MOA Automotive Software - Case Study Example

Automotive software Institution Name Table of Contents Table of Contents 2 Introduction and background of project 3 Market analysis 3 Customers and customer development 4 Competition and positioning 5 Business model and Go-to-market philosophy 6 Conclusion 7 References 8 Introduction and background of project The project is automotive software for Ford Motor Company. The objective of the project is to offer the automotive industry innovative software, where frequent software updates will keep the car as new. Hence, consumers would need to spend a lot of money on a car they would expect to own for years. The software can identify the deals at close retailers and restaurants depending on the preferences of the driver. It also has sync capabilities that enable voice commands while simultaneously using audiobooks, GPS maps, as well as Pandora. The software has a lane-keeping aid that can alert a driver when the technology senses a lane change while there is no signal. It can also jolt the car back to its lane. This report consists of a market opportunity assessment (MOA) for the software. It presents investigation of the feasibility of the software and viability of commercialising it. Market analysis The software industry is targeted since it offers attractive growth opportunities for the project. This is specifically for the automotive software market, which is less concentrated. Ford is the sixth largest car manufacturer globally, and second in United States. This shows that the new software expected a large customer base and great opportunities for growth. Globally, the software market is estimated to have passed $265 billion in 2014. The market growth is expected to pass 6% each year, between 2014 and 2015, which would bring the market to nearly $357 billion. Statistics by Bureau of Economic Analysis indicates that 2013 was a strong year for the automotive industry, with new reported sales of up to 15.5 million units, which was an increase by over 1 million compared to the previous year and more than 5 million in 2009 during the global financial recession (MarketRealist, 2014). Use of software for home and business applications are currently leading in the industry with $64 billion. This accounts for some 25 percent of the overall software market, which covers application and system software. Automotive applications are yet to gain ground (Equifax, 2014). The software market is greatly globalised, which offers Ford’s software an opportunity for expansion, especially in the developing nations. Over the recent past, extensive consolidation has occurred in the software industry. Growth of revenue is hence assured for Ford in the industry. The economy of the United States heavily relies on business spending for software products. Still, the success of the companies in the industry is heavily reliant on marketing and technical expertise. While the new software firms compete by targeting the niche markets or innovating new technology, the large scale companies compete by acquisition of or forming alliances with the smaller firms. The software industry in the United States is concentrated, with the 50 largest firms generating some 70 percent of the revenues. The US automotive industry is highly innovative, with new R&D initiatives changing the industry to effectively changing demands of the 21st century (Equifax, 2014). Customers and customer development The target customers mainly include car owners aged between 20 and 45 years who are tech savvy, have high disposable income and who use Ford brand of automobile in the United States, as well as globally. Currently, Ford is the sixth largest car manufacturer globally. The third-quarter pretax earnings for 2012 showed Ford made a record of $2.2 billion, while more than 50 percent of Ford car owners alluded to the connectivity system as a key reason for purchasing the software. As indicated by a research Equifax (2014), more consumers are looking for energy-efficient cars such as hybrid and electric cars. Additionally, trends in the US show that people are holding to their cars longer. For instance, a study by R.L. Polk & Co. showed that consumers are holding their cars for longer by averagely 63.9 months in 2014, up by 4.5 months compared to 2013 (MarketRealist, 2014). Indeed, the auto accessories, including software market, is estimated to be a $32 billion dollar market, with additional statistics indicating 92 percent of car-owners are willing to buy auto accessories. Additionally, with the increased disposable income and car-owners holding their cars longer, auto accessories (such as software) is a sensible investment (MarketRealist, 2014). This is since, rather than spend thousands of dollars on new cars, they would only need to upgrade the software. Currently, customers do not have any next-gen software and rely on inbuilt features of their cars. The customers will be reached through integrated communication marketing tools, such as social media, automobile blogs, television, billboards and direct marketing strategies, such as emails and newspapers. Competition and positioning Ford's competitors, such as Toyota and GM, the main competitors in the United States, are likely to be tempted to serve the same customer needs in future. Still, General Motors, Honda and Chrysler, as well as Toyota have reported reduced demands and sales over the last three years (FranchiseHelp, 2014). Toyota's key advantage over Ford is that it produces more affordable cars. Additionally, it serves diverse customer needs by producing cars for the less affluent and for the affluent consumers. However, its major weakness is that it has a bad reputation for producing less quality cars, leading to persistent car recalls (FranchiseHelp, 2014). Its sales have however, been steady. The barriers of entry into the automobile software industry include the high initial cost required for research and development, car manufacturing and marketing. An additional barrier of entry is that the automobile industry is highly competitive. Still, to overcome the barriers, seeking strategic alliances with firms with already established brands that have high market power and already established manufacturing plans with sound research and development program can help overcome the barriers. For the software product to succeed, a distinct competitive advantage has to be built based on the Three Circles model proposed by Urbany and Davis (2007). In the first circle, the customer value has to be established. Customers in the automotive industry targeted with the software are likely to value multipurpose software that is easy to use and manage. The second circle represents the perception on how customers are likely to perceive the product. Customers are likely to perceive the product as highly innovative, relevant and inevitable. The third circle represents the views regarding how the customers would perceive competitor products. Customers are likely to perceive Toyota’s products, as low quality and mainly intended for low-income customers. Business model and Go-to-market philosophy As established from the above analysis, an opportunity for growth exists in the automobile industry. Still, turning the idea into a viability business opportunity is a critical concern. To ensure this, Ford would have to depend on its already established customer base, as well as by reaching out to the varied formerly prime consumers. The company will greatly depend on its loyal customer base, as well as customise its products to appeal to tech savvy customers. The software will be low-priced to avoid constraining budget-conscious customers. The software is expected to appeal to a wide customer base given its appeal to functionality and practicality. The company also needs to infiltrate the low-cost market segment in the emerging markets in order to consolidate the market share of the software and to continue gaining competitive edge over competitors. Brand positioning is therefore critical for success of the software. The strategy of concentrating on the entry-level segment will allow the company to increase its market share, as well as manufacture premium cars. Conclusion The automotive software industry offers Ford’s software an opportunity for expansion. More consumers are holding to their cars longer. More car-owners are also willing to buy auto accessories. Additionally, with the increased disposable income and car-owners holding their cars longer, auto accessories (such as software) is a sensible investment. Ford would have to depend on its already established customer base, as well as reach out to the varied prime consumers through brand positioning. The company also needs to infiltrate the low-cost market segment in the emerging markets. References Equifax 2014, US Automotive Market Outlook: Economic Outlook Commentary. Retrieved: FranchiseHelp (2014). Automotive Industry Analysis 2014 - Cost & Trends. Retrieved: MarketRealist. (2014). Why the global automobile industry matters for investors. Retrieved: Urbany, J. & Davis, J. (2007). Strategic Insight in Three Circles. harvad Business Review, 1-3 Read More