Self-Drive Vehicle a Paradigm Shift in the Automotive Industry - Essay Example

? Self-drive Vehicle: A Paradigm Shift in the Automotive Industry Industry analysis using the porter 5 forces This analysis is created in order to identify a number of competitive chances and attractiveness in the automobile industry. Better place is a company whose sole aim is to develop a link between manufacturers of cars, battery firms and final consumers in a way which would enable the electric vehicles to spread widely across the globe. Thus, its establishment is based on the idea of providing service to drivers who wish to use electric vehicles. Competitive rivalry The competition in the automobile industry is relatively high since the companies have flooded the market thus offering customers’ a number of choices. This high competition result to companies earning low profits since the costs of the entire competition will also be high. Moreover, Better Places will face competition from other energy producers such since they all struggle to occupy a stable position in the market. A number of oil companies have linked with major car producers across the globe whereby they make lots of profits are being made. Threat from new competitors The industry dealing with hybrid electric vehicles is stable and well established. It has maintained a significant average annual growth for many years. Thus, the potential level of threat from the new competitors is categorized as medium. This is because competition in this industry is already high hence it is quite discouraging for the new companies that are struggling to get into the market. However, one of the largest threats is from the new competitors that are environmentally conscious in their lines of production. Threat from consumers Consumption begins with wholesalers and retailers who demand lower pricing for the products. Large retailing businesses sell the product to many users whereas internet marketers or retailers cover a broader region in terms of sales. All these customers opt for Better Place’s Auto’s product because of its convenient price and distribution. However, the demand for low pricing is a major threat for the company since raw materials and other production costs are too high in the car manufacturing industry. Threat from suppliers of raw materials As the trend of car fashions change from time to time, there is need for quality and modern products from the vehicle industry. Thus, for Better Place to maintain its position in the market, it should maintain its good relationship with suppliers since the prices of raw materials are fluctuating in the industry. This would enable the firm to acquire the relevant materials for its production at reasonable prices, or else, when the relationship is poor, the company would have some difficulty obtaining the raw materials for production. Threat from close substitutes Most likely, competitors who are coming up with similar products that are environmental friendly are a greater threat to Better Place. It is expected that all the products from the company would outplay products from other companies with unparalleled quality and uniqueness. A Company such as Honda Motors is among the oldest manufacturers in the car industry thus products from such company can pose a threat to the company’s products because of the famous name. Customers consider product differentiation since there are so many vehicles in the industry with the same features hence there is little threat from substitutes. 2. Scenario Planning Scenario planning enables a firm to describe what is easy and possible to attain over a specific time frame. It permits specification of particular objectives which are supposed to be attained in a sequence of both investment and implementation decisions. It therefore helps a firm to plan for the entire project regardless of the obstacles that might come along the way. The following steps are depicted in the Better Place plan: Identification of Stakeholders The company identified stakeholders whose interests were similar to the founders’ interests. These stakeholders ranged from customers, investors, other companies and the government from different continents of the world. The customers identified are those with the interest of transforming the globe’s transportation image; those who are interested in the electric vehicles and ready to support the firm’s idea by owning or rather being loyal to its system of innovation. Investors who were identified by the company ranged from car manufacturing firms, battery manufacturing companies to energy producing companies. Among the car manufacturing firms was the Nissan Company. The energy producing companies included the electricity and steam and wind companies whose energy would serve the forecasted purpose of charging car batteries to replace the oil. The initial government to be involved was Israel where this innovation was received with all the potential customers and investors. Moreover, the company moved to expand its operations to Japan, United States of America, Canada, China and a number of European countries such as France Infrastructure and software The firm’s model would be based on the recharging infrastructure for electric vehicles which composed of two components; the charging spots and switching stations. These would enable the drivers of electric vehicles to fill their batteries at specific and convenient places whenever the cars are packed. This would be at a cost of one thousand dollars. Thus, for a battery to be full, an estimated duration of hours would be a requirement. Resources The chief resources for this model are energy, labor and capital. Thus, the firm involves various investors who are willing and have the interest similar to the Better Place’s. These investors would contribute greatly in terms of capital and other related resources. Moreover, the investors would benefit in return as they will have a share of the general profits obtained from the entire project. Better Place project’s initial resources are batteries, energy, labor and location to place he filling stations. Thus, the energy would be obtained from the large produces of energy (electric, steam and wind) across the globe. The labor required is from highly skilled individuals who are recruited regardless of the gender, race or religion. Lastly, the batteries to be used are from the leading battery manufacturers in the world. Thus, all these would facilitate smooth running of the firm’s operations. An outline of basics The firm project’s basics comprise of ownership of batteries which is separated from the vehicle ownership, charging spots where the vehicles will be connected to chargers, the battery switching locations or rather stations where the depleted batteries will be replaced and the software which will be monitoring the state of batteries and network interface. 3. Key Success Factors There are a number of key success factors of the Better Place Company. The factors range from making choices on the broad topic, finding immediate solution, struggle for implementation, broad network partners who have similar interests, leaders’ personal involvement to designing the probable solutions as an operational business model. Defining the problem Deciding or rather choosing a broader and a challenging problem ensures that the solution from the company would make a real and true difference to the society. These changes would be basic. The problem is “how to convert or rather transform the entire globe to electric vehicles. Secondly, struggling for a solution that is actually of greater benefit to the society is part the problem. The solution to this problem has to be within the scope of science being practiced in today’s world and within the current economic realities. This is an instant and implementable solution. In addition, the solution is defined as a business model. This makes the solution to be accessible for many stakeholders; from customers, investors to governments. Hence, it creates a true and genuine strive for both short term and long term solution from the consumers to the governments, making it independent of political disturbance. Realizing the Idea In order to realize its ideas, Better Place developed an extensive partner network. These partners have aligned interests alongside a strong commitment since they are all motivated by true and genuine interests and not the ecological responsibility. The interests include oil independence, financial returns and commercial advantages. Furthermore, the company realizes its ideas through engaging the appropriate skills. Recruitment of the right and highly skilled experts who are focused on the goals has enabled the firm to succeed. Apart from recruitment, the firm aligned its goals objectively to the direction of what motivates its operations. General personality of the founder Shai Agassi, the founder of Better Place has invested time to identify and study the problem, its root causes and the probable potential solutions. This signaled the seriousness of the problem to the investors and partners globally. Moreover, Agassi has the ability to associate the technical knowledge with the business acumen which set the company free of competitors; he never lost sight of the most crucial details regarding the market, customers and the potential investors globally. Understanding the trend and nature of business models, their complexities and system viability to solution finding enabled him to harness the skills in software execution. His charismatic leadership is key to the firm’s success since he naturally involves individuals from diverse backgrounds across the globe thus tapping all the available skills, resources and attention from various governments where the company has partners. 4. Resource and capabilities This being a game changer and in the automotive industry, it might seem that one needs a lot of financing to have the project take off and be viable. This is not necessarily the case since it is a project that is supposed to be gradually accepted over the years just like how the first internal combustion engines were first introduced. The future of public and mass transport has to be looked into and the plans being looked at by various major governments around the world. Most of the private commuting in future will be shorter distance than it is nowadays. Most people will be using private vehicles for commutes to points where they can board mass rapid transport systems as it is already the case today, but on a larger scale. Electric trains will be used to ferry people to their places of work and with more people working at home online the number of people commuting to work will gradually come down. With all this in mind, a company interested will have to do a test on how these cars can be operated on a small scale at first using short distances. This can presently be seen in the United Kingdom (U.K). The U.K. town of Milton Keynes is getting a fleet of 100 self-driving vehicles to run between the city’s housing estates, working districts and train stations beginning in 2015. The self-drive vehicles will carry a maximum of two adults, and light family shopping. The first 100 vehicles are set to ply the streets in 2015 as part of a ?65 million infrastructure investment by Milton Keynes, with a full roll-out of the vehicles coming in 2017, when passengers will pay ?2 per trip and summon the rides through a smart phone application. The vehicles-similar to those used at Heathrow airport since 2011- will be have electric motors on each wheel that will be charged at designated points1. Driverless cars can also be capable to navigate busy intersections and travel relatively long distances. Computer scientists are looking for ways to make this more achievable. In the year 2012, scientists working on SARTRE (Safe Road Trains for the Environment) in Barcelona, Spain, used a road train, which is semi-autonomous highway convoys of vehicles that follow the movements of human driven cars, to demonstrate this. The five-car road train consisted of a lead truck followed by an autonomous truck and three Volvo sedans. The convoy traveled about 125 miles outside the city at speeds around 53 miles per hour while keeping a uniform 20-foot following distance between vehicles. It was the first time such a convoy had operated on a public highway being used by other conventional vehicles at the same time.2 A road train uses a combination of existing car sensors (radar, lasers, and cameras embedded in safety features) and wireless communication to stitch together a maximum 15 vehicle convoy. The cars follow every action performed by the professional driver in the lead vehicle. Every vehicle communicates with other automobiles in the surrounding area to ensure a smooth run of traffic. Once drivers find a road train through their onboard system, they can become part of the train as long as they are equipped with the convoy's software program. Cars that join the train become self-directed until drivers manually detach from it when they so wish. This enables drivers to do whatever they want while their car is part of the train: eat, read and talk on the phone to business clients’. Among this project's main goals are reducing congestion (by limiting human traffic errors) as well as fuel consumption (by limiting air drag). Human operated cars may require expensive physical improvements- not to mention infrastructure changes- SARTRE says participation in a road trains requires only modest upgrades to the cars’ software system and wireless communication network. 5. Business -level and corporate strategies Starting up a new business or trying to come up with your own completely new car design and brand can be a daunting task to any large cooperation let alone a new startup technology in a fierce industry like the automotive industry. We can take examples from Tesla Motors in the United States of America which has faced hurdles in trying to sell its vehicles since most states favor selling cars through auto dealerships that support the local communities that they operate in. Most auto dealerships have deep historical ties with the main car manufactures like Ford and Chevrolet and this can be a difficult bond to break so as to have an opportunity to break into the auto-market. Any startup company must formulate a way to navigate around this obstacle. From the tests in Barcelona, Spain, by SARTRE scientists, we can see that it is possible to use the modern safety and navigation features in modern cars to come up with self-drive cars. Most modern cars come with features such as cruise control, parking assist, features that activate the car breaking system if the car senses an impending collision, sensors that monitor the road and pavement lanes so as to avoid the vehicle veering off the road when the driver looses concentration like in the 2014 Mercedes S-Class. With the availability of all these features in modern cars, it will be prudent and wise for any start up self-drive companies to incorporate its technology into these vehicles by partnering with the already established auto companies to roll out self-drive cars that are also at the same time recognizable brands. This will be much easier to sell to the intended consumers since there will be a level of trust and loyalty that has been cultivated over the years between the general public and these auto brands. The self-drive vehicles will use extra sensors and wireless communication technology to communicate with other vehicles on the road to monitor traffic conditions and avoid collisions on the road. The technology can be disabled by the driver voluntarily if the driver feels the need to personally take control of the vehicle, and also enabled if the driver feels tired after a long day at work or from a night out. When the owner of this technology uses the strategy of partnering with established brands, the technology will soon become mainstream after data and subsequent research prove that the self-drive vehicles experience far less accidents than conventional vehicles. This can follow the same path as the airbags and Anti-Lock Breaking Systems (ABS) that improved safety standards in vehicles after their introduction leading to laws being passed in Europe requiring any new motor vehicles to have these features. With such overwhelming confidence built and consumer trust in the said technology, one can branch out and come up with his own brand of motor vehicles which can be more readily accepted in the general population, which will be more receptive of the idea of ceasing control to technology to take us around while doing our daily chores. 6. Stakeholder mapping Stakeholders refer to entities that will be affected in some significant way by the outcome of a project, either because they are employees, funders or consumers of the service or products that the project aims to produce. Undertaking such a project requires one to recruit several groups of people in the industry that is the key to one’s success and stability of a project. As we have already discussed, it is pretty evident who the key stakeholder in this project is going to be, the auto manufacturers. There are also other key stakeholder namely;-the financiers, the auto users /consumers, the government / local authorities and the parts or software developers and suppliers. These are the key groups of people critical to the success of this project and they have to be constantly kept informed and satisfied to ensure they continue staying on board with the project. One has to critically analysis the interests of each and every group of stake holders on the success or failure of the project. The financiers of this project have a clearer and more open interest on this project. Their main interest in the project is that it is able to meet both its short and long-term financial obligations. This will enable the project to repay its loans to its financiers in whatever form that it may have been agreed at the start of the project. This will in turn enable the financiers to balance out their books and clear out any toxic debts. The government/local authority is also a key stakeholder in such projects. The success of such a project in one’s area of jurisdiction can significantly raise the level of employment in the area, hence improving the economic well-being of the surrounding community, which is any governing politician’s dream. A successful project will also increase the taxes paid to the local authority’s coffers which will also enable it meet its obligation to its residents. Such a technologically intense project will most definitely enlist the services of software developers and various hi-tech part suppliers. This group of stake holders needs to be kept abreast with the demands of the market and expected volume of supply of the parts so as not to be caught off guard with unexpectedly large orders that can lead to faulty parts and programs being developed in a short time or low demand for parts that have been mass produced leading to losses on their part. This group is one of the most sensitive of all the stake holders since they can survive with or without your company’s orders by selling your parts’ designs to a competitor to your disadvantage. Their integrity is the key to the project’s success and long-term prospects in the industry hence the need for constant monitoring and reviews on this group. The large auto manufacturers that the project manages to partner with are integral in the success of the project. They expect good quality technology from the project to incorporate to their vehicles so as not to water down the hard-earned reputation they had before the partnership. There has to be constant communication and updating from both ends on what the other party is working on to enable compatibility of the vehicles and technology being developed. The last and probably one of the most important stake holders is/are the consumers. This group expects nothing short of good and safe technology to entrust their lives on while on the road. There has to be constant follow up on new technologies put out there and assessing of the customer feedback so as to get to know what if any are the flaws and how to improve the already satisfying customer experience. Reference List Dror E., &Jeroen, S. (2011). Better Place: Shifting Paradigms in the Automotive Industry. McGill University, Canada. Retrieved from http://www.oikos-international.org/academic/case-collection/free-cases. Read More