Green Propulsion - Strategic Position of the Company Relative to Industry Forces - Case Study Example

Green Propulsion: Is Small Beautiful? Green Propulsion: Is Small Beautiful? Discuss only the most relevant segments from the general environment and explain how they impact the industry and/or the firm. There are many forces that operate in the business environment which impact the operations of the industry as well as the firm. These forces can be categorized into political-legal factors, economic factors, social-cultural factors, technological factors, environmental factors and global factors. Of these, the environmental factors and technological factors appear to have a monumental impact on the hybrid car industry. The genesis of the hybrid car industry can be traced to the depletion of finite natural resources and the general plundering of the environment. The increase in emission of greenhouse gases and the resultant global warming has provided the impetus to design and manufacture automobiles that are energy efficient. While the U.S. and Japanese companies had taken the lead in developing energy efficient vehicles, countries like China also jumped into the fray in 2010. Now China intends to become one of the chief producers of hybrid and all-electric vehicles in the coming years. The European Union (EU) automobile industry has invested heavily in R&D and is in pursuit to roll out innovative hybrid vehicles. One of the key targets of leading car manufacturers is the production of lithium-ion batteries. The lithium-ion batteries weigh less and have the potency to store more power than the current batteries used in hybrid vehicles. The challenge for automobile manufacturers is to develop the state-of-the-art technology and reign in cost at the same time. The company that develops cutting edge technology is bound to dominate the industry in the future. Green Propulsion (GP) has created a new company called Imperia sensing the opportunity thrown open by these dominant general environment forces. The company intends to launch a hybrid roadster in Belgium and cash in on the opportunity put forth by the dynamic business environment. Evaluate the industry. How attractive is the industry and to whom? What is the strategic position of the company relative to industry forces? The hybrid car industry is bound to see tremendous growth in the future. The various stakeholders of the industry include the companies, customers, government as well as the environment. The attractiveness of the industry can be gauged by analyzing the five dimensions of the Michael Porter’s Framework. The Intensity of Rivalry among Competitors The key players in the hybrid car industry are Japanese behemoths Toyota and Honda. Chinese companies like BYD, Chery Automobile Co and Geeley have demonstrated serious intent to become dominant players in the industry. General Motors, Chevrolet and Tesla have their own brands of hybrid vehicles. The intensity of rivalry in the industry is thus moderately high. The Threat of New Entrants The threat of new entrants in the hybrid car industry is high given the unanimous belief that such technologies will rule the roost in the future. The governments of various countries have played a key role in the development of the hybrid car industry. The Chinese government urged the states to adopt ‘green’ transportation measures. The governments of US, Japan and European countries offer tax break and subsidies and thus induce new players to enter the industry. The high cost of R&D may however pose as a deterrent to the new players. The Power of Suppliers The power of suppliers can said to be moderate as most of the components of a hybrid car are the same as used in conventional cars that run on gasoline. The difference arises on account of installing the rechargeable system in addition to the traditional combustion system. Suppliers of such systems and associated components enjoy high bargaining power, at least as of now. The Power of Buyers The hybrid cars are priced considerably higher than the conventional cars. The government generally offers substantial subsidies on such automobiles to enable consumers buy such automobiles. Since the buyers have numerous options to choose from, their bargaining power is high. The Threat of Product Substitutes Companies have invested heavily in R&D to develop cutting edge technologies. Automobiles driven by fuel cells, natural gas and electric batteries are possible substitutes. At present hybrids, milder hybrids, plug-in hybrids are the types of hybrid cars available in the market. The technology for the electric car is at a nascent stage in various automobile companies. With passage of time, development of alternative fuels and advancements in technology will increase the threat of substitutes. Strategic Position: Green Propulsion (GP) GP has already developed a hybrid motorization system. The company has got the technology patented under the name of ‘PowerHybrid’. GP’s proposed launch of a hybrid roaster in Belgium is a case of forward vertical integration. GP already develops prototypes for third parties and carries out various test bench activities with regard to electric motors, batteries, and hybrid motorization. The company has the requisite wherewithal and is in a good strategic position to make inroads in the hybrid car market. Discuss the performance of the firm and any other outcomes. GP was founded in December 2001 as a co-operative limited company. The company commenced operations with an initial capitalization of €44,000 with each of the three founders contributing 24 percent. The ensuing discussion highlights the various aspects that point to the robust performance of GP. Financial Condition The company’s financial health is pretty good. In 2009, the company had current assets of € 695,794 up from € 584,840 in 2008. The company’s capital and reserves stood at €280,791 in 2009. GP’s operating profit was a healthy € 125,798 during the same period. The company’s turnover has also risen considerably from € 506, 944 in 2007 to €1,630,227 in 2009. GP is however finding it difficult to attract investors for its Imperia project. Survival Instinct GP is a small and medium scale enterprise but has learnt to deal with big challenges. In 2006, it confronted a major problem when one of the buses in which the company had installed an electric battery caught fire. GP showed tremendous resilience and managed to maintain trust of all its clients. The company inculcated the ‘survival instinct’ due to the faith in its capabilities and flexibility of its founders. Organizational Culture The success of GP can be attributed to the shared ethical values of its founders and staff members. The employees get together every Friday afternoon for an informal get-together. These get-togethers have been instrumental in creating camaraderie amongst the employees. The company has created an organizational culture where ethics and values take precedence over profit maximization. The company refuses contracts and projects if they contravene the basic values of the founders. GP is thus ‘doing well’ while ‘doing good’ for the society as a whole. The company is committed to adopting ‘green technologies and green business processes.’ Does the company posses any core competencies? The three founders of GP; Yves Toussaint, Nicholas Naniot and Bernard Loly are highly qualified and experienced. All of them acquired implicit knowledge during their respective research stints. The experience and know-how of these founders is the core competency of GP. Toussaint, Naniot and Loly are so proficient that they can juggle with multiple projects. At the same time they demonstrate tremendous flexibility at work. GP has been able to gain competitive advantage because it has, through its founders and other employees, acquired complementary and integrated competencies especially in the fields of simulation, mechanical engineering, electronics and Information Technology. VRIO Framework Valuable The knowledge acquired by the founders of GP has enabled the company successfully carry out its business during the last decade. The company has set up a dedicated department to carry out high-performance testing. It has the requisite expertise and the desired flexibility to fine-tune its technical know-how as per the needs of the clients. The capability has thus helped GP generate valuable business Rare While human resources and their skills and knowledge may not be rare, the implicit knowledge of human resources is definitely a rare capability. Most multinationals hire professionals for various tasks. The founding members are generally not involved in the day-to-day functioning of the organization. This is however not the case with GP. The founders are passionate about their work and are instrumental in the success of the company. Costly-to-Imitate The experience and technical know-how that the founders of GP possess is costly for competitors to imitate. The competitors may have the financial resources to hire people with the same set of qualifications and experience; however they may find it difficult to find people who have passion, zeal and zest for work. Organized to Be Exploited GP uses the experience and technical know-how of its founders to the maximum possible extent. The founders have retained full decision making powers ever since the company was founded. They do not intend to relinquish their control in the future. The organization is lean and flat. The employees repose full faith in the founders and the relationships within the organization are based on trust. What is the strategy of the firm? Corporate Level Strategy Over the years, GP has grown even though there was no clear strategy for growth. The Imperia project indicates that the company is poised for further growth. Technological advances and the quest for environmental friendly fuels bode well for GP. The company is working on developing an electric mobike, electric and hybrid Microbus, a hybrid city bus and a hybrid Renault Kangoo van. The projects that are currently in the pipeline will fuel the future growth at GP. Business Level Strategy GP has adopted the business level strategy of differentiation. The Imperia GP is positioned as ‘the perfect marriage between electric and thermal’. Its various features like the ‘EcoMax’ configuration are bound to attract the consumers. GP will target a niche segment that is interested in buying a beautiful car and at the same time is concerned about the environment. Since the target market is small, the production will be a maximum of 200 units per year. What is your recommendation? Problem Statement Toussaint is the only founder member working full-time at GP. His importance to the organization can be gauged from the fact that he is the ‘go-to’ man when it comes to meeting clients and negotiating contracts. He is instrumental in finding new ideas and developing new technologies. Toussaint has been instrumental in creating an organizational climate where ‘profit-maximization’ is not the be-all, end-all of business. GP essentially has a R&D focus. The proposed plant where Imperia GP would be produced will however require a manufacturing focus. The second main issue is with the hybrid roaster. There appears to be a contradiction between a swanky sports car and ecological values; attributes that are present in Imperia GP. Thus leadership at the company and positioning of the product are two problems that GP needs to address. Recommendations It is recommended that Toussaint, in his current capacity as the CEO, also looks into the day to day functioning of Imperia, at least till such time that the company encounters teething troubles. At the same time, Gilles should be groomed to take over the complete charge of Imperia. The focus at Imperia should be quality control and profit maximization. Toussaint will have to play the balancing act wherein he encourages his team at GP while remaining glued to the original values at beliefs. On the other hand, Imperia will have to be run on the profit maximization orientation. After all, Imperia will compete with hundreds of other niche car manufacturers who do not thrive on volumes but flourish purely by satisfying the needs of a small segment in a superior manner. The second problem can be overcome by advertising heavily and increasing the believability quotient of the consumers. Actual product demonstrations to the target market will help cement the belief that Imperia GP is genuinely a beautiful sports car that minimizes environmental plundering. Read More