Strategic Management Analysis - Better Place - Essay Example

? Strategic Management Analysis Introduction Better Place, a start-up company, is changing its transportationmode from relying on the combustion engine that is internally destructive to electric power derived from renewable materials. As a way of overcoming the current technology limitations as well as making use of the shelf hardware, the company is extensively distributing infrastructure to offer opportunities on ubiquitous charging so as to meet the driver requirements (Roth, 2009.p.97-101). This kind of transformation has led to Better Place establishing a paradigm shift; whereby in the business model, sales are shifted from products to services. Mission and Vision The company’s mission is to reduce the social and environmental impacts in relying on petroleum by the transportation sector. The Better Place case highlights the automotive industry history in brief offers an overview of numerous automotive technologies such as hybrids and demonstrates consequences brought forth by its expansion (Romero, 2009: p.155-159). Industry Analysis The Better Place case highlights numerous aspects of the company, its shortcomings and advantages. It as well examines the rollout strategy of the company, which is an entrepreneurial that is trying to expand and grow globally at a quick pace. Its key challenges include a complex business model on the economy particularly on the wide upfront investments that are dispersed in various locations internationally, how infrastructure is coordinated, how consumers can be convinced to switch to electric cars as well as ways of convincing automotive producers that EVs are a better option. Porter’s five Porter’s five looks at the five forces that act on Better Place Company and are the determinants of the company’s profitability. 1. Threats of new entrants This is a low threat in Better Place Company being in the automobile industry. Factors that determine this threat include barriers which include brand equity whereby new firms may not have any ability in product distribution. This can result to a firm closing down due to inability to establish a dealer network. Other factors include capital requirements as it costs a huge amount to set up a manufacturing center, as well as government and legislation policy such as emissions and safety policies (Pickard, 2010.p.77-79). 2. Bargaining power of buyers Buyers always bargain before buying cars, and so dealers gives out great deals to the buyers so as to move the industry. In this case, the buyers usually have a considerable bargaining power even if they purchase a single car at any given time which is a good factor that determines this force. 3. Threat of substitute products When buyers look at other products compared to those of Better Place, as well as competition, and are able to switch with ease, then the company can have a high threat of force. This is because the cost of switching can be high as one cannot sell a car for the sum paid for. In the differentiation of product, cars could be particularly similar in various ways but if choosing the amphibious cars, the threat of substitute products can be of low. 4. The bargaining power of suppliers This involves suppliers of electronics, parts, components and tires as well as the assembly workers. The auto unions are powerful in a tremendous way. On the other hand, suppliers can be of small firms who often depend on carmakers and can have a single carmaker as a customer. Therefore, this force can be either low or high. 5. Competitive rivalry Better Place is a company that has a fierce competition in terms of price cut, product development and ad campaigns, which drives it to the profitability and innovation edge. This leads to low margins and a high pressure on rivals. However, if there is less pressure from rivals, the pressure on imports becomes high although there will be a difference in profitability because the business models will vary (Pickard, 2010.p.125). Sources and Capabilities SWOT Analysis of Better Place a. Strengths Having a strong position in the market- being a huge dealer in the US, Better Place Company has a magnificent reputation globally as well as strong commercial sales that have turned out to be profitable. The company’s economic initiative has produced engines that are highly fuel-efficient and this has created improved fuel consumption for most vehicles. The company has a commendable financial performance as its profit margin in comparison to its competitors is high. The company has made efforts to reduce environment pollution. b. Weaknesses Better Place has a structure of high cost in comparison to other similar companies in the automobile industry. The company has had unprofitable operations, which have incurred losses in the past years. c. Opportunities The company has created a positive approach towards green cars. This is because vehicles that emit huge amounts of carbon dioxide, and are not fuel efficient pollute the environment, and consumers being aware of this vice are looking forward to buying fuel efficient vehicles that produce less carbon dioxide. Having had a significant emphasis on engineering hybrid engines and cars that are fuel efficient, this will result to a pay off as the fuel prices increase. The company is likely to be affected positively with new regulations on emission standards in the automobile industry (Slavin, 2009.p.213). Better Place Company has a magnificent way of creating partnerships and alliances with other companies in the automotive industries. Due to the current pressure by rivals, many companies are likely to indulge in such partnerships so as to cut down costs, gain better and new skills as well as be able to enter new markets. d. Threats If prices on fuel drop, Better Place Company, would be affected negatively as its main focus is on flexible hybrid cars that are fuel efficient and less attractive if the fuel prices are low. The prices of raw metals when high can lead to lifting of costs for Better Place Company, and this can lead to profits being squeezed. The company is faced with an intense completion from various auto manufacturers especially in cars that have hybrid engines. Value Chain Analysis Primary activities i. Inbound logistics- Better Place Company purchases its raw worldwide, and as a way of making their materials readily available, the company maintains a good relationship with its suppliers. ii. Operations- the Company has an assembly line where it manufactures and organizes parts that make car engines. Better Place also is reliable for its efficient operations. iii. Outbound logistics- Better Place manages its own distributions to various countries and it ensures that its products can be easily accessed (Woody, 2009.p.332). iv. Marketing and sales- Better Place ensures that it meets its customers’ needs by focusing mainly on communications, marketing and promotion. v. Service- Better Place values its customers hence, it ensures that its services are efficient including final checking, training, handling, after sales and so on. Support Activities i. Procurement- The aim of Better Place Company is to secure prices at their lowest when purchases are made. It becomes responsible when outsourcing and purchasing. ii. Technology development- the company innovates so as to sustain and protect competitive advantages as well as minimize costs. It has implemented marketing activities in the internet, production technology and other numerous technology developments. iii. Human Resource Management- the Company manages development, training, recruitment, rewards, election and remuneration. It considers its workers as human capital. iv. Firm infrastructure- the activity is driven by strategic and corporate planning. Better Place Company has established management information system as a mechanism to control and plan various departments. Business and Corporate Strategies There are numerous strategies that can be used by Better Place Company including market penetration, development, liquidation and implementation. The company can initiate product improvement as a priority by creating a kind of hybrid cars that will enable it to maintain the competition pace although it should stand out, as well. The market that Better place tries to approach should be re-evaluated as times are changing and the original market is getting rid of the traditional outlook. The company’s financial sector can be sorted out through liquidation, and this can be done by converting its assets to cash (Arif, 2012.p.15-17). This would increase the availability of funds, and therefore, the company would not depend on their sales in the US and this would also reduce the risk of its financial tactic. For Better Place, there are key business strategies that it can adopt and enhance its growth and survival in the businesses it operates. These are: a. A market penetration strategy. In this strategy, the best scenario to describe the case of Better Place is that in which it signs up with buyers for a service plan. In this, the company partners with other companies and ensures that the required energy for cars is adequately provided by the partner. As such, this implies that a market penetration strategy for the company would entail a re-engineering of the car and not the re-engineering of the batteries that are provided by the company. Through this, it will be possible to enhance the sale of the batteries as cars will always need them for locomotion. This is based on the vision of the company that will require drivers to sign up with ERGO and be provided with the electricity required. b. A market development strategy. The adoption of a market development strategy by this company in this case would imply that it successfully acquires technological means of production as well as expanding on its infrastructural network. Consequently, an improvement of the battery standards would greatly enhance the expansion of the market for the company. This is because by merely providing the customers would electric vehicles would not comprehensively satisfy their needs unless the same is accompanied by a transport or infrastructural solution that is coherent in the industry and for the benefit of the company. The successful attainment of this will enable the company fight off direct competition. c. Conglomerate diversification. As a strategy, conglomerate diversification ensures that the company examines its options and viability to vertically integrate with other companies. With this strategy, the company will also be required to electric vehicle market based on the increasing demand for such vehicles. The strategy also aids in the overcoming of challenges that might outweigh the supply-side of the industry (Hill & Jones, 2007.p.415). d. New products and services strategy. This final strategy may be referred to as the roll-out strategy for the company. In this, after determining the consumer demands and consciousness, the company can expand to other places such as neighboring islands. For instance, the case is known to be well practiced in the cities of Hawaii and San Francisco. With this, growth may be quite possible if appropriate networks are made and specifications in those new markets are found to be in line with specifications of Better Place Company (Hill & Jones, 2007.p.433). BIBLIOGRAPHY ARIF, MOHAMMED. (2012). General Motors Strategic Management. 08 Oct. 2012. http://www.slideshare.net/arifkk/general-motors-strategic-mangement HILL, C. W. L., & JONES, G. R. (2007). Strategic management: an integrated approach. Boston, Mass, Houghton Mifflin. PICKARD, JIM. (2010). “Electric Car Buyers to Receive Subsidy.” Financial Times, 25 Feb. 2010. [Accessed 2 Jan 2013] from http://www.ft.com/cms/s/0/3ccf8b9e-2168-11df-830e00144feab49a.html. ROMERO, FRANCES. (2011). A Brief History of the Electric Car. [Accessed 2 Jan 2013] from http://www.time.com/time/business/article/0,8599,1871282,00.html. ROTH, HAND & GOHLA-NEUDECKER, BODO. 2009. Analysis of Renewable Energy Power Demand for Specifically Charging EVs. Munich: Munich Technical University. SLAVIN, MATTHEW. (2009). “Portland may be Better Place down the road.” DJC Oregon, 15 Jul.2009 [Accessed 2 Jan 2013] from http://djcoregon.com/news/2009/07/15/portland-may-be-better-place-down-the-road. WOODY, TODD. (2013). Solar City makes electric cars an even smarter investment. [Accessed 2 Jan 2013] from http://www.grist.org/article/2009-10-05-solarcity-electric-vehicles-california. Read More