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Table of Contents

Section and Title Page Number(s)

I. Executive Summary...................................................................................................... 2

II. Introduction............................................................................................................. 3 - 5

III. Analysis of the International Business Situation:

A. Economic, Legal, and Political Analysis .................................. 5 - 9

B. Trade Area and Cultural Analysis .......................................... 9 - 14

IV. Planned Operation of the Proposed Service:

A. Proposed Organization ......................................................... 14 - 16

B. About the Proposed Service ................................................. 17 - 19

C. Proposed Strategies ............................................................... 19 - 24

V. Planned Financing:

A. Projected Income Statement for First Year’s Operations .............................. 25

B. Projected Balance Sheet for End of First Year’s Operations ......................... 26

C. Description of Projected Growth ............................................................ 26 - 28

VI. Bibliography .............................................................................................................. 29

VII. Appendix .....................................................................................................................30

International Business Plan Event, 2011

I: Executive Summary

The Republic of South Africa is currently facing one of the largest energy crises ever witnessed in modern history. Electricity consumption in the country has risen 70% in the past 16 years while electricity capacity, generated by the country’s government-backed Eskom Company, has stagnated. This fact has lead to the current situation in which the company is struggling to meet consumer electricity demand in the country. Eskom has run operating losses of over $1 billion annually for the past several years and has thus been deferred from funding new electricity generation projects, given the government’s plan to shutter the company. The South African government has begun to aggressively illicit foreign companies’ investment into new energy production operations in the country to alleviate the coming crisis that threatens to leave millions of citizens, factories, and businesses in the dark. These incentives are taking the form of generous tax breaks, varied write-offs, and eased government regulations for certain companies that set up operations in the country. These incentives will ultimately serve to fill the void left by Eskom by attracting new companies to enter the South African electricity industry to usurp market share and run profitable business ventures in electricity production.

Dominion Resources Incorporated is a major energy company that operates within the United States in Virginia, North Carolina, Massachusetts, Illinois, Pennsylvania, and Ohio, among other states. Founded in 1983 and headquarted in Richmond, Virginia, the company employs 18,000 workers and serves over 5 million customers nationwide. Although the company currently accrues $14 billion in annual revenue, it has found the maintenance of an environmentally-conscious image to be difficult as the majority of the power plants in its portfolio run on coal-fire and natural gas-based combustion systems, which are unclean to say the least. Thus, the proposed plan to extend Dominion’s operations to South Africa and build a biomass-combustion power generation facility with advanced carbon capture systems stands to proliferate the company with an environmentally-friendly image. This transplantation is poised to take place by September 30th, 2013 to South Africa’s highly-urbanized Gauteng Province; home to its economic hub city of Johannesburg along with 12 million citizens. The prospect of extending Dominion operations to South Africa presents a unique opportunity for the company. If this proposal is acted upon, Dominion stands to gain a greener image, gain a position as a future vanguard in the country’s energy industry, along with gaining an increased consumer threshold for its electricity generation services. Expanding the company’s operations to such a robust economy like South Africa will yield untold benefits and opportunities for expansion for many years to come.

The South African economy is based upon the Rand currency, which has an exchange rate of 1 Rand for every 6.8 United States Dollars. With a gross domestic product purchasing power parity of $524 billion, South Africa is currently the 24th largest economy in the world with strong growth expected in the future. In fact, the nation was invited to join the B.R.I.C. economies; recognized by Goldman Sachs as having prospects of being the largest or among the largest economies in the world by the year 2050. Its robust economy is anchored by an effective constitutional government that has high public approval ratings and is thus effective at dealing with social and economic obstacles in the country. A strong government that’s capable of social and economic intervention will be necessary in deploying the incentives for attracting new energy production companies, like Dominion to the country. South Africa’s currently-strong economic growth in conjunction with its relatively stable government, make for an ideal location in which to integrate Dominion Resources Incorporated’s operations and set it up for future success and growth


II: Introduction

Dominion Resources has an operations scheme that’s stratified into three major divisions;

electrical power generation, energy transmission, and oil & natural gas exploration. In

preparation to extend operations to South Africa, Dominion plans to generate electricity using

state-of-the-art biomass combustion technology. Upon meeting our proposed transplantation date

of September 30th, 2013, Dominion’s specialized power generation and transmission methods

will solve two pressing issues there; the severe scarcity of electricity and current waste

management and disposal problems. Our electricity generation method is designed to cleanly

burn biomass and waste from landfills, which contain 95% of South Africa’s total waste output,

while giving Dominion an environmentally-friendly image. Besides alleviating trash overloads in

South Africa, this method of power generation has another benefit; the elimination of the excess

costs of exploring and extracting natural resources for use as fuels. Traditional fuels for

electricity generation, like oil and coal, are found in deposits deep within the Earth, forcing

energy companies to conduct costly

fuel exploration and extraction

projects before such fuels can be

utilized. We will eliminate those

costs typical of a traditional energy

company by using readily-available,

discarded biomass and waste.

The energy market in South Africa is a notable one; as the leading industrial producer of

Africa, it constitutes 40% of all electricity usage on the continent. From what it can produce, the

government-backed electricity conglomerate, Eskom, is currently running yearly losses of nearly


$1 billion. This fact has led the South African Government to heavily subsidize and seek private

and/or foreign investment into energy production and distribution – exactly what Dominion

Resources will provide while also solving the country’s waste disposal problems. These

incentives will be discussed further within the context of this proposal.

South Africa is an ethnically-diverse country located at the southern-most point of Africa.

It’s bordered by Namibia, Botswana, Zimbabwe, and Mozambique, all to the north, the Atlantic

Ocean to the southwest, and the Indian Ocean to the east. With a gross domestic product

purchasing power parity of $506.3 billion South Africa is the 24th largest economy in the world,

and the largest in Africa. This fact indicates that the country has relatively well-developed

infrastructure, a stable socio-economic landscape, and developing service and industrial sectors

of its economy. The service and industrial sectors, including tourism, manufacturing, and public

services, are all energy intensive. Their presence in South Africa, making up 65% of total

economic output, will form one of our target markets of energy consumers. Of the nearly 50

million citizens in the country, 75% are of African descent, 15% are Caucasian, and 10% are

either mixed raced or of another ethnicity. A Constitutional Republic-style of government

effectively governs this bustling economy. In fact, South Africa’s recent economic development

has lifted millions above the poverty line, expanded educational opportunities, and has improved

the healthcare system. It will continue to do so as South Africa’s economy grows at an estimated

5% annually in terms of GDP.

The United States and South Africa already have strong economic ties, as the U.S.

accounts for 11.1% of South Africa’s imports. Both are members of the World Trade

Organization and are cooperators with the African Development Community. Trade barriers

between the two countries are minimal as the United States has already established a unilateral


trade agreement with South Africa that may become a free trade agreement in the near future.

This comprehensive trade agreement has led to a steep reduction of tariffs, fees, and taxes for

imports and exports going to and from the respective countries. Thus, the process of shipping

supplies, equipment, and miscellaneous items between the two countries will be a relatively

simple undertaking.

III: Analysis of the International Business Situation

Section A

The Republic of South Africa is organized as a mixed-free market economy; meaning

that the means of production and distribution of goods and services are stratified between private

business proprietors and government-backed enterprises. The federal government has a notable

role in regulation and management of privatized industries. This is pertinent to our proposed

operations in that we will need to account for a notable amount of government regulation in our

daily operations, in addition to perks that are outlined in the government’s new economic

incentive policies. The country’s continuously-precipitous development will create ample

opportunities for companies such as Dominion to embed themselves in South Africa’s

infrastructural development. The country is currently a member of several blocks of trade and

economic cooperation, which facilitate its international trade relations. Notably, it’s a member of

the Group of 20 Industrialized Nations (a block of 20 major world economies), the World Trade

Organization, the South African Development Community, and it works very closely with the

European Union in matters of trade facilitation and logistics. In conjunction with its noteworthy

trade relations, South Africa’s reductions of protective tariffs, easing of environmental standards,

and implementation of several recent investment treaties have contributed to both the estimated

$9 billion in direct foreign investment into the country in 2008 and the numerous trade partners it

boasts. This will catalyze the process of importing and exporting necessary equipment and


supplies necessary for our operations while easing the process of securing funding for the start-

up costs of our operations. The vivacious economy is currently dominated by developing

agricultural, manufacturing, and service sectors, all of which are energy-intensive and will utilize

the electricity we plan on producing. This fact is two-sided, however, as South Africa’s recent

economic growth has contributed to its current energy shortage, stemming from electricity

shortfalls from the South Africa’s currently-failing national energy company, Eskom. Rolling

blackouts for several hours, occurring several times a day, have become commonplace. The

deficit in production verses consumption, a difference of 25 billion kWh in 2007, is projected to

rapidly expand proportionate to South Africa’s continually-precipitate economic progression.

This fact will necessitate the expansion of Dominion and its energy production services to the

country to fill the void in the domestic electricity industry left by the outgoing Eskom Company.

Johannesburg, to where Dominion Resources will be transplanted in South Africa, is the

wealthiest and largest city economy in South Africa and is a primary economic hub on the

African continent. The city alone produces roughly 17% of the GDP output of the country

overall and it is host to the Johannesburg Stock Exchange– one of the top twenty stock

exchanges in the world. The city’s exceptionally-high GDP output is extenuated by an educated

urban population in the larger Gauteng Province that fills jobs in energy-intensive industrial and

retail sectors of the city’s economy. Economic output in the city is aided by its well-developed

infrastructure, such as rail lines, highways, and mass transport, which catalyzes private and

commercial transport within the city proper and connects it to other areas of economic output in

South Africa. These aspects of Johannesburg, and the Gauteng Province at large, make it an ideal

place to develop Dominion Resources Incorporated’s operations. It will provide a broad

customer base, both commercial and industrial, for electrical services especially amidst South


Africa’s current energy crisis while its developed infrastructure will allow for easy transport of

by-products and waste to and from the proposed power plant during construction and operation.

Pertinent to Government, the South Africa is a constitutional republic that’s stratified into

9 provinces, each with semi-independent

administrative powers. The current form of

the South African government, established

by the 1994 constitution, codified amidst

the country’s emergence from Apartheid

rule, consists of a bicameral legislature, a

judicial branch composed of the Constitutional

Supreme court along with lower circuit courts,

and an executive branch headed by the current President, Jacob Zuma. The Zuma administration

is steadfast and stable because it has a relatively high approval rating of 68% among its

constituents. This means that the current government is able to efficiently and effectively carry

out its duties, including providing government services such as schooling and public security,

appropriating funding to solve major social issues including the AIDS epidemic, and increasing

the competitiveness of South African industry, all with the consent and cooperation of the South

African citizenry. The many initiatives carried out by the government to reduce crime, increase

the population’s literacy, and facilitate the exit of the population from the depths of poverty

towards the middle class have created a stable, well-functioning socio-economic atmosphere in

South Africa that looks brighter every day. An ideal atmosphere for investment and development

of an additional arm of Dominion Resources Incorporated has been created by the South African

government.


The federal government’s Department of Trade and Industry is responsible for

monitoring international trade, and ensuring that trade laws passed by the national legislature are

abided by. As Dominion Resources Incorporated is an energy and resources company, importing

and exporting activities will be kept to a bare minimum. The only restrictions on trade that may

affect our company are those pertinent to the weight and breadth of shipments of hazardous

materials, heavy equipment, and some raw materials. However, these forms of cargo can be

transported into, out of, or throughout South Africa by use of special permits granted by the

Office of the Director of Import and Export Control, provided that we pay appropriate tariffs

(currently set at 14% but set to be lowered pending a free trade agreement with the U.S.) and

registration fees. As long as we comply with relevant trade guidelines based upon the gross

tonnage and amount of cargo being shipped, there should be no problem with transporting

required cargo. Much of the country’s trade policies are offshoots of the World Trade

Organization’s regulations, which are observed in the U.S., so most standards of trade and

commercial regulation in the country will be easy to comply with.

The Department of Trade and Industry, Department of Labor, and the Department of

Mineral and Energy affairs are major influences over the everyday operations of commercial

interests in South Africa and likewise, they will yield influence over Dominion Resources’ South

African operations. The Companies Act of 1973 is a major piece of legislation that governs how

employees can be paid (with over-time wages mandated on federal holidays) while it also lays

out guidelines for ethical operations of businesses. Such guidelines govern the methods for waste

and refuse disposal by industry and they lay out workplace equality standards for personnel of all

races, genders, and political affiliations. Likewise, the Competition Act of 1998 regulates

business in a way to promote plentiful and fair consumer choices, gives small businesses a


chance to compete against monopolistic multinational corporations, and promotes fair pricing

and diversified opportunity in commerce for all citizens of South Africa. These and other

legislation are enforced by the aforementioned government agencies to produce a fair and

favorable business climate in South Africa and will likewise be mandated onto Dominion.

III: Analysis of the International Business Situation

Section B

The 470,000 mile2 area of South Africa has a predominantly sub-tropical climate with

mostly semi-arid conditions. Topographically, South Africa consists of a large plateau in the

center of the country called the Highveld, a surrounding ring of low, rugged mountains, and

finally a small coastal plain along the full length of the country’s ocean shores. Occasional,

prolonged droughts occur where the Namib Desert extends along a portion of the country’s

western coast. South Africa has a fragile ecosystem that’s framed by minimal usable freshwater

supplies and a wealth of mineral resources. These mineral resources include gold, diamonds,

timber, and fertile soils that support extensive agricultural activity across the country. Especially

integral to the country’s agricultural and consumer interests is the use of irrigation from the

South Africa’s small streams and rivers. The city of Johannesburg, which will be the primary

location of Dominion Resources Incorporated in South Africa, is located inland in the

northeastern portion of the country’s Highveld plateau. In fact, Johannesburg is the largest city in

the world that isn’t directly located on a major river system. The city itself features a subtropical

highland climate, meaning that it has consistently warm weather that ranges between 60 to 80

degrees between the summer and winter seasons there. The city is in proximity to the confluence

of two of southern Africa’s largest rivers, the Limpopo and the Orange, yielding ample and

convenient transportation connections to the South Africa’s coastal ports.


The society of South Africa is heavily influenced by the presence of a collectivist culture

in the country, meaning that the good of the nation and its people are emphasized. Many of the

national holidays in the country are focused around the celebration of freedom and equality, such

as the Human Rights Day holiday on March 21st. This sense of equality is roughly analogous to

the social conditions in the United States. Although South African society is still partially

patriarchal, both sexes and virtually all ethnicities have relatively equal opportunity in holding

jobs, owning property, and participating in the political process. In essence, the egalitarian

society of South Africa is heavily-influenced by solid family values and the ethics associated

with the country’s major religious denomination, Christianity. The professional world of South

Africa is governed in much the same way as the social mainstream. Signs of respect and

acknowledging authority, such as scheduling meetings at appropriate times or inviting colleagues

over to the home for a meal are essential to conveying a respectful relationship with others. A

western style of dress and most behaviors is accepted as the professional norm. Physical contact

is used in excess to make points during meetings and to engage both parties as equals in

conversation. The sense of unity and connectedness that transcends South African social and

professional culture extends to the population’s environmental consciousness. Thus, many South

Africans tend to favor policies by the government and international community that prevent the

environmental degradation as a result of human actions, such as unclean energy production, and

littering. This fact is especially pertinent in that the natural ecosystem in South Africa is very

fragile– small changes in weather patterns could yield disastrous consequences for the country.

This environmental consciousness in South Africa’s population will aid the rise of Dominion

Electric’s South African division. Our planned use of human waste to fuel energy production


will provide our company a positive, environmentally-friendly among our customers and the

country at large.

Demographically, as previously stated, South Africa is an extremely diverse country.

This diversity is exemplified by the fifty million citizens of South Africa who represent over 10

major ethnic groups, including the Xhosa, Zulu, and Sotho tribes and even those people drawing

European ancestry from African colonizer nations like the Netherlands or the United Kingdom.

South Africans are predominantly young, as the population’s median age is 24.8. The population

is well-educated, with relatively-solid educational systems encompassing high school and

university-level education, an 86.4% literacy rate, and 15% of the population holding higher-

education degrees. This fact means that the population is relatively well-suited for tasks in

advanced technology fields such as those involved in constructing and running a biomass-fueled

power plant. 61% of the South African population currently resides in urban areas, thus catering

Dominion Resources Incorporated’s electric generation to suit the urban landscape will be

integral to capturing as large of the market as possible in an efficient and effective way.

Our selected primary target market is geared towards the most energy-intensive

electricity consumers; individual households which consume 47% of all energy produced on

Africa, the second-most populous continent in the world. Our primary target market is defined as

the following:

Primary Target Market


Demographic Geographic Psychographic

Younger and middle-aged consumers

Initially located in the Greater Johannesburg area

Want to get a fair prices for electricity

Affluent consumers who can afford use of energy-intensive appliances and technology

Suburban consumers in proximity to the city

Crave environmentally-friendly electricity to protect their country’s natural attributes

Collectivist and extended-family households

Respectful socially-responsible corporations

Secondary Target Market

Demographic Geographic Psychographic

Small, mid-sized, and larger companies

In proximity to the city of Johannesburg

Desire fair and competitive prices

Industrial producers and manufacturing plants

Industrial/commercial parks and centers

Need environmentally-sustainable energy production

Public and municipal facilities Suburban and rural commercial areas

The current electrical crisis in South Africa is influential and pertinent to our selected

primary and secondary target markets. The state-controlled, and highly indebted, electricity

conglomerate, Eskom, is currently being forced to ration electricity among its South African

energy consumers. The numerous factories, retail stores, office buildings, hotels, and private

consumers who depend on Eskom’s electricity production across the country are dangerously

close to being left in the dark, which already occurred briefly in April 2009. Eskom produced

260 billion kilowatts of energy in 2009, while consumption was 241 billion kilowatts,

representing a 16% rise from 2008 levels, and is expected to continue to rise dramatically as


South Africa’s economic advancement continues. Indicative of this fact are the alarming figures

that the South African government has released pertinent to its “reserve energy” supplies:

electrical capacity set aside in a given year for use only in emergency situations. The level of

reserved electrical output in South Africa has fallen from 25% of total electric production in

2002 to only 8% in 2008, as the government has tapped into emergency energy reserves to

supply normal electricity to Eskom consumers. This trend of electrical production shortfalls that

has continued over the past several years has led Eskom, which is already extremely unprofitable

as it is losing nearly $1 billion in public funds annually, to have to incur costly transactions in

order to import an estimated 10 billion kilowatts of energy from its neighbors annually. These

costs have compounded emergency spenditures to try and upgrade current production

infrastructure to ensure enough energy is available for seasonal usage spikes and in emergency

circumstances. Both policies have proven myopic and only marginally effective in alleviating

electrical production shortfalls in South Africa. To compensate for financial losses, Eskom has

been forced to jack up prices for nearly all consumers, especially the working classes, which has

shown high levels of public dissatisfaction with the current system of electrical production. Yet

another problem is the South African government’s financial inability to fund such an expansive

operation. Estimated costs for the country to update current transmission and production

infrastructure in the short term and build new power plants is nearly $100 billion USD, in

addition to future projections of operation losses from the Eskom company. South Africa

desperately needs increased energy production capacity in order to support its quickly growing

base of consumers. All of these issues have given the South African government, which itself is

trying to maintain its positive perceptions by its constituents, additional stimuli to catalyze the

country’s transition towards a private-controlled energy industry.


IV. Planned Operation of Dominion Resources Incorporated’s South African Operations

Section A

As Dominion Resources Incorporated is established in South Africa, it will be legally

incorporated as a limited liability corporation. This type of business combines the best aspects of

a closed corporation and a proprietorship in South Africa. It divides its liquid capital assets to be

distributed to public shareholders or to be sold to just a handful of key investors that possess

close relationships with the company. A Limited Liability structure is also advantageous in that

Dominion will have the ability to sell these shares of stock to raise capital for itself, while the

shareholders will have minimal autonomy when it comes to governing company processes. The

advantages of this operational style also translate into diminutive costs when it comes to filing

documents and paying corporate taxes. To top it all off, only a very short process will be

necessary to legally establish a limited liability company in South Africa, with steps including

reserving a business name with the Registrar of Companies and paying pertinent fees,

documenting company information with the government’s CIPRO agency in Pretoria, declaring

assets and funds for taxation purposes with the local government (Receiver of Revenue), and

completing registration with the governmental agency for Compensations for Occupational

Injuries and Disease Act. The increasingly-urgent energy crisis has led the South African

government to elicit private investment in its energy grid in order to alleviate current strains on

its systems. Given the current economic incentives provided by the government, Dominion

Resources will be eligible for many tax write-offs and refunds for aspects of the business,

including write-offs for proportional expenses pertinent to company reinvestment and payouts to

employees. Dominion will also qualify for numerous government-subsidized tax rates and low-

rate interest fees including a 20% reduction of Dominion’s tax rates during its first few years of

its operations in South Africa. In addition, due to South Africa’s relatively high national


unemployment rates, the government has instituted a free program to match qualified employees

with potential employers, creating easy access to qualified labor that will be needed to run our

proposed power plant and corporate offices.

Although not directly employed by our company, we will need contractors, designers,

and construction teams to actually build the proposed power generation facility outside of

Johannesburg. We will partner with companies experienced in high-technology construction and

design such as Concor Incorporated, a top-100 company in South Africa. Once constructed, the

operation of our proposed power generation facility will involve the utilization of a “grate

incinerator system;” a fairly-complicated incineration process that, to run, will require a number

of employees at various levels of the workplace hierarchy from equipment technicians to upper

management-level employees and plant managers. In addition to employees at the actual power

generation facility, we will also require staff at our corporate office location in the central

business district of Johannesburg. The necessary employee hierarchy and their job descriptions

pertinent to both the power plant and corporate office are delineated in the following charts:

Employee Heirarchy Chart:

Position (number employed)

Job Description

Chief Operating OfficersAct as Dominion’s directors of South African operations, manage department heads, and


(2) meet with lower-level employees and representatives as necessary.

Office Manager(1)

Represents the division of office-based employees in board meetings, manages lower-level office staff.

Secreterial & Office Staff(35)

In charge of organizing files, arranging appointments, managing relations with company stockholders, and daily billing/receiving tasks.

Legal/Financial Staff(8)

Manage daily accounting information including payments, taxes, and payroll. Ensure compliance with tax and legal codes.

Plant Manager(1)

Represents the division of plant-based employees in board meetings, manages each lower-level division of plant staff.

Head of Maintenance(1)

& Lower-Level Maintenece Staff(30)

Inspect that the power plant’s physical infratructure, including all equipment and components of machinerey, are ensure they’re operated and maintained properly/safely.

Head of Engineering(1)

& Lower-Level Engineering Staff(40)

Ensure the integrity of the plant, its structure, and operating logistics of incineration machinery in relation to electricity output.

Head of Plant Operations(1)

& Lower-Level Overseers(45)

Monitor general ouput and capacity levels of the facility, manage safety monitoring of the plant’s operations, receive oversight bodies.

Biomass Trasnport Personnel(15)

Resposible for transport of biomass waste from surrounding landfills in Gauteng Province to the power generation facility.


Section B


As an energy company, Dominion Resources Incorporated’s South African arm will

provide one product; electrical energy. This electrical energy will be produced in our proposed

power generation facility in Johannesburg’s outer district of Melville in Gauteng Province. This

electricity, a proposed generation capacity of 359 MW, will be produced via a direct combustion

of biomass waste that results from grate incinerator systems. In essence, the process of direct

combustion creates electrical energy through the creation of steam which is able to force a

turbine into motion inside the field of an electromagnet. The motion of the turbine itself in the

electromagnetic field is what produces the electricity. The grate incinerator system will provide

for the clean, efficient burning of biomass to produce this steam, and subsequent electricity

trough the following steps:

1. Biomass (garbage, excess organic matter, human waste, etc) is brought from landfills to

the power generation plant and is stored in an appropriate, on-site facility

2. Stored biomass is transported into holding chamber for immediate use in the grate system

3. Biomass products are placed onto the moving grate (moving similarly to a conveyor belt)

4. Biomass passes down the moving grate system and through an intense flame chamber

5. Super-heated carbon and other gaseous emissions rise and enter a tube apparatus as

steam, charred remnants of biomass are re-exported as fertilizer

6. Steam enters the turbine chamber, (consists of a turbine fitted with an electromagnet in

opposite polarity to the magnetic field of the chamber itself) and forces the turbine to

rotate

7. The rotating, opposite-poled magnets produce an electrical charge, which is diverted into

electricity storage cells until it’s elicited and forwarded onto electrical infrastructure for

use by consumers


8. Excess steam is funneled into an exhaust release system utilizing advanced carbon

capture and air filtration systems to ensure the release of only safe emissions (such as

oxygen) out of the exhaust tower and into the atmosphere

In conjunction with our factory operations,

we also plan on establishing a corporate office

presence in the central business district of

Johannesburg. This office location will be

responsible for administering an array of clerical

duties, including processing and monitoring electricity bill balances, payments, and usage levels

from our company’s consumers. They’ll also send out direct mail promotional fliers in addition

to managing official communications on behalf of Dominion Resources Incorporated’s South

African operations branch, whether these communications are with the parent corporation in the

United States or with some other entity. A third task that will be required of office personnel will

be to manage the oversight of the grounds of the electrical generation facility. In managing the

power plant, they will be responsible for scheduling inspections by governmental agencies and

processing expenses required to finance upgrades and repairs.

In transplanting the business, we will keep importing and exporting to a minimum. The

electrical storage cells that will be used to stow away electrical current produced by the power

plant will be bought as capital goods from an external manufacturer in South Africa and operated

by our own personnel. As needed, these energy cells will distribute previously-stored electrical

current through the electrical grid in order to satisfy customer demand across our region of

coverage. In terms of electrical distribution infrastructure, South Africa already has a fairly-


comprehensive power grid that’s capable of reaching the vast majority of customers, so minimal

construction efforts will be needed only to connect the proposed power plant to existing

infrastructure via high-tension power lines. Very few other capital goods will need to be

imported or exported from the United States into South Africa. If any, such capital goods may

include high-technology items such as highly-polarized magnetic materials in conjunction with

other factory components and construction effects. In order to legally import these capital goods,

we’ll be required by the South African government to obtain special import provision licenses in

addition to paying pertinent tariffs and fees associated with import permit holders. We’ll also

need commerce invoices, Bills of Lading, insurance documentation, and packing lists for each

import shipment in compliance with the South African Foreign Trade Organization and its

related monitoring government agencies. We will transfer an array of current Dominion

employees to its new South African location to assist in training personnel and running the

power plant when it first comes online. These employees will be transferred back home after a

period of 3 years, when training and development are complete, although high-level employees

will remain.


Section C

Dominion Resources Incorporated plans to implement a penetration pricing strategy,

defined as one that offers a high-quality, premium product or service at a low price in order to

quickly gain market share in an area. This pricing strategy will be integral to our business growth

model as the current industry leader, South Africa’s government-backed Eskom company, begins

to phase out its operations due to its precipitous losses of public funds through its operations and

ineffective efforts to keep up with domestic electricity demand. As a result of its poor

performance, the Eskom company is in the process of being scaled back in favor of a more


productive and efficient free-enterprise system of electricity production in South Africa.

Dominion Resources Incorporated will set fair, competitive prices in order to afford the luxury of

electricity to as wide a variety of consumers as possible; from powering governmental operations

to providing energy for high-intensity manufacturing and private uses. We will place somewhat

of an emphasis on driving growth in electricity usage for the lower middle class; those who have

most recently moved above South Africa’s poverty line, as South Africa continues its

exponential economic growth and advancement. We’ll target these consumers, in both private

and small business-based electricity consumption, as a way to integrate Dominion into the

country’s economic solidification. As the local currency is the South African Rand, all prices,

costs, and financial information will be reflected in this currency, which has an exchange rate of

1 United States Dollar for every 6.85 South African Rands.

To keep our prices competitive against any competition, we have devised an innovative

system of penetration pricing which we’ve dubbed the Bracket System for the pricing of

electricity that will create cost-effective and profit maximizing ways to bill consumers for their

electricity use. The Bracket System will set divisive ranges of prices (based upon a rate of .65

Rand per kilowatt hour) for electricity between certain monthly usage ranges (measured in

kilowatt hours). These divisive prices will be computed using the following formula:

[(wattage utilized x hours used) ÷ 1000 ] x .65 = cost of bill.

We will not charge any peak-hour rates or usage fees in our pricing system, as opposed to

our competition. The proposed bracket system will simplify the process of determining prices for

each unique electricity purchaser, lowering the necessity for a large amount of billing and usage

management personnel and thus decreasing the costs of managing this division of the company’s

operations. This system will give us a competitive advantage over our competitors, like the


Eskom company, which use complicated pricing formulas that charge unpredictably-high rates

during peak usage hours and stagnate at other points during the day. These peak-hour charges are

often frustrating and unfair to consumers. Pricing for our electricity will be determined by a

comprehensive set of expenses which the company will have to incur including for labor, power

facility maintenance expenses, costs of capital goods, and the transporting of biomass in

conjunction with annual rates of taxation imposed by the government. As these cost burdens

fluctuate, our prices will change proportionally. The factor of competition in the South African

electricity industry will be kept to a minimum as our main competitor, Eskom, will be phased out

upon our entry into the market, although several small companies will compete with us. Our

simplified Bracket pricing system’s specific pricing levels are delineated in the chart below:

Amount of Electricity Used Price [in South African Rand (R)]

> 1750 kWh > R 140

1250 - 1750 kWh R 100 – R 139

750 - 1250 kWh R 60 – R 99

< 750 kWh < R 59Amount *based upon the amount of kilowatt hours (kWh) of electricity that the customer uses

Self-promotion is integral for a business, as it is the medium by which it annunciates its

existence and communicates with potential and existing customers. In order to most effectively

and efficiently deploy advertising and public relations campaigns, Dominion Resources

Incorporated’s South African Operations will utilize campaigns that are geared towards the

primary and secondary target markets delineated in part III section B. We’ll unfold a three-

pronged advertising plan utilizing both print and digital media in conjunction with outdoor

advertising. This advertising campaign will be used to increase public awareness of our


existence in addition to succinctly explaining why our company beats the competition in terms of

pricing and environmentally-friendly policies.

Digital media will make up roughly 50% of our initial advertising budget. The current

number of televisions per capita in South Africa is about 135 per 1,000 people and this rate is

reciprocated in the Johannesburg area; our primary region of coverage. This rate is low; ranked

as the 114th country with the most televisions per person. Due to this fact, we will utilize a

smaller-than-average television advertising campaign. We’ll initially incorporate 68,000 Rand

for this section of our advertising budget, but will gradually increase this value to 102,000 Rand,

an increase of 50%, by the 5th year of operation in South Africa as personal incomes continue to

increase and proliferation of televisions continues to become more common. These TV

advertisements will be placed during primetime programming on major Johannesburg TV

stations like SABC1, the South African Broadcasting Corporation’s flagship station, and on

others such as MNet and ETV. Utilization of radio media will also be used on area stations like

SABC and 5FM, which have large audiences that rival those of the country’s television shows.

Thus, we’ll appropriate 54,000 Rand for radio advertising operations. As internet is a growing

advertising niche worldwide, we’ll also incorporate it into our initial advertising campaign.

Computer use in South Africa is not very common, but it is utilized by the wealthy and major

business operators; two major users of electricity. For website and internet banners, we’ll set

aside 34,000 Rand.

Print media, including magazines, will make up 40% of our initial advertising budget. We

will place advertisements in Johannesburg-area magazines, like South Lifestyle Magazine and

the Wits Business Journal, and in newspapers like the Sunday Times. For these print

advertisements, 80,000 Rand will be appropriated. In addition to print advertisements, we will


utilize a direct mail campaign to reach private and corporate consumers. We will send

specialized advertisements and discount vouchers that explain what makes us different from the

competition to selected consumers and businesses to draw in customers and expand our market

share with subsequent word-of-mouth advertising. For direct mail, known to be the most

expensive form of advertising on a per-customer reached basis, we’ll procure 60,000 rand. We

will utilize public relations campaigns, mostly via print media, to not only spread awareness of

our company, but also to advertise the environmentally-friendly and socially-responsible image

that we exemplify with our clean energy production, fair pricing, and egalitarian personnel

management policies. We will issue press releases when sponsoring charity or related campaigns

and events in addition to possibly founding our own events and campaigns to benefit the citizens

who we supply with electricity.

Finally, outdoor advertising will make up the third component of our comprehensive

advertising scheme, comprising the final 10% of our advertising budget. We will place billboard

advertisements in dense areas, such as Fitzgerald Square in downtown Johannesburg, and on

widely-used transport vehicles and infrastructure, such as buses and subway stations. In addition,

billboard and ad space will be bought in proximity to public institutions, such as at the famed

Soccer City Stadium during soccer games; extremely-popular social events. We’ll buy billboard

space in varied capacities around the city and the greater Gauteng province to spread awareness

of our company to the masses.

StrengthsAbility to Employ penetration pricing

Environmentally-friendly operations

Flexible customer service policies

Strong experience in effective operations

policy via Dominion’s American

Weaknesses

Lack of relationships with banks and South

African financiers/investors

Initial anonymousness in the South African

energy industry, especially against


operations competitors

Opportunities

Current electricity crisis in South Africa

necessitating a need for increased

production and output

Ability to use and research biomass, solar

power, & other clean energy technologies

Small field of competitors

Growth and integration into the

expanding South African economy

Threats

Possible language barriers due heterogeneous

language mix in South Africa

Continued operation by Eskom as

government phases it out

Competition from small electricity providers


We believe that the aforementioned plan for the transplantation of Dominion Resources

Incorporated to South Africa has many strengths, and subsequently will have many opportunities

for success in the South African energy market when it’s transplanted to the outskirts of

Johannesburg. However, very minor threats and individual company weaknesses may have some

impact on the business. These strengths, weaknesses, opportunities, and threats are analyzed in

the SWOT analysis chart below:

V. Planned Financing

Section A



Section B

Balance Sheet for 2011-2012 Fiscal Year (as of 9/30/2012)

Assets Value (in Rand) Liabilities Value (in Rand)

Current Assets Current LiabilitiesCash Equivalent 550,678 Accounts Payable 3,995,260Accounts Receivable 2,192,029 Lines of Credit:Inventory… ABSA Bank 2,000,000

Electricity (ready-in storage) 3,009,871First Nat’l Bank-South Africa 700,000NedBank 400,000

Temporary Investment 374,186Prepaid Expenses 894,203 Total Current Liabilities 7,095,260

Total Current Assets 7,020,967 Long-Term Liabilities

Fixed Assets Construction Overhead 17,546,386

Land 2,849,400Other Long-term Liabilities 3,304,921

Equipment 18,998,301Total Long-Term Liabilities 20,851,307

(Equipment Depreciation) -3,637,421 Shareholders' EquityFurniture and fixtures 301,503 Capital Stock 203,158Total Net Fixed Assets 22,149,204 Retained Earnings 28,934

Total Shareholders' Equity 232,092

Total Assets 29,170,171Total Liabilities and Equity 28,178,659



Income Statement Dominion Resources

Inc. September 30th, 2012 - September 30th, 2013

Financial Statement in South African Rand (R)

Revenue

Consumer (Household) Power Division 16,697,528Industrial Electricity Division 9,801,204Governmental Operations 7,435,781Retail/Corporate 14,694,100

Stock Income 203,158

Gross Income R 48,831,771

ExpensesOperating Expenses:

Office Location 717,987Transporting waste 636,384Plant and combustion 822,293Transportation/storage of electricity 556,089

Employee Payroll 5,013,600Equipment 18,998,035Insurance 450,245Advertising 334,000Construction/Land 20,395,786Maintenance 22,490Taxes 4,034,049Total Expenses R 49,458,494

Section C

Dominion Resources Incorporated’s main avenue of expansion will occur once the company

creates a firm imprint in the energy sector of South Africa. As a result of extensive self-

promotion campaigns in the previously-mentioned promotion plan, the company will become

well-known within the Johannesburg business scene, as many companies, enterprises, and

families will rely on us for fairly-priced, reliable electricity. As public perception of the business

becomes more measurable over the course of our first and second years in operation, public-

relations campaigns and intensified advertising promotion strategies, will take effect. These

campaigns will be anchored by charitable contributions to varied agencies in South Africa to

promote a positive external perception of the company in conjunction with continual market

segmentation analysis to make our promotional plan as effective at reaching consumers as

possible. By the end of the second year’s operations, these enhancements in public relations will

yield an ever-growing list of retainable clients, and an increased threshold of demand for

Dominion’s electrical power generation and distribution services.

After three years and into the future, as profit margins rise and the effects of expenses

such as construction payments and initial loans begin to decrease, the company will begin to

reinvest in itself. Once this point is reached, the business, given overall profitability and

appropriate domestic fiscal conditions, may expand the size of the proposed power plant in

Johannesburg to provide additional output capacity, or it may even consider developing probing

commissions to look into opening new power generation facilities or hiring additional staff at

leased office spaces. These plans for future growth will require resources. For one, capital and

monetary investment from profit yields will need to be secured in order to finance a second

power plant venture, and to finance additional expansions in personnel and office space. This

capital will come from stock income, profit from the proposed Johannesburg power generation


location, and lines of credit. This capital will also be used in the short term to pay for additional

company demand for office supplies, upgraded equipment purchases necessary for efficient

power generation, and other necessary expenditure needs.

2012 2013 2014

Revenue:

Consumer (Household) Power Division 16,697,528 18,049,837 21,548,094

Industrial Electricity Division 9,801,204 10,990,413 12,303,907

Governmental Operations 7,435,781 9,765,017 11,456,293

Retail/Corporate Division 14,694,100 17,175,812 19,176,849

Stock Income 203,158 209,190 214,408

Gross Income 48,831,771 56,190,269 64,699,551

Expenses

Advertising:

Broadcast Media 169,000 173,000 175,000

Internet Advertising 55,000 58,000 60,000

Billboard/Outdoor Promotion 40,000 45,000 47,000

Direct mail/Print media 70,000 72,000 75,000

Employee Payroll 5,013,600 5,050,034 5,100,925

Equipment 18,998,035 16,994,029 13,195,209

Insurance 450,000 400,000 375,000

Operating Expenses 2,102,789 2,110,049 2,120,917

Construction/Real Estate 17,546,786 15,095,303 13,986,292

Maintenance 22,490 55,283 85,505

Taxes 4,034,049 6,672,528 8,840,017


Projected 3-Year Finances for Dominion Resources Inc. (in Rand)

Total Expenses 49,151,749 46,725,226 44,060,865

Net Profit (-319,978) 9,465,043 17,638,686

V. Bibliography

"AfDB Helps South Africa Tackle Energy Crisis-Approves €1.86 Billion Loan." African

Development Bank, 26 Nov. 2009. Web. 15 Oct. 2010. <http://www.afdb.org/en/news-

events/article/afdb-helps-south-africa-tackle-energy-crisis-5421/#>.

"Biomass Fuel - The Basics of Biomass Fuel." Alternative Energy Resources. 2010. Web. 16

Dec. 2010. <http://www.alternative-energy-resources.net/biomassfuel.html>.

“Dominion Resources, Inc.” Forbes, 2010. <http://finapps.forbes.com/finapps/jsp/finance/compi

nfo/CIAtAGlance.jsp?tkr=D>.

"Dominion Resources, Inc. Financials." Hoovers | Business Solutions from Hoovers. Hoover

Inc., 2010. Web. 15 Oct. 2010. <http://www.hoovers.com/company/dominion_resources_

Inc/rfcjki-1-1njea5.html>.

“Government At Fault in South African Energy Crisis” The Washington Post, February 2009.

<http://www.washingtonpost.com/wpdyn/content/article//02/08/AR28001190.html>.

Machariaa, James. “South Africa Still Faces Major Energy Crisis.” Reuters, 2 Apr. 2009.

<http://www.reuters.com/article/idUSTRE5315U320090402>.

"South Africa Energy." Statistics South Africa - Home. 30 Nov. 2009. Web. 15 Oct. 2010.

<http://www.statssa.gov.za/>.

"South Africa's Energy Industry - SouthAfrica.info." South Africa's Official Gateway -

Investment, Travel, Country Information - SouthAfrica.info. 2006. Web. 28 Oct. 2010.

<http://www.southafrica.info/business/economy/sectors/energy.htm>.

“South Africa Invited to Join BRIC Group.” Reuters,24 Dec. 2010. <http://www.google.com/sea

rch?hl=en&rls=com.microsoft%3Aen>.

"South Africa's Trade Relations - SouthAfrica.info." South Africa's Official Gateway -

Investment, Travel, Country Information - SouthAfrica.info. SouthAfrica.info Reporter,

2010. Web. 15 Oct. 2010. <http://www.southafrica.info>.


http://www.southafrica.info/

"The World Factbook - South Africa." Central Intelligence Agency. Central Intelligence Agency,

29 Sept. 2010. Web. 27 Sept. 2010. <https://www.cia.gov/library/publications/the-world-

factbook/geos/sf.html>.

"UNdata | Country Profile | SOUTH AFRICA." UNdata. 2010. Web. 15 Oct. 2010.

<http://data.un.org/CountryProfile.aspx?crname=SOUTH AFRICA>

VII: Appendix

Proposed Office Location: 2 floors leased in an office building on Eloff Street facing Ghandi Square (a major transport hub)

Floor One: staff cubicles, lounge, filing area


Floor Two: office foyer, cubicles, board room, COO offices


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