Better Place Company - Essay Example

? STRATEGIC MANAGEMENT ANALYSIS Topic: Better Place Company Mission Vision and Stakeholder Over the years the automobile industry has greatly adopted new changes that have contributed to the improvements in the forms of transport used. Better place is a company that was founded by Agassi in 2007 and its main focus is on transforming the automobile industry by promoting the adoption of Electric Vehicles (EVs). The headquarters of the company is located in Israel at the R&D center, at Palo Alto and also in California. The use of such vehicles will reduce the risks that are caused by the harmful emissions of carbon. It is as a result of this that most of the governments, organizations and businesses have prioritised the need for reducing the effects of carbon emissions. Mission. To be a company that is able to hasten the change in the automobile industry from the use of vehicles that are oil based and promote the adoption of vehicles that use electricity- renewable energy. Vision Better Place vision is to be able to create linkages among car companies, utilities, battery companies and also consumers in order to successful promote the adoption of EVs. Stakeholders Stakeholders in a company are mainly the people, groups or organizations that draw certain interest towards the business strategy of a company. Better Place Company is supported by majority stakeholders who have interest in the product that is being generated by the company (Johnson, p153). Stakeholder’s expectations are a major concern that the manager of Better Place had to deal with due to the fact that the success of the adoption of the Electric Vehicles depended on the decisions that were made by the stakeholders. Being an automobile company Better Place stakeholders include car companies, automobile manufacturers, governments, utility companies, battery manufacturers, investors and potential consumers for the Electric Vehicles. Better Place stakeholders can be classified into three groups (Johnson, p155): Technological stakeholders-This group of stakeholders involve the competitors that bring up new technologies with an aim of making improvements in the standards of the industry. Economic stakeholders-They involve the competitors, the suppliers and the manufacturers. In the case of the company it involves the car companies, automobile manufacturers and the battery manufacturers. Socio/political stakeholders-such stakeholders include governments as well as various agencies that are interested in the business strategy of the company. The rollout strategy of Better Place was adopted by various governments such as Japan, Australia, Hawaii, Toronto, Israel and Canada. Despite the go ahead by most stakeholders Better place faced a number of challenges while trying to affect the use of their business model. The first challenge focussed on the company’s reputation: Better Place lacked a convincing marketing strategy and as a result it was quite hard for consumers to adopt its product. The other challenge was focused on the company trying to convince the various stakeholders that the adoption of the EVs as a mode of transport that would be viable. The figure below shows the stakeholder mapping of the power/interest matrix: The customers in segment B are those that are largely supportive of Better Place business strategy. Customers in segment C are those that are hostile and the customers in segment D are those that are indifferent. The investors, car companies and the government in segment D are of major importance to the company due to the fact that acceptability of the strategy depends solely on them and thus they hold the highest power as the key players. Utility Companies also hold vital role as key players for instance governments were offering rebates imposed on tax on the electric vehicles in order to achieve renewable energy objectives. Manufacturers of batteries and automobile in segment B play the role of ensuring there are adequate supplies of the components required by the EVs. Industry and scenario Analyses The automobile industry has made great advancements in technology over the years. The use of the Electric Vehicles came into being in the 19th century with its first invention based on a steam powered engine. Better Place made improvements in the electric car sector in 2007 by improving the battery technology, electric technology and motor technology based on previous EVs inventions (Schoemaker, p14). Based on scenarios that focus on cost advantage as well as differentiation Better Place has been able to create a positive impact with regard to the reduction of carbon emissions thus creating a more environmental friendly mode of transport. However, it cannot be predicted what should be expected with regards to the future of Electric Vehicles. Factors that have geared up the adoption of change in Better Place Company rely on cost cutting, production, innovation, globalisation, global sourcing as well as many more factors (Fressynet, p8). Scenarios that have greatly impacted on Better Place business model focus mostly on the cost as well as its nature of requiring service after short distances. The first scenario looks at the adoption of the EVs with regards to the build-up cost of the vehicles which is quite expensive. This scenario can be addressed in the future by adopting raw materials that are cost friendly thus making it easier for Better Place to make a profit as a result of an increase in the sales of the EVs. The second scenario focuses on the charging issue of the cars due to the fact that a driver cannot travel long distances without the battery being charged occasionally. Better place has addresses this issue by implementing charging infrastructure that have two main components that is a recharging spot and charging station. An application of Porter’s five forces in the Company is illustrated below (Porter, p4): 1. The buyer power- This force mainly focuses on factors such as buyer volume, buyer information, buyer switching cost, bargaining leverage and buyer price sensitivity. In the case of Better Place Company being able to identify the buyer’s needs and the relevant services is essential in order for them to retain their customers. The rollout strategy introduced by the company was aimed at retaining the customers. Another factor that made Better Place to retain and attract more customers was the media coverage that they received and as a result of this the buyer power was high. 2. The supplier power-This focuses on the cost that is relative to the selling price, the significance of the supplier volume and the supplier concentration. The control of the suppliers with regards to the car industry is the main focus of this force. When it comes to the issue of pricing a product the suppliers are the main decision makers. In order to increase the adoption of the EVs Better Place required the services of various stakeholders. For example, Toyota Company steered up a project to install twenty solar powered stations in order to cater for PHEVs and EVs. Tesla Motors also were aimed at implementing the services of recharging stations at the roofs of their customers to enable easier access of clean electricity source. Better place made sure it had partnered with car companies like Toyota and batteries manufacturers like Hitachi in order to increase its supplier power ability. 3. Competitive rivalry-This force focuses on differentiation, exit barriers, size of competitors, and the number of competitors as well as the industry growth rate. Dependence of the competitors that exist in the market is the main objective of the competitive rivalry. If there are many competitors in the market the possibility of the attractiveness of the market getting lowered is quite high. Better place was faced with a lot of direct competition from various car companies, battery manufactures as well as automobile manufacturers that were producing various components of the EVs. Japanese Industry focused on being reliable and efficient to its customers. The production of the vehicles in their automobile workshops was of high quality and most importantly their vehicles were of low cost. On top of all this Japanese manufacturers like the Toyota were producing their vehicles at a faster rate. Better Place began to lose the attractiveness it had gained in the market. 4. Threats of substitution-This force focuses on the product differentiation, the buyer switching cost as well as the buyer propensity to substitute. If there is a slight change in price of a product the buyer might change the supplier. Saft partnership together with Johnson Controls developed cobalt, lithium, and aluminium and nickel chemistry to be used by the Mercedes-Benz. Hitachi, Samsung, AESC and LG Chem also began capitalizing on batteries made of manganese thus attracting the attention of car companies like the General Motors (GM). Reason for this was the fact that the prices for their products were friendly and resources that were used were quite effective. Regardless of the fact that Better Place were using batteries that were ion based with a life span of up to 8 years there emerged other designs that offered better life spans, weights, price points as well as energy densities (Grundy, p213). 5. Threat of new entry-This force focuses on factors such as capital requirements, the learning curve, economies of scale, switching cost and patents. With regards to Better Place the demand for the battery manufacturers, automobile manufacturers and car companies quite high. Nevertheless, many of the competitors that are in the car industry have already themselves. This is through relevant marketing strategies that aim to attract more customers. Companies such as Toyota aimed at catering for its customers through the introduction of solar powered charging stations. Profitable markets are surely prone to adapt the possibility of receiving new entrants and as a result Better Place has made investments on its technology that have impacted on new competitors as well as existing ones (Grundy, p215). The five forces of Porter are well illustrated using the figure below: Resources and Capabilities Resources in a company consist of the assets available, capabilities, attributes, processes as well as information and knowledge that are well regulated by the company to ensure that efficiency and effectiveness of the product can be seen (Grant, p117). Better Place resources and capabilities are best illustrated using the figure below that shows the steps involved in a resource based theory approach towards strategic analysis: Better Place resources and capabilities The company’s resources can be classified into tangible resources and intangible resources. Tangible resources Equipment and raw materials Financial resources Organizational abilities- structures and processes Human abilities- knowledge and skills Better Place recharging infrastructure was implemented based on the emphasis of using various raw materials as well as equipment and other resources in establishing the charging spots and the switching stations. The intangible resources include: Innovation abilities-facilities and employee skills Technological resources-knowledge Reputation-Stakeholders reputation. With regards to Better Place marketing strategy it was not that convincing in attracting more potential stakeholders and thus the company’s reputation was low. Better Place through the administration of the recharging infrastructure services is able to work on being the best competitor to beat in the automobile industry. Appraising the firms resources and capabilities Better place is able to gain a competitive advantage in the market due to the fact that its solution of introducing the charging spots and switching station is quite effective and efficient. The challenge of this infrastructure is that it focuses on the factors of differentiation and cost cutting. Differentiation focuses on service while cost cutting focuses on the cost of raw materials and the labour force. The aim of Better Place with regards to its resources and capabilities is to ensure that there is production of EVs that aim at transforming the transport sector (Barney, p103). Developing Strategy and Implications Better Place experiences strength and weaknesses that have helped it to grow in the automobile industry. Utility companies have been a source of strength that has enabled the company to be able to roll out its strategy. Weaknesses that have faced the company are based on the cost of the equipment and materials used for the EVs as well as differentiation. Business and corporation strategies Better Place corporation strategies with regards to Porter’s five forces theory rely on differentiation as its main factor in gaining a competitive advantage in the car industry. Differentiation-in order for Better Place to increase its level of reputation in the competitive market, it came up with the rollout business strategy so as to market its product effectively. Media coverage was the main factor that made the reputation of the company to be strengthened. As a result of this many potential customers became aware of the use of the Electric Vehicles. A strategic drift was experienced by the company and thus it was over powered by the many changes that had been introduced in the company. Better Place corporate strategies were changing incrementally due to emphasis on various historical as well cultural influences. It is due to this fact that the company was unable to cope with the changes in the environment (Johnson, p187). The figure below show the phases that Better place faced with regards to the strategic drift: 1. Phase 1 focuses on incremental change. With regards to Better Place the change drastically occurred due to the fact that EVs were adopted with emphasis on the historic and cultural influence. 2. Phase 2 refers to the strategic drift that adopted an incremental change direction with regards to Better Place. 3. Phase 3 is the period of flux. Better Place faced a couple of strategies that impacted negatively on the management of the company for instance the introduction of a new CEO. This strategy had direction that was not clear. 4. Phase 4 focuses on transformational change. This may occur in the case of a possible change in the market as well as a takeover by a competing company. References Barney, J. B. (1991). Firm resources and sustained competitive advantage. Freyssnet, M. (2009). The second automobile revolution: trajectories of the world carmakers in the 21st century. Basingstoke, Palgrave Macmillan. Grant, R, M.(2001).The Resource Based Theory of Competitive Advantage: Implications for Strategy Formulation Grundy,T.(2006). Rethinkimg and reinventintimg Michael’s porter five forces model.Strategic change 15(5)213-219. Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy. Harlow, Financial Times Prentice Hall. Porter, M.(2008) The Five Competitive Forces That Shape Strategy. Harvard Business Review. Schoemaker, P. J. H. (1989). When and how to use scenario planning. Chicago, Center for Decision Research, Graduate School of Business, University of Chicago. Read More