Strategic Management Analysis Based on Case Study - Essay Example

?Better Place Company I. Mission, vision and stakeholders Mission The Better Place Company was opened by Shai Agassi in the year 2009 with a view to make the world a better place by 2020. The company has its headquarters in Palo Alto, California and an R&D center in Israel. The company was launched with the vision to establish connection between car companies, battery companies, utilities and consumers. The company’s mission is to diminish and ultimately eliminate the requirement of oil in the automobile industry. Therefore, the company focuses on manufacturing of electric cars that are run by chargeable batteries. This mechanism gets rid of greenhouse gas emission from the vehicle’s engine. For this purpose, Better Place strives to create a global market for electric cars. In order to fulfill its mission of making automobile industry independent of oil consumption, Better Place focuses on re-engineering its car’s model instead of re-engineering the battery. This is in contrast to PSA which is a European automobile firm. PSA’s focus, under the chairmanship of Jacques Calvet, was on using different batteries like cadmium-nickel batteries or lithium-ion batteries to improve the functioning of electric cars so as to capture the commercial market. Their attempts failed to yield positive results (Freyssenet, 2009, p.252). Better Place’s mission is to make electric cars convenient in every way, and also to make them affordable for commercial customers. Vision Shai Agassi opened his company Better Place with the vision to make the world a better place. For this, his goal was to reduce or eliminate a country’s dependence on oil consumption especially with regard to transportation. He was known as an environmental visionary, and although his dream seemed apparently not practical, he was however determined to make a world that will not be relying on oil (Better Place: Charging into the Future? 2010, p.1). The company’s vision is to become one of the most valuable automotive companies in the world. For this the need is to design and manufacture electric vehicles in economic and user friendly manner so as to attract the most loyal customers of the industry. Stakeholders Better Place strives to hold a valuable place for its suppliers and dealers by becoming their most profitable business partner. For employees, the company intends to provide a safe, sound and motivational workplace. For investors, the company strives to become a long term and sustainable profitable venture. Finally, the company’s loyalty lies with its loyal and enthusiastic customers who expect continuous growth and improvement in everything the company does including designing of the cars to durability to after service after sale. For this, Better Place promotes technologies that are most convenient for customers. According to Better Place smart grids which are reliable and safe technologies for charging and billing of EVs “reduce CO? by charging EVs intelligently and at the same time making it easy for EV owners to charge vehicles during off-peak hours” (European Strategy...., 2010, pp.2-3). Power/interest grid for stakeholders High Power Keep satisfied Shareholders Car manufacturer Government officials Banks Manage closely Customers Insurance company Employees Suppliers and dealers Low Power Monitor Public authorities Automotive supplier Infrastructure supplier Keep informed Road operator Service provider II. Industry and Scenario Analysis Bargaining power of buyers In order to understand the standing of Better Place in the automobile industry, it is necessary to study the Porter’s five forces analysis. The electric cars are seen as solution to vehicle induced air pollution. However, there are many drawbacks attached to electric cars like limited mobility and speed, need of charging battery failure of which can cause power disruption, costlier than conventional cars etc (Cheron & Zins, 1996, p.1). The buyers have little advantage regarding electric cars, since they do not have the option to switch between multiple brands. Better Place strives towards capturing the market of personal transportation. However, technological obstacles do not give the buyers the bargaining power. Moreover, unlike other firms for EVs that emphasize on modifying battery technology, Better Place focuses on re-engineering the structure of cars to make them more battery friendly. This gives the firm a hold on the buyers compared to other firms. Bargaining power of sellers Although Better Place buys batteries, it restructures its cars’ models to make them more compatible with batteries. Therefore suppliers do not have much bargaining power. Moreover, in the automobile industry bargaining power of suppliers is very low. This is because a car has many manufacturing parts, and so there needs to be large number of suppliers. This reduces the bargaining power of suppliers because Better Place can easily shift between suppliers (Ahlstrom & Burton, 2009, p.133). Threat of new entrants The threat of new entrants is much less in automobile industry as compared to other industries. This is because it necessitates huge investments and therefore only those investors with large volumes of capital can think of establishing an automobile firm. Moreover, electric vehicles are yet to capture the consumer market because of its technological hurdles and high costs. Moreover, in the automobile industry established brands have market power and it takes long time and high costs to make a new brand acceptable to the customers. Moreover, the firm Better Place like any other established automobile firm has its own distribution channels, and for new entrants it is difficult to use established distribution channels (Li & Sun, 2011, p.26). Therefore, Better Place faces less threat from new entrants. Threat of substitutes The threat of substitutes is substantial in the automobile industry. This is because consumers have the easy option to switch to public transport like bus, trains, cabs etc if price of gas, diesel or petroleum goes up higher than usual. Electric vehicle is the latest in car technology that promises environment friendly performance as it runs on battery. The battery needs to be charged which makes the vehicles have limited speed and mobility. This is one major reason why EVs are not gaining as much foothold in the consumer market as expected. Companies like Better Place and General Motors were benefited from high number of EV production and therefore succeeded in offering electric cars to a lower price in the market. The demand pattern in automobile industry is essentially driven by price elasticity and if Better Place continues to provide electric cars at affordable prices, then it can diminish the threat of substitutes (Five Forces analysis in the auto industry, 2009, p.6). Rivalry within industry To survive in automobile industry, Better Place focuses on discipline and innovations. The company designs cars that can be sold separately without batteries, thus making their costs at par with gasoline-powered ICE (internal combustion engine). The firm that succeeds in investing more on sustaining customers is the winner in the industry. III. Resources and capabilities In order to make electric cars viable, it is required that charging spots be established in regular intervals in important locations like train stations, malls, offices, grocery stores, parking lots and even along sidewalks (Etzion & Struben, 2011, p.6). More advantageous is that drivers should be allowed to have their own charging spots at home for an affordable charge. Better Place focused on installing a large number of charge spots as they fulfill the customers’ demand for energy needed for their electric car batteries. Another option which is switching stations use robotic arms to make automatic replacement of batteries with no charge with fully charged ones (Etzion & Struben, 2011, p.6). Better Place installed 100 switching stations in each of its primary launch stations. Lastly, electric cars have computers installed in them that can track the time before battery will need to be recharged, and also how far the next switching station is. Moreover, these computers can convey driving patterns to ERGO (Electric Recharge Grid Operator) that will help ERGO to prioritize cars in case of electric shortage. In case of electric cars, one major criticism is that greenhouse gas emissions have not been reduced in any kind since the emissions have merely been transferred from car engines to facilities that generate huge volumes of energy by converting coal into electricity (Etzion & Struben, 2011, p.7). Therefore, to fulfill its vision of making the world a better place, the company needs to use energy source that is renewable, and Better Place strives to purchase only clean electrons that arrive from renewable sources. Since Better Place has high demand for energy since it produces electric cars therefore it has the advantage of buying electricity at wholesale prices. Therefore, when production of renewable energy will be increased to meet the high demands of automobile industry, then driving cost of an EV can be less than or equal to the driving cost of a gasoline-powered ICE. However, even though Shai Agassi had in place the car models that would make a major impact on the automobile and transportation industry, there were other stakeholders of the industry including governments and auto manufacturers who were developing other processes to give new dimensions to transportation. So, Better Place needs to make appropriate strategies that will make best use of the company’s resources and capabilities with relation to external opportunities. For any firm, its resources and capabilities are more or less constant, and these are the elements that need to be studied before arriving at any strategy. These elements create identity of the firm and also are major sources of profitability. The strategies need to be designed in the manner that will make maximum exploitation of all the elements of a firm. The need is to establish relationship between “resources, capabilities, competitive advantage, and profitability” (Grant, 2001, p.133). Competitive advantages There are various advantages attached to electric cars. Firstly, yearly running costs can be reduced. Secondly, since drivers are allowed to have own charging spots at home, therefore there is the convenience of overnight charging thus saving battery charging time during driving. Thirdly, charging points are installed at every convenient area. Fourthly, battery installed cars do not emit greenhouse gases like ICE vehicles. However, Better Place has realized that a solution to transportation cannot be achieved merely by providing electric vehicles since competitive firms are forming alternative recharging infrastructures. Therefore, Better Place promotes international standards to be adhered to by utilities, car manufacturers and battery developers. Porter’s value chain: Better Place SUPPORT ACTIVITIES Integration of the value chain Global communication Staff appraisal and performance management Staff recruitment and retention Technology linked manufacturing and sales Integrated technology managed design Database management and IT controlled purchasing of parts and sub-assemblies Supply chain integration and coordination Accounting management and financial filings like taxes and annual reports Transportation of finished products Inbound logistics Purchasing of components Supply chain management Plant capacity management Operations Design and product development Different levels of manufacturing Quality control Order fulfillment Customer visit Outbound logistics Distribution, coordination and support Dealer relationships and management On time delivery Inventory management Marketing and sales Market research Advertising Pricing Promotion Service Warranty and car servicing management Recycling parts Customer call center Customer survey PRIMARY ACTIVITIES IV. Business and corporation strategies Shai Agassi who is the founder of Better Place Company created a coordination chain between car companies, battery companies, utilities and consumers so as to spread the popularity of EVs around the globe in order to capture the international market (Etzion & Struben, 2011, p.5). Better Place redesigned its car models so as to make them compatible with chargeable batteries, but also can be sold separately without the battery. This strategy helped the company to capture the market of both electric cars and also the usual market of gasoline-powered ICE. This is because, when the company’s model cars are sold without implementing batteries, then the costs of the cars become equal to an ICE vehicle. During the course of purchase, the buyer has the option to apply for a service plan with the company or else with a competing ERGO. The service plan or ERGO can provide services required for a battery implemented electric cars. This strategy eliminates some price burden from the shoulders of the customers since according to this strategy the battery needs to be purchased by ERGO and not the buyer. There are also opportunities for reducing cost. For instance, when production of renewable energy will be able to satisfy the growing demand in the automobile industry, then cost of EVs can be reduced and brought to the level of ICE vehicle costs. The one advantage of electric vehicles is the strategy of differentiation. This provides an added advantage for Better Place (Johnson et al., 2008, p.236). By focusing on re-engineering car model, the firm has been able to establish a distinct brand of electric cars. This gives the customers scope to make proper decision while buying EVs. However, competition arose for Better Place around components of electric cars. Better Place produces car batteries especially lithium ion batteries with a possible span of life for 8 years (Etzion & Struben, 2011, p.12). However, other battery manufacturers offer several different designs with competitive prices, energy densities, weights and life spans. 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