production plant in Germany a year later. Due to lack of sea links to customers, the
Schwarzheide plant lacked the opportunity to seek new potential customers beyond its own
oversupplied region in contrast to the plants in Rotterdam and Rostock that are located
close to the sea and have an access to a wider pool of customers. During 2010
BIOPETROL took a number of other actions to further reach cost efficiency and remain
competitive. They also moved their commercial activities from Switzerland to Rotterdam,
- 47 -
the main hub of the European biodiesel industry.48 Despite the unfavourable market
conditions, operational performance showed significant signs of improvement with the
utilization rate of operating plants in Rotterdam and Germany increasing in the second half
of 2011. Company’s survival strategy in this challenging environment is to improve
operational and financial performance.49
Biopetrol Industries AG signed an agreement to acquire Dutch Biodiesel BV in
2010 and as part of the transaction, BIOPETROL intended to transfer their current
operations from Dutch Biodiesel to existing BIOPETROL sites in Rotterdam. The aim of
these actions was to create opportunities for improved logistics and operational synergies,
providing enhanced services to customers.50 A further increase in capacity in Rotterdam
was considered, as there was growth through acquisitions and the broadening of the product
range could include more of the by-product glycerine. Rotterdam is a good location for
BIOPETROL, placing them in the largest European refinery centre and very close to their
major customers from the oil industry.
Biopetrol Industries AG has unsustainable levels of debt and are therefore seeking
to improve the finances of the company by initiating a restructuring of our balance sheet
and engaging with their main creditors regarding the financial situation. 51 BIOPETROL
succeed to engage in more favourable loan terms with its majority shareholder in the last
years. The company’s strategy is to continue to explore opportunities to strengthen its
balance sheet, including diversifying its financing providers, where possible.52
Business Network
Biopetrol Industries AG is an established partner of the oil industry, traders and fleet
operators and they follow a strategy of an international supplier of high-quality biodiesel in
the EU. The shareholders of the company are Glencore with 60.3%, Agros Group with
17.8% and there is free float of shares of 21.9%.
53
Glencore is one of the world's largest
suppliers of commodities and raw materials to industrial consumers.54 Argos Oil, founded
in 1984, has developed into a major market player through autonomous growth and
acquisitions to become one of the largest independent oil companies in North-West Europe
trading fuels and lubricants.55 Part of the BIOPETROL free float shares are held by the
Klink family and the management who are institutional investors.56
- 48 -
Especially strong presence the company holds in Germany where also the national
government and leading German politicians support domestic production of biodiesel57 In
2006 BIOPETROL INDUSTRIES signed a long-term agreement with the tank storage
company Royal Vopak. Royal Vopak is the world's largest independent tank storage
company and serves 73 terminals in 29 countries with a storage capacity of over 20 million
cubic meters.58
5.3. Abengoa Bioenergie59
The information is quoted from press releases and facts provided at the official website of
the company.
Abengoa Bioenergy is the major European biofuel producer and one of the leading
producers in the United States and Brazil.
60
The company produces bioethanol from 1st
generation (grains, sugar cane) and 2nd generation (agricultural waste) and company’s
activities can be described as procurement of raw materials, production and marketing of
bioethanol and its co-products DGS (from grain) and sugar (from sugar cane). Abengoa
Bioenergy aims to establish a leading position in the biofuel industry and develop
sustainable solutions for the transport sector and chemical bioproducts from renewable raw
materials.61 The company has 7 bioethanol plants in the EU, one of them in construction,
and a biodiesel plant. Three of the bioethanol plants are in Spain, where there is also the
only biodiesel plant that Abengoa have in the EU, one bioethanol plant in France, one in the
Netherlands, one in Germany, and one in construction in the UK (see fig. 7 Abengoa
Bioenergy’s Plants in the EU in the Appendix).
Abengoa’s biofuels are certified under the scheme RBSA, which is applicable at
global level, approved as well by the European Commision and it certifies sustainable fuels
and reduction in GHG emissions. Results, in regards sustainability can be seen in the
recognition of the company as Sustainable Bioethanol Award for Producer Company in
2010 for its greatest sustainability benefits as measured by GHG savings, environmental
impact and further societal benefits of the operations or technology.62
- 49 -
Internationalization process
Abengoa Subsidiaries can be summarized as it follows:
 Ecocarburantes Españoles Owned by Abengoa Bioenergía S.A. (95%) and IDAE (5%).
 Bioetanol Galicia Fully owned by Abengoa Bioenergía S.A. (100%).
 Biocarburantes Castilla y León Fully owned by Abengoa Bioenergía S.A.
 Abengoa Bioenergy France S.A. Owned by Abengoa Bioenergía S.A. (69%) and Oceol
(31%). Oceol is an association of the main agricultural cooperatives and industries of the
region. This plant produces bioehtanol from corn.63
 Abengoa Bioenergy Netherlands Fully owned (100%) by Abengoa Bioenergía S.A. This
plant produces bioethanol from corn.
 Lignocellulosic Biomass Plant Fully owned (100%) by Abengoa Bioenergía S.A.
 The company also has biodiesel plant, Abengoa Bioenergía San Roque, in Cádiz, Spain.
It is fully owned (100%) by Abengoa Bioenergía S.A. In 2005 this plant started as an
agreement between Abengoa Bionergía and CEPSA (an energy company with strong
presence in Spain and international emerging activities). The manufacturing process will be
carried out from crude vegetable oils. The location of the plant is strategic since the close
position of the refinery aims at reducing logistic costs.64
In 2003 Abengoa Bioenergía signed a contract with the Swedish company Svenska
Shell to supply bioethanol.65 The deal was driven by the growing demand in Sweden and
lack of local production. In the same year, Abengoa Bioenergy was awarded, in partnership
with the German distiller KWST, a contract to supply bioethanol to railcars at PCK, in
Germany. PCK is a Joint Venture established by BP, Shell, and AET66. Abengoa
Bioenergy's strategy was focused on entering into long term supply agreements for 2004
and further years, since they perceive this as an opportunity for end-users and market
expansion through the development of the infrastructures required to introduce the
bioethanol. Since 2004, Abengoa Bioenergy has it own R&D subsidiary that was signed as
a strategic alliance with SunOpta and allowed Abengoa to convert agricultural residues into
ethanol, products of animal feed and biochemical products.
In 2006, the first contacts with German producers took place when the company
directly shipped grains to Germany from Spain and Abengoa were noticed internationally.
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In the same year the subsidiary in France, Abengoa Industrie, signed contracts for direct
blending with major chains of hypermarkets in France; Carfuel (Group Carrefour), SCA
Pétrole et Dérivés (hypermarket Intermarché), Distridyn (hypermarkets Casino and Cora),
Petrovex (Group Auchan) and Siplec (hypermarket E. Leclerc).67
In 2007 Abengoa Bioenergy lead the project I+DEA, (Research and Development
of Ethanol for Automotive Applications), developed by a wide consortium of private
companies and public investigation organizations to generate an important impulse for
agrarian, biofuels, automotive and biotechnology industries in Spain.68 The same year,
Abengoa signed a bioethanol supply agreement with the independent petroleum product
distributor Petrovex, a company with great gasoline network distribution in France.69
Abengoa Bioenergy also signed a bioethanol supply agreement with Argos Oil for the
distribution of E5 and E85 in The Netherlands. Argos Oil is one of the largest independent
oil companies in The Netherlands, with a network of around 75 petrol stations countrywide.
Moreover in 2007, there was a decreased production of cereals due to climate factors which
put pressure on the costs. However, Abengoa Bioenergy enabled partial mitigation of the
impact on raw material cost increase due to its geographical diversification with presence in
the USA, Europe and Brazil, flexibility in the use of different raw materials on their
production facilities, together with long term contracts.70
In 2011 Abengoa Bioenergy had the aim to become leader in the distribution of
biodethanol
in the Mediterranean region under sales contracts signed with oil and
petrochemical companies in Spain, Italy, and the south of France, and even oil operators in
Spain.71
In 2010, Abengoa also facilitated positive arbitrage for exporting bioethanol from
Europe to Brazil and sold their sustainable European products to cover Brazil’s growing
demand when the local offer was insufficient.72 The same year the company already had
thirty gas stations where they could supply E85.
With these supplies, Abengoa is expanding its activities in Europe while increasing
and diversifying customers between oil companies and refineries throughout Europe, and in
this way penetrating existing and new emerging markets opportunities. The company shows
intention of expanding to other European countries like Poland, Hungary and Italy.73
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Business Network
Abengoa Bioenergy partnerships can be seen in Table 11. Abengoa Bioenergy Partnerships
in the Appendix.
Biocarburantes Castilla y León have signed a contract with the European Union to
develop an R&D project under the Fifth Framework Programme. The main outcome of the
project will be the first lignocellulosic plant in the EU to start operation on a commercial
basis. The application of the lignocellulosic materials as well as the enzymes to convert
them will be the subject of intense research and development. The project brings together
partners from the research community and industrial companies, with a construction
company as a major subcontractor, to create an integrated fuel bioethanol chain.
Biocarburantes Castilla y León S.A (Spain) will be responsible for project co-ordination,
plant design, engineering, construction and operation, technical and economic evaluation,
and socio-economic study. Centro de Investigaciones Energéticas, Medioambientales y
Tecnológicas, Ciemat (Spain) will be responsible for determining process conditions for the
process of biomass to ethanol in laboratory. University of Lund (Sweden) will assess the
bioethanol process conceptual design from biomass. Novozymes A/S (Denmark) will be
responsible for production of enzyme for bioethanol process from biomass. Ecoagricola
S.A.(Spain) will be responsible for the suitable supply of raw materials to sustain the
bioethanol plant. Repsol Petróleo S.A. (Spain) will provide laboratory studies and vehicle
tests of ethanol-petrol mixtures for market distribution.74
Abengoa Bioenergy Corporation has identified BP (British Petroleum) as a
company with which they wish to strengthen their relationship because they are a major
international company, blending large volumes of ethanol and have innovative pricing
structures.75
Abengoa Bioenergy also entered into a cooperation agreements with Ford Spain and
General Motors Spain in order to develop the Ford vehicle market with flexible engines
("FFV") in Spain that use biofuel "Bioethanol E85" manufactured by Abengoa Bioenergy.76
In 2010 two former European bioethanol associations, UEPA and eBIO, merged into
ePURE which is an industry association governed by bioethanol producers. the scope of
ePURE's work covers all uses of bioethanol, including beverages and industrial applications
as well as fuel. In this coalition Abengoa Bioenergy was appointed to serve in the first
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Executive Committee of ePURE, along with the following biofuel companies: Tereos
(France); CropEnergies (Germany), Cristal Union (France), Ensus (UK), Royal Nedalco
(The Netherlands) Lantmannen Agroetanol (Sweden), Alco Biofuel (Belgium), Enviral
(Czech Republic) and Inbicon (Denmark).77
5.4. Crop Energies78
The information is quoted from press releases and facts provided at the official website of
the company.
Founded in Mannheim in 2006, Crop Energies have production facilities in Germany,
Belgium, and France as well as trading offices in the USA and Brazil. They are one of the
leading European manufacturers of sustainably produced bioethanol and manufacture their
bioethanol from cereals and sugar beet. Crop Energies produces approximately 700,000
cubic meters of bioethanol per year that mainly replace petrol and reduce CO2 emissions by
up to 70 percent.
Internationalization process
Crop Energies subsidiary in Belgium, BioWanze S.A. in Wanze, has a leading market
position in Belgium. It is also seated in place with favourable conditions for export to
Antwerp and Rotterdam due to the inland and deep-sea waterways.
In 2007 The R&D department of Crop Energies AG, Mannheim and several
institutes of the Fraunhofer-Society cooperated to promote the usage of bioethanol in fuel
cells for power supply and heating since they have applications in portable appliances such
as mobile phones, on-board energy supply of trucks, busses or automobiles and even house
energy supply. As one of the biggest European bioethanol producers, the Crop Energies AG
will actively participate in the further development of bioethanol fuel cells. To this effect, a
research cooperation with the Südzucker AG and several institutes of the Fraunhofer
Society which are the Fraunhofer-Team Direct-Ethanol-Fuel-Cell, the Fraunhofer Institute
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for Solar Energy Systems (ISE) and the Fraunhofer Institute for Ceramic Technologies and
Systems (IKTS) has been started.
Crop Energies AG, moreover supports filling stations who convert pumps to E85 to
promote the extension of the E85 filling station network in Germany.79 CropEnergies AG
had their campaign in which they supported modifications of up to 50 filling stations in
Germany, which are interested in selling Crop Energies AG "CropPower85" bioethanol.
Crop Energies AG signed an agreement for the acquisition of French alcohol
producer Ryssen Alcools S.A.S in 2008. Ryssen Alcools specialized in the drying of raw
alcohol for the fuel sector and has favourable logistical position in the port of Dunkirk.
From there the refineries in the ARA (Amsterdam-Rotterdam-Antwerp) area can be
supplied quickly and at low cost. The site also has facilities for loading and unloading rail
and road tankers80.
In 2008 CropEnergies AG, Mannheim, completed the expansion of the capacity of
their bioethanol plant in Zeitz, Saxony-Anhalt, from 100,000 m³ to 360,000 m³.81
Bioethanol produced at the plants of Crop Energies AG, Mannheim, in Zeitz
(Saxony-Anhalt) and Wanze (Belgium) conforms to all the requirements of the German
Biofuel Sustainability Regulation. In this way, Crop Energies can prove that bioethanol is
produced sustainably at all plants.82 As a result, the bioethanol produced there can be used
by the mineral oil industry to meet its mandatory blending obligations with sustainable
bioethanol.83
Crop Energies experienced failure of the launch of E10 due to the uncertainty of the
customers. Super E10 (petrol blended 10% bioethanol), which has been introduced at
German petrol stations, is a petrol standardized according to DIN 51626-1. The Federal
Ministry of Economics and Technology proceeded with the introduction of E10 in
Germany with the support of organisations representing the automotive, fuel and
agricultural sector as well as the consumer side.84
Business Network
Crop Energies Partners can be found in Table 12 in the Appendix.
Crop Energies AG, Mannheim, one of the leading bioethanol producers in Europe
that entered a fuel and technology partnership with the Volvo tuning specialist HEICO
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SPORTIV to supply them with high-performance E85 fuel for endurance races.85 Crop
Energies also have partnerships with Audi and Dart Races. Crop Energies are also a
member of ePURE which is the European trade association that promotes renewable
ethanol.
The results from the four cases can be summarized in Table 13. Summary of Results in the
Appendix.
6. Discussion
The present section serves as a link between the theoretical background from section 2 with
the empirical results from section 5. The four cases of the biofuel producers in the EU will
be discussed in the light of the employed theories.
Entry Modes and Business Network
The four cases show a repeated pattern where all biofuel producers are part of huge agrofood companies. It can be observed that biofuel producers in the EU can be owned by agrofood companies (Diester Industry is owned by Sofiproteol), or operate through a joint
venture with, again, a food company (DII). There can also be an equity alliance of a
supplier of raw materials, an oil company and institutional investors (Biopetrol Industries
AG) or close cooperation with food companies (Abengoa Industrie and Crop Energies).
The reason why biofuel producers are owned by agro-companies is because those
companies specialize in vegetable oil production, from which not only food is produced but
biofuels, and at the same time renewable sources of energy are produced. In this ways,
biofuel production for them is another product in their portfolio. With biodiesel and
bioethanol production, these plants oil producers could achieve economies of scope,
diversifying their main portfolio of vegetable oils. Moreover, the by-products from the
processing of biodiesel and bioethanol are supplied in the animal food or pharmaceutical
industry.
In regards to the preferred modes of internationalization on the biofuel market in the
EU, the cases show that producers of renewable fuels mainly prefer international expansion
through subsidiaries and fewer strategic alliances or contractual entry modes.
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Companies prefer to acquire already existing producers (the local French company,
Ryssen Alcools, acquired by Crop Energies) or raw material suppliers in the target markets
instead of expanding through intermediaries as local agents. Expansion through acquiring
existing companies in new markets can be observed in all four cases of biofuel producers in
the EU. According to the institutional-economic theory, a company will seek cost-efficient
way to perform their expansion activities and this is when they minimize their transaction
costs. This could characterize the biofuel producers’ internationalization tendency as
internalization, own production. However, the cases do not provide sufficient information
on the reasons why companies prefer to acquire existing producers – do they want to
achieve cost efficiency or higher degree of control of international operations. Even in the
cases of strategic alliances, companies invest in majority stakes. This implies that
companies prefer high resource commitment to maintain desirable degree of control,
especially over production plants. However, it does not provide the reasons for this choice.
High resource commitment, moreover, means less flexibility. While in the cases of Diester
Industrie, Abengoa Bioenergy and Crop Energies subsidiaries are successful strategy,
Biopetrol Industries AG have experienced the negative side of the high resource
commitment entry mode. Due to overcapacity in the region in which Biopetrol’s subsidiary
Schwaheide was operating and lack of sea links to customers, the company had to close
down their operations there. This on its turn led to unstable financial situation, unstable
levels of debt and survival strategy of operational and financial restructuring.
As second preferred entry mode by the EU biofuel producers can be identified the
contractual mode, mainly with oil companies and distillers, who are key buyers. In
particular, turnkey contract could be signed for the delivery of innovative technological
processes, while long-term contracts with tank storage companies and suppliers are
desirable in the observed cases. The latter is a preferred mode due to plan of production and
avoiding overcapacities that endanger the financial situation of the company and their
business. As already mentioned, the most significant contract for a biofuel producer is with
big oil companies such as BP and Shell, with international fuel network and large capacity
for blending. This can be observed in the four cases. This is why companies identify this
relationship as significant for their operations and were willing to invest more time and
trust to strengthen it. Moreover, contractual modes served as initial entry in new countries
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as Sweden, Germany and the Mediterranean region for Abengoa Industry. All of these
contracts have been with strategic significance for the company. In Sweden, Abengoa
Bioenergy still has contractual agreement with Shell, while in Germany, where they have
started with sales contracts, now they own production plants there. In the Mediterranean
region, Abengoa Bioenergy has chosen an entry strategy of sales contracts aiming to
develop strong future market position. Contractual agreements does not require high
resource commitment, however, the company has to decide the importance of the
relationship and the future investments they would take to expand their business through
the already established connections.
Contractual modes are flexible entry modes because a company does not dedicate
many resources to invest. In the case of Abengoa Bioenergy, with its sales contracts in a
target region, it can be observed that the company seeks opportunities to increase long-term
profits being at the same time risk averse. However, in this way the company can not gain
experience and market knowledge about the target market and overcome the liability of
outsidership. Furthermore, if a company is exceedingly risk averse, for example not willing
to develop existing contractual relationship, international operations may not proceed in the
long-term and this can be loss of opportunity for the company. In the case of the same
company, it can also be identified a pattern of exporting to neighboring countries
(Abengoa’s strategy in the Mediterranean region). This reminds of to the Learning
perspective where in the first stage of internationalization companies export to neighboring
countries or countries with great psychic distance. However, deterministic incremental
commitment to internationalization, going through every stage of the Learning Perspective
internationalization, does not exist in any of the discussed companies in the present paper.
It can be noticed that biofuel producers do not follow these phases and all of them expand
rapidly through acquisitions. None of the biofuel producers use intermediaries as entry
modes. And in three of the cases companies do not even export to new markets, but acquire
local companies. Such process reminds of the case of Born Global, where accelerated
internationalization does not aim profitability but spreading operations in number of
countries simultaneously, however, it could not be observed a pattern where the chosen
biofuel producers seek expansion from their inception or have a significant international
experience, except the case of Abengoa. Although, Abengoa’s main internationalization
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strategies is through subsidiaries, it could be argued that they had a second strategy where
they were expanding in few new countries in the EU through sales contracts in their early
stages of existence, which could be due to their international experience in operation in
USA and Brazil.
Overall, biofuel producers first develop domestically, and their development is
mainly supported by the local governments, before they take an action to expand abroad
whether through contracts or acquisitions. Internationalization phase, in which companies
develop first in their home market and expand internationally afterwards in multiple
markets offering unique product, is similar to the first phase of internationalization in the
Strategic Competition strategy, where a company internationalizes to achieve economies of
scale. It must be noted that biodiesel and bioethanol production could be advantageous
from cost and GHG reduction perspective only if the crops are cultivated in accordance
with the land requirements by the EU. The second internationalization stage of the same
perspective is about achieving economies of scope which can be observed in the cases of
the biofuel producers in the EU. After they penetrate a certain market, for example the
cases of Diester Industrie, Crop Energies and Abengoa Bioenergy, who have strong market
shares in their home markets, biofuel producers launch new products with higher
percentage of biofuel mixture as the products Diester Biodiesel 30% (B30), Abengoa
Bioenergy Bioethanol E85 and Crop Energies E85. By now, these products have achieved
success in company’s home markets and the producers are lobbying to trade them in
foreign markets. These observed four cases, however, do not give additional information on
knowledge sharing systems from which it could be any conclusions made about global
coordination, the third phase of internationalization in the strategic competition perspective.
The biofuel producers’ strategies of consequently entering of countries and their
heavy resource commitment, both asset and financial investments, lead to the conclusion
that they follow market concentration expansion strategy. In the case of Abengoa
Bioenergy, there can be identified a pattern of market diversification because they enter
simultaneously new countries with contractual modes. Abengoa aims at becoming a leading
biofuel producer in the Mediterranean region where they now operate through contract
modes with exception of Spain where they have strong presence with several subsidiaries.
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The partnerships of the companies can be analyzed in several ways. First, the most
important, is the support of the national governments since they boost biofuel production
and promote development. These are the cases of Diester Industrie in France and Biopetrol
Industries AG as well as Crop Energies in Germany, where both governments support
domestic biofuel production as inseparable part of the sustainable development of the
countries. As part of the renewable energy directive countries have to reach 10%
percentage of renewable energy in the transport sector by 2020. Some of the individual
Member States have to achieve more than this 10 percent stated in the directive, for
instance for Germany this is 18% and for France 23%. This could be an explanation why
some of the local governments support local production. In France, Diester industry has the
support of more than 60 local communities and enterprises where biodiesel is blended up to
30% and in Germany the local government supports domestic biofuel production.
Second, Companies have strong partnerships with research centers, laboratories and
biotechnology companies which can bring them not only new technologies and processes to
improve efficiency but also competitive advantage in the development of next generations
biofuels since the EU aims to change tax breaks in regards to 1st generation biofuels and
boost next generation biofuel production. Third, it can be observed some distinctive
characteristics to the bioethanol producers, Abengoa Bioenergy and Crop Energies that
have their own projects to promote infrastructure for E85. They also invest in key
partnerships with car manufacturer for the development of flexible engines supporting
higher mixture of bioethanol. Both bioethanol producers are united under the common EU
bioethanol producer association (ePURE).
Through their business networks, it can be observed how biofuel producers make
strategic connections with other organizations that have complementary resources. They
lobby with local governmental and non-governmental organisations, create coalitions with
research and technological centers to boost the development of next generation biofuels and
new technological processes. Biofuel producers analyze which relationships to develop
through long-term commitment, as one of the relationships that biofuel producers explicitly
state that they are most willing to develop is with big oil companies since they use biofuels
as complementary resources to their fuel products. This leads to the idea that biofuels from
first generations are mainly used as complements to the fossil fuels not as substitutes.
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Moreover, companies create strong partnerships with car manufacturers. The strategy of
creating relationship to acquire access to particular resources in different regions is in line
with the Network model. This is also in line with the systems approach since biofuel
producers create synergies through their partnerships.
Certification
All of the four companies comply with the EU Renewable Energy directive (EN 14214),
which is the mandatory requirements set by the EU. Moreover, the biodiesel producers
comply not only with the sustainability criteria in the directive but also with other
certification schemes such as the ISCC (International Sustainability & Carbon
Certification). Interesting to emphasize is that Diester biodiesel not only complies with this
directive but exceeds by far the thresholds and the company plays significant part in the
sustainable development of whole France with great reduction of GHG emission in 2010.
Moreover, all Diester production plants are certified according to the 2BSvs (Biomass,
Biofuels, Sustainability Voluntary Scheme) in France. Moreover, Biopetrol Industries AG
main strategy is the provision of high-quality product and to achieve their objective they
ensure quality through certified suppliers, quality control of the production process, and
control of incoming and outgoing goods.
Abengoa’s biofuels are certified under the scheme RBSA, which is applicable at
global level, approved as well by the European Commission and it certifies sustainable
fuels and reduction in GHG emissions. This global certification implies that Abengoa
Bioenergy aims to maintain global leadership of high-qualitative bioethanol worldwide.
Crop Energies bioethanol is as well a certified sustainable product that reduces CO2
emissions by up to 70 percent. The bioethanol of all their plants in Germany, the
Netherlands and Belgium not only complies with the EU standard but also it conforms to
all the requirements of the German Biofuel Sustainability Regulation (REDcert). Moreover
their petrol blended 10% bioethanol (E10), which has been introduced at German petrol
stations, is petrol standardized according to DIN 51626-1.
It can be observed that companies strictly comply with certification and even
voluntary ensure further quality of the products and the processes. Another conclusion that
can be made in regards to Porter’s Generic strategies is that from the strategic competition
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perspective it seems obvious that biofuel producers follow strategy of cost leadership since
they provide not only sustainable products but a main business idea is to offer cheaper
alternative to fossil fuels.
Political Situation, Competition and Supplier/Buyer Related Uncertainties
In section 4, Market Analysis, it was argued that the political incentives support biofuel
production in the EU, in general, through tax breaks, and the EU Renewable Energy
directive. It was slightly discussed the negative side of the political issues, however, in the
chosen cases in the present paper the lack political incentive in time had seriously negative
impacts on the business. To start with the example of Diester Industrie when their financial
results were influenced negatively due to cheap Argentine and Indonesian imports. Another
loss for the same company was their drop in production due to buyer’s preference of waste
oils produced by competitors rather than plant oils produced by Diester.
In the case of Biopetrol, the introduction of B7 was delayed due to political debates
that damaged the relationships with buyers, who in this case preferred only short term
contracts and it was impossible for biofuel producers to plan their production. Moreover,
the pure biodiesel market (B100) collapsed in 2011 due to tax increase. The company also
suffered competition from the fallen prices of biodiesel. These unfavorable situations for
Biopetrol and the liquidation of one of their German plants gradually added to the current
debt situation in which there are now.
Moreover, in 2007 there was a decreased production of cereals due to climate
factors which put pressure on the costs, however, Abengoa Bioenergía enabled partial
mitigation of the impact on raw material cost increase. This was due to their geographical
diversification with presence in the USA, Europe and now Brazil, flexibility in the use of
different raw materials on their production facilities, together with long term contracts.
Crop Energies experienced failure of the launch of E10 due to the uncertainty of the
customers. Moreover, key part of the introduction of higher biofuel mixtures was identified
as the acceptance from the customers. This was the lesson for Crop Energies who had to
inform their customers about the advantage of these products before launching them.
However, here the national government intervened to support the initiative of the German
bioehtanol producer to reach the customers. The Federal Ministry of Economics and
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Technology proceeded later with the introduction of E10 in Germany with the support of
organisations representing the automotive, fuel and agricultural sector as well as the
consumer side. These examples show that the biofuel industry in the EU is greatly
dependent on political decisions and that they can not only influence positively but damage.
The government, more precisely the EU, has the power to control and even destroy the
biofuel industry.
With all this challenges the only way to remain competitive for biodiesel producers
is the tax breaks, vertical integration, and diversification of risk. Although, it is argued that
tax breaks to first generation biofuels will be only temporary and the future incentives of
the European Commission will be related to boost next generation’s biofuel production. On
one side, even though some of the discussed biofuel traders sustain production plants that
can switch to production of advanced biofuels, on the other side, such step will require to
great extend new technology processes and the investment from many other producers and
companies. Diester Industry and Abengoa Bioenergy, both leaders in the biodiesel and
bioethanol production in the EU, diversify their risk through business operations in many
countries. Other companies, such as Biopetrol Industries AG diversify their risk through
different financial investors. As last, vertical integration can overcome the supplier threat
and it could be not so far difficult solution for biofuel producers since crop growing is not a
specialized process.
Strategic Location
Diester strategy was the acquisition of already existing oleochemical company as they did
in Germany, Austria, Italy, and Belgium. The acquired companies also have their own
network and subsidiaries around Europe and offices overseas which expands the reach of
DI. Moreover, the strategy of DI was to expand the capacity depending on the market
conditions and in this way avoid overcapacity, a bitter lesson in Biopetrol’s case. The
overcapacity, not only on the market, but in the region of the one of the German Biopetrol’s
plant and the lack of sea links there brought the liquidation of the subsidiary and led to
unstable levels of debt and survival strategy of operational and financial restructuring and
dependence on creditors. Biopetrol Industries AG learned their lesson and moved
production in Rotterdam, the largest European refinery centre, where the location was
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strategic, close to major customers and clients and more sea links. Something, that Diester
have been already doing, choosing locations close to petroleum refineries where deliveries
can be achieved by water or pipelines to other strategic regions with major customers.
Crop Energies also followed similar strategies. They acquired already existing
companies and seated their plants in place with favourable conditions for low-cost export to
Antwerp and Rotterdam due to the inland and deep-sea waterways.
It can be concluded that location close to customers and available low-cost structure
to supply quickly are a must for survival in this industry and is also in line with the
Strategic Competition Perspective suggesting that a company can achieve competitive
advantage through locating strategically their production in regions where they have closer
access to customers and suppliers. Acquiring already existing companies in foreign markets
seems preferable and successful strategy for international expansion.
Market Position
Abengoa Bioenergy is the European bioethanol leader of 1st and 2nd generation production
and a leading producer in the USA and Brazil. Abengoa Bioenergy's strategy since 2004
was focused on entering into long term supply agreements, because they perceived this as
an opportunity for end-users and market expansion through the development of the
infrastructures required to introduce the bioethanol. They also invest in partnerships with
technological and R&D centers since they want to maintain leadership in 1st and 2nd
generation biofuels. Sales contracts to countries in which they do not have any other mode
of presence are strategy to be noticed internationally. They also focus on higher bioethanol
mixtures. Crop Energies acquired companies with leading market positions, as for instance
the case with their subsidiary in Belgium. Crop Energies AG will actively participate in the
further development of bioethanol fuel cells and filling stations to promote the extension of
the E85 filling station network in Germany.
Diester Industry and Abengoa Bioenergy can be described as both, the leaders in
biodiesel and bioethanol production respectively. Their objectives are global leadership.
They maintain high degree of complicated network not only in the EU but also
internationally. Biopetrol Industries AG and Crop Energies can be described as some of the
leading companies in the market, the followers. They have strong presence in not more than
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3 countries and uncertainties on the market can threat their business since they do not have
geographical diversification of the risk. This is a reason for them to expand their production
capacity based on market conditions and to search possible opportunities to diversify risk.
In summary, it can be concluded that the main internationalization entry mode of biofuel
producers in the EU is through subsidiaries and as other less preferred entry modes can be
identified as joint ventures and contractual agreements. Biofuel producers are either owned
by agro-companies or cooperate closer with such businesses. In relation to their
partnerships and business relationships, biofuel producers show significant interest in
strengthening the connections with big oil companies. Other strategical cooperation that
they maintain are with R&D centers, laboratories, biotechnological companies and car
manufacturers to develop new products and introduce them to new and existing markets.
Also, a significant part of the network is with local governments. In regards to certification,
all of the biofuel producers comply with the EU directive and even with other certification
schemes since some of the companies operate outside the EU. The companies take actions
to ensure high-quality processes of production and products. The tax breaks are the most
essential government incentives, however, governments can also delay to react on time by
and influence negatively not only production but company’s financial situation and even
the whole market. For this reason, it can be concluded that the government has the key
power to control the biofuel industry. Location, close to customers, refineries or sea links,
is decisive for production plants. Overall, acquiring of already existing plant oil or alcohol
producers in new countries is the main strategy of the biofuel producers in the EU.
7. Elaboration on Hypotheses
The purpose of the present study was to provide answers to the proposed problem
statement How biofuel producers internationalize in the EU. For this reason, theories were
employed to allow a prior understanding of the macro-environment and the internalization
behaviour of a company. In this section it is discussed the extent to which these theories
were confirmed or not.
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First, it was identified that biofuel producers mainly internationalize through acquiring
existing companies, which become their subsidiaries. From this, it follows that biofuel
producers could prefer to maintain higher degree of control of their operations abroad. It
can be argued that they also internalize their activities to minimize their transaction costs.
However, there is not sufficient information from the cases to make conclusion about
these costs or control. This means that the following hypotheses can be formulated for
further testing:
H1: Biofuel producers internationalize through subsidiaries to maintain higher degree of
control over international operations.
H2: Biofuel producers internationalize through subsidiaries to achieve cost efficiency of
international operations.
Second, in this policy-driven market, the government has the power to decide the future of
the business, since biofuel production depends on tax breaks to remain competitive on the
market. This is why complying with certification and lobbying are necessary conditions
for a company to compete. This result confirms the institutional theory and the third
hypothesis can be formulated as:
H3: Government incentives are the most decisive factor for business in the biofuel market
in the EU.
A third important conclusion was that biofuel producers are most willing to develop longterm relationships with big oil companies since biofuels are complements to fossil fuels.
This confirms the Network approach, where business relationships with companies with
complementary resources allow access of a company to external resources and allow both
parties to achieve synergies through their relationship. Since biofuels can be seen as
mainly complements not substitutes to fossil fuels, the fourth hypothesis can be
formulated as:
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H4: Biofuel production depends on the strength of the business relationships of a biofuel
producer with companies with complementary resources such as oil companies and car
manufacturers.
An important part of the biofuel producer’s strategy was the location of the production
plants. They were placed near to customers, refineries or sea link where they could be
distributed quickly which confirms the strategic competition perspective. For these
reasons the fifth hypothesis can be formulated as:
H5: Strategic location of production plants is a competitive advantage.
The learning perspective was not confirmed in the four cases because none of the
discussed companies follow a deterministic process of internationalization. From this
follows that:
H6: Biofuel producers do not follow a deterministic process of internationalization.
The four cases, moreover, show that biofuel producers follow market concentration
expansion strategy since they expand in few markets through high resource commitment
modes. The last hypothesis can be formulated as:
H7: Biofuel producers internationalize through market concentration expansion strategy.
Overall, it can be concluded that partly most of the theories were confirmed with
exception of the Learning Perspective that was rejected.
8. Conclusion
In summary, what was done in the present paper aimed to provide understanding of the
internationalization process of producers in the emerging market of biofuels in the EU. The
- 66 -
present paper started with introducing the reasons why biofuels are necessary for society. In
the next section theoretical formulations gave explanation of the expected behaviour of
players on the market and producers expanding operations internationally. Methodology
was necessary to set framework of how data will be gathered and analysed, as well as
limitations of the research and validity of findings were clarified. In the market analysis the
power and connection between different market players were analysed and the conditions
for doing business were defined. Then four cases from the biofuel industry in the EU were
formulated and later discussed on the basis of the theoretical understanding provided
earlier.
The study concluded that biofuel producers prefer high-resource commitment entry
modes as subsidiaries and joint ventures. They follow market concentration expansion
strategy. Few can be the cases when they would prefer contractual modes to enter a new
market and this could be due to their international experience in other countries. The most
decisive factors for biofuel production in the EU are policy regulations and debates as well
as the competition from oil companies. A main threat is that since biofuels are policy
dependent, the EU could stop the subsidies. From their network relationship, the most
important connections were defined with oil companies and car manufacturers as well as
R&D centers. A suggestion for opportunity in more countries as a niche strategy for
biofuels from 1st generation could be bus fleets for public transport, truck operators, and
agricultural vehicles and furthermore, they are attractive options because they can maintain
higher mixtures of biofuels and even pure forms of it. In addition, the high octane number
of bioethanol allows the engine to achieve better performance and could be used not only
for the racing vehicles. Propositions for future research can investigate further the reason of
internationalization decisions by biofuel producers. It might also be interesting the
investments of first generation biofuel producers in advanced biofuels to be investigated
and how they develop business relationships with their partners.
The study has shown that since fossil fuels have finite nature and tendency of
increasing prices biofuels have the potential to give the world efficient and sustainable
energy. The new entrants in the industry must carefully choose their geographical locations
and technologies and establish the key relationships with buyers, suppliers and as well as
R&D associations. Moreover, vertical integration, though costly, can be a crucial step for
- 67 -
establishing in this emerging industry. By now, government regulation has helped boost
both demand and profitability in the industry and more similar incentives as subsidies,
import tariffs, or research grants must continue to stabilize the industry. However, if the
government support diminishes over time, this could negatively influence profits. Biofuel
companies must also lobby and build relationships with local government organizations
that regulate biofuels and the nongovernmental associations that influence public opinion. It
seems, however, that the fastest-growing field for biofuels is not in technology but in deals.
Even after years of scientific studies, political bargaining and heavy lobbying, however, the
European Commission proposed new rules aimed at discouraging the use of biofuels
derived from food crops, while at the same time boosting next generation biofuels, which
don't compete with food crops, even though they are still in development.86
- 68 -
Appendix
Figures
Fig.1. Porter’s Five Forces Framework
Fig.2. Modes of Entry
(Source: Huang & Sternquist, 2007)
- 69 -
Fig.3. EU Supply & Demand of Biodiesel and Bioethanol
(Source: Flach, et. al 2012)
Fig.4. Production and Production Capacity of Biodiesel in the EU by Country
Source: European Biodiesel Board (http://www.ebb-eu.org/stats.php)
- 70 -
Fig. 5. Trend in EU Biodiesel Production 1998-2011.
(Source: European Biodiesel Board (http://www.ebb-eu.org/stats.php)
Fig. 6. Production of Bioethanol in the EU in 2009
(Source: Biofuels Platform, http://www.biofuels-platform.ch/en/infos/eu-bioethanol.php)
- 71 -
Fig.7. Abengoa Bioenergy’s Plants in the EU
Tables:
Table 1. Theories Explaining the Internationalization Process of the Firm
Theory/Perspective
Variables affecting the
Delimitations
Connection
internationalization development
(excluded issues)
with the
Problem
Company’s resources;
Theory
suppliers, rivalry, substitutes and
Institutional pressure.
potential entrants
Institutional based
Coercive and normative pressures from
Industry structure
theory
governmental and non-governmental
conditions;
organizations
Company’s internal
resources
- 72 -
EU can be characterized?
Industry structure conditions: buyers,
diesel and bio-ethanol in the
Industry-based
How the market of bio-
Statement
Approach
control; Internalization;
market knowledge; Risk.
Firms can build trustful
partnerships with
agents/distributors and avoid
great resource commitment
in subsidiary.
Uppsala Model
Born Globals
Experiential knowledge; Psychic
In practice companies do not
distance; incremental stages of
follow deterministic stages
internationalization.
of internationalization.
Company’s unique source of
External sources.
competitive advantage; quick
expansion.
Strategic
Internal resource of competitive
Competition
advantage; Cost leadership or
perspective
differentiation; Economies of scale and
External sources.
scope; Global coordination.
Network Approach
Cooperation strategies through
Business networks are most
relationships with suppliers, buyers and
likely to emerge where
others.
conditions are changing
rapidly. Relationships
require trust and time to
develop, however not every
relationship turns into a
partnership.
- 73 -
producers in the EU follow in future?
Little flexibility; Little
for their strategic choices?What kind of internationalization strategies and business focus could biofuel
Cost-efficiency; High degree of
What kind of entry modes and business relationships do biofuel producers prefer and are there any reasons
Transaction Cost
Table 4. Calculated GHG Emissions for Different Raw Materials
(Source: adopted by Flach et.al 2012, p. 7-8)
Raw Materials
Typical GHG savings
Rape seed biodiesel
45%
Soy bean biodiesel
40%
Sun flower biodiesel
58%
Palm oil biodiesel (Process not specified)
36%
Palm oil biodiesel (process with methane capture at oil mill)
62%
Corn ethanol, Community produced
56%
Sugar beet ethanol
61%
Sugar cane ethanol
71%
Waste vegetable or animal oil biodiesel
88%
Table 6. Main Biodiesel Producers in the EU and their Production Capacity.
(Source: EurObserv’er, 2011; EBB, 2009)
Company
Home
Country
Number of plants
Production
capacity in
tonnes
Diester Industrie & Diester
Industrie International
France
France (7), Germany (2), Italy
(2), Austria (1), Belgium (1)
3 000 000
Neste Oil**
Finland
Finland (2), Netherlands (1)
1 180 000
ADM Biodiesel
Germany
Germany (3)
975 000
Infinita
Spain
Spain (2)
900 000
Natura /Biocarburantes
Spain
Spain (3)
855 000
Biopetrol Industries
Switzerland*
Germany (2), Netherlands (1)
850 000
Marseglia Group
Italy
Italy (2)
560 000
Entaban/Eolia/NMAS
Spain
Spain (3)
500 000
Verbio AG
Germany
Germany (2)
450 000
Cargill/Agravis
Germany
Germany (2)
370 000
Acciona Energia
Spain
Spain (2)
283 000
*Despite the fact that Switzerland is not part of the EU but the home country for Biopetrol Industry, it is
included in the analysis because of its operations in other two EU Member States.
** Neste Oil is not included in the further analysis since it produces mainly second generation biofuels.
- 74 -
Table 7. Main Bioethanol Producers in the EU and Their Production Capacity.
(Source: EurObserv’er, 2011; EBB, 2009)
Company
Country
Number of plants
Production capacity in
million liters
Abengoa Bioenergie
Spain
Spain (4), Netherlands (1), France (1)
1 283
Tereos
France
France (6)
725
Crop Energies
Germany
Germany (1), Belgium (1), France (1)
700
Cristanol
France
France (4)
540
Agrana
Austria
Austria (1), Hungary (1)
410
Verbio
Germany
Germany (2)
355
Agroetanol
Sweden
Sweden (1), Czech Republic (1)
310
Table 9. “Partners of Diester 30% Partners“
Source: Based on http://www.partenaires-diester.fr/carte/
“Diester Industrie 30%” Partners
Business area
3 Valleys
manufacture of egg products for the food industry
AMIENS METROPOLE
One of 33 municipalities. This one is the
municipality of the City of Amiens form a single
administration and integrate transport policy and
sustainable development into their policy.
CHAMPAGNE CEREALS
grain cooperative group based in Reims
Urban Community of La Rochelle – RTCR
public industrial and commercial service provider
Urban Community.
Agglomeration community of Rouen HauteNormandie
third urban community of France
Conurbation COUNTRY Châtelleraudais
12 municipalities
Community of Municipalities of Epernay
13 municipalities
Agglomeration community of Val de Loire
ORLEANS
22 municipalities of agglomeration
Urban Community of Alençon
City of history, trade and culture
Communities of Communes Causses Millau Aveyron KEOLIS
Community of Millau
BUS COMPANY OF MONACO
operator of public transport in the Principality of
Monaco
DANONE FRESH PRODUCTS FRANCE
Danone France Fresh Produce (DPFF), market leader
in sustainable dairy products
DERICHEBOURG ENVIRONMENT
a major player in the environmental services market
Geopark
Amusement park activities for seminars
- 75 -
LARGE GARAGE DU GARD - Peugeot Nîmes
Peugeot dealer in Nimes
COOPERATIVE GROUPS Maïsadour
Production and marketing of seeds, grain, farm
supply, production of vegetables
MILLET group
French leader in the manufacture of doors and
windows
Nantes Métropole
Urban Community
NEO2
NEO2 organizes driving courses and competitions
QUIMPER COMMUNITY
urban community
RATP
Business transit of Ile de France
REGIE WATER CANAL Belletrud of
PEYMEINADE (06)
The Water Board Canal Belletrud including 6 units
SITA Centre West
a subsidiary of SITA's leading regional integrated
waste management group
SITA Dectra
a subsidiary of SITA's leading regional integrated
waste management group
SITA ILE-DE-FRANCE
a subsidiary of SITA's leading regional integrated
waste management group
SITA North
a subsidiary of SITA's leading regional integrated
waste management group
SITA Normandy and Picardy
a subsidiary of SITA's leading regional integrated
waste management group
SITAC - Agglomeration of Calais
Organizer of public transport for six municipalities
SIVOM Valley Yerres and Sénarts
includes 15 municipalities
SMICTOM VALS AUNIS
SMICTOM AUNIS VALS is a community that
provides collection, treatment and recovery of
household waste
SNN
regional subsidiary of SITA France
Transport Company of Grand Angoulême (TAG)
A Company on the behalf of the city's public
transport network of the Grand Angoulême.
Society of Urban Transportation Paloise
Mixed business company, delegated public service
Company TRIBALLAT – Noyal
family business, delivery of food
City GRAND CROWN
urbanized area, port and industrial activity
City of Rueil-Malmaison
The city practice collection and recycling of
household waste and garden waste
City of Saint-Quentin (Aisne)
Municipality
City of Troyes
municipality exercising environmental impact
City VITROLLES
City involved in broader municipal environmental
policy to maximize energy efficiency in the transport
sector but also increasing public awareness
City of Le Havre
industrial port city
VILLEMONT André SA
family business of collecting and selling grain
- 76 -
Table 10. Biopetrol Industries Structure
(Source: http://www.biopetrol-ind.com)
Table 11. Abengoa Bioenergy Partnerships
(Source: http://www.abengoabioenergy.com/web/en/acerca_de/colaboraciones/)
Abengoa Bioenergy Partners
Business area
Industrial partners
Antares Group
engineering and development firm focused on Bioenergy, Renewable
Power, and Energy Efficiency projects
Cargill
an international producer and marketer of food, agricultural, financial
and industrial products and services
Dyadic
global biotechnology company with patented and proprietary
technologies that are used to discover, develop, manufacture and sell
enzymes and other proteins for the bioenergy, bio-based chemical,
biopharmaceutical and industrial enzyme industries
Genencor
global leader in industrial biotechnology
Novozymes
Enzymes and other industrial biotechnology solutions
Terranol
Terranol A/S develops yeasts to be applied in 2. generation bioethanol
production.
Antibióticos S.A.
A world leading producers of Pharmaceutical Active Ingredients
Biópolis
a biotechnology company offering research, development and
production services to companies
Neuron
Albemarle
chemical company
- 77 -
Universities
Auburn University
USA
Kansas State University
USA
Lund University
Sweden
University of Nebraska
USA
University of Concepcion
Chile
University of Seville
Spain
University of Santiago de
Compostela
Spain
University of Murcia
Spain
University of Cartagena
Colombia
University of Illinois at UrbanaChampaign
USA
Oklahoma State University
USA
Research centers
Asociación de Investigación y
Cooperación Industrial de
Andalucía
AICIA (Association of Research and Industrial Cooperation of
Andalucía)
Centro de Investigaciones
Energéticas, Medioambientales y
Tecnológicas
CIEMAT (Research Centre for Energy, Environment and Technology)
Centro de Investigaciones
Biológicas, CIB-CSIC
Biological Research Center
National Renewable Energy
Laboratory – NREL
Idaho National Engineering
Laboratory – INEEL
Argonne National Laboratory –
ANL
Instituto Catálisis y Petroquímicos
ICP (Catalysis and Petrochemical Institute)
Washington University - St. Louis
Instituto Tecnológico Agrario de
Castilla y León
ITACyL (Agro-Food Technological Institute of Castilla and León)
Instituto de Tecnología Química -
UPV (Chemical Technology Institute of the Polytechnic University of
- 78 -
ITQ - de la Universidad Politécnica
de Valencia
Valencia)
Netherlands Organization for
Applied Scientific Research - TNO
CTAER(Centro Tecnológico
Avanzado de Energías Renovables)
Advanced Technology Centre for Renewable Energy
CENER(Centro Nacional de
Energías Renovables)
National Renewable Energy Centre
Platforms
Bioplat
(Spanish Platform o Biomass)
European Biofuels Technology
platform
CTA
(Andalusian Technology Corporation)
Associations of biofuels
ePURE - European Bioethanol
Renewable Ethanol
trade association that promotes renewable ethanol
RFA
Renewable Fuel Association
UNICA - União da Indústria de
Cana-de-açúcar
Biotechnology Industry Association
APPA Biocarburantes, Asociación
de Productores de Energías
Renovables (España)
Association of Renewable Energy Producers in Spain
Asebio, Asociación Española de
Bioempresas (España)
Spanish Bioenterprise Association
Kansas Alliance for Bioenergy and
Biorefining
Amfep
Association of Manufacturers and Formulators of Enzyme products.
PCOR
(Plains CO2 Reduction) partnership
- 79 -
Table 12. Crop Energies Partnerships
(Source: http://www.cropenergies.com/en/Links/)
Crop Energies Partnerships
Business Area
BioWanze SA
the largest producer of bioethanol in Belgium and
also the bioethanol plant that is the most innovative
in Europe. (Crop Energies subsisdiary in Belgium)
Ryssen Alcools SAS
the leading European producer for high-quality
alcohol especially used for traditional and industrial
purposes (Crop Energies subsisdiary in France)
Südzucker AG
Owner of Crop Energies and Global operating
German food group
BENEO-Orafti
Orafti® ingredients are a range of inulin and
oligofructose ingredients extracted from chicory root
Beuker
Leading company on the European market of liquidrich animals feeds
Bioraffinerie 2021
The joint project BIOREFINERY2021, which is
funded by the German Federal Ministry for
Education and Research (BMBF), aims at the
development of a fully integrated and sustainable
biorefinery
Hedimix
Hedimix supplies various liquid by-products of
agricultural, food products and fermentation industry
as feed for pigs and cattle farmers.
REDcert
certification system to fulfil the requirements of the
German Biomass Sustainability Ordinances
ePURE
European Producers Union of Renewable Ethanol
Audi
Partnership for E85 / Flexible Fuel Vehicles (FFVs)
HEICO SPORTIV GmbH & Co KG
Dart Racing - TU Darmstadt Racing Team
- 80 -
BP and Peugeot-Citroën. Danone is
also part of the network but only at
(50% ownership) in Germany and Belgium. A
turnkey contract with technological company.
- 81 Crop Energies
Abengoa Bioenergy
Biopetrol Industries
Few big multinational companies as
(2), Austria (1), Belgium (1). Joint ventures
customers are agricultural and
construction industries large-scale
Germany (1), the Netherlands (5). Long-term
contracts with buyers and suppliers
partnerships. Part of ePure (EU
Bioethanol network.)
Germany (1), UK (1); equity strategic alliance
in France, R&D strategic alliance; contract
Support from the German
government; Part of the EU
Belgium (1). Trading offices in the USA and
Brazil.
bioethanol producers network.
Many domestic partnerships;
Subsidiaries in France (1), Germany (2) and
leader in Brazil and USA.
France, and Mediterranean region. A market
agreements in Sweden, the Netherlands,
Many international and domestic
Subsidiaries: Spain (3), the Netherlands (1), 1
distance transport.
fleet operators, public short-
Mainly oil companies. Other
Home office in Switzerland; Subsidiaries:
domestic level.
More than 60 domestic partners.
Subsidiaries: France (7), Germany (2), Italy
Diester Industrie
Network Relations
Entry Modes
Companies
Table 13. Summary of Results.
Endnotes:
1
http://www.eia.gov/countries/prices/gasolinewithtax.cfm
2
http://www.eia.gov/countries/prices/dieselwithtax.cfm
3
http://www.shell.com/home/content/environment_society/environment/climate_change/biofuels_alternative_
energies_transport/
4
http://www.businessdictionary.com/definition/multinational-corporation-MNC.html
5
http://www.merriam-webster.com/dictionary/oligopoly
6
http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm
7
http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_11.htm
8
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm
9
http://energyfromwasteandwood.weebly.com/generations-of-biofuels.html
10
http://www.iea.org/newsroomandevents/pressreleases/2011/april/name,20302,en.html
11
http://www.biofuels-platform.ch/en/infos/eu-biodiesel.php
12
http://www.biofuels-platform.ch/en/infos/eu-bioethanol.php
13
http://www.biofuelstp.eu/legislation.html
14
http://www.iea.org/newsroomandevents/pressreleases/2011/april/name,20302,en.html
15
http://www.upm.com/EN/ABOUT-UPM/Businesses/Biofuels/Pages/default.aspx
16
http://www.iea.org/publications/freepublications/publication/name,3976,en.html
17
http://www.biofuels-platform.ch/en/infos/eu-use.php
18
http://www.biofuels-platform.ch/en/infos/eu-directive200330.php
19
http://www.biofuels-platform.ch/en/infos/eu-biodiesel.php
20
www.ebb-eu.org
21
http://www.risk.net/energy-risk/feature/2189653/european-biodiesel
22
http://biofuelsandthepoor.com/facts-and-definitions/
23
http://www.bbc.co.uk/news/world-europe-19688358
24
http://diester.fr/
Diester Industry, http://www.partenaires-diester.com:
 Press Release, February 9, 2011. Diester Industrie develops in a less favorable environment.
 Press Release, October 15, 2010. Peugeot engages FNSEA for biofuels.
 Press Release, October 15, 2010a. Danone runs its trucks Diester.
 Press Release, October 14, 2010. Preserve the tax shelter biofuels.
 Press Release, May 24, 2010. Champs Elysees giant model of the firm France.
 Press Release, September 7, 2009. Diester closely to environmental challenges.
 Press Release, January 19, 2009. An agreement signed by DIESTER INDUSTRY for the acquisition
of Belgian OLEON, http://www.prolea.com/
25
26
http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=5523729
27
http://www.aquafuels.eu/consortium/49-consortium-members.html
28
http://www.greencarcongress.com/2005/12/diester_industr.html
- 82 -
29
http://www.europolitics.info/biodiesel-merger-cleared-art346881-1.html
30
www.sofiproteol.com/en/diester-industrie
31
http://phx.corporate-ir.net/phoenix.zhtml?c=130024&p=irol-
newsroomArticle_Print&ID=764232&highlight=
32
http://www.navaol.it/cms/gruppo/mission.html
33
http://www.greencarcongress.com/2005/12/diester_industr.html
34
http://www.mannheimbiofuel.com/
35
http://www.europolitics.info/biodiesel-merger-cleared-art346881-1.html
36
http://www.flex-news-food.com/console/PageViewer.aspx?page=20560
37
www.sofiproteol.com/en/diester-industrie
38
http://www.novaol.it/novaol/cms/gruppo/index.html
39
http://business.highbeam.com/436407/article-1G1-148674784/technip-has-turnkey-contract-diester-
industrie-new
40
http://www.novaol.it/novaol/cms/gruppo/mission.html
41
42
http://www.partenaires-diester.fr/
http://www.partenaires-diester.fr/catalogue/utilisateurs/4/
43
http://www.biopetrol-ind.com/
44
http://www.reuters.com/finance/stocks/companyProfile?symbol=B2I.DE
45
http://www.e-energymarket.com/news/single-news/article/biopetrol-industries-ag-prepares-financial-
restructuring.html
46
http://www.biopetrol-ind.com/ir_kennzahlen_e.htm
47
http://renewables.seenews.com/news/biopetrol-industries-plunges-further-into-loss-in-h1-2012-305377
48
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49
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in/?companyID=598&newsID=709693
50
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51
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52
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53
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54
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biodiesel-plants.html
55
http://www.dgap.de/dgap/News/?newsType=&companyID=598&newsID=650341
56
http://www.biopetrol-ind.com/press_meldung_060427_e.htm
57
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58
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59
www.abengoabioenergy.com
60
http://www.abengoabioenergy.com/web/es/index.html
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61
www.abengoabioenergy.com/web/en/acerca_de/general/introduccion/areas_actividad
62
www.abengoabioenergy.com/web/en/prensa/noticias/historico/2010/bio_20100910_1.html
63
www.abengoabioenergy.com/web/en/prensa/noticias/historico/2005/20050614_noticias.html
64
www.abengoabioenergy.com/web/en/prensa/noticias/historico/2005/200512_noticias.html
65
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66
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67
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68
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73
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74
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