Assignment details: New Industry (Electric Vehicle) & Automotive Industry (Current)
1. Analyze Rivalry Among Existing Competitors
Intense competition for market share can limit a company’s profits when diversifying into a new industry. Consider these questions as you describe the rivalry in your company’s existing industry.
* How many competitors currently supply engines for the automotive manufacturing industry?
* What is each competitor’s position? How much of the market share has each one captured?
* Do these companies compete intensely in the automotive industry? If so, do they engage in rivalry and lower prices to gain market share?
* Do companies compete to provide additional services or constant innovation?
Describe the rivalry among your company’s existing competitors (supplying engines to the automotive manufacturing industry).
Examine Conflict Among Current Competitors When expanding into a new industry, a company’s profitability may be constrained by fierce rivalry for market share. As you discuss the competition in the current industry your firm is in, take into account these questions.
How many suppliers of engines are there today for the vehicle manufacturing industry?
Where does each rival stand? What percentage of the market has each one seized?
Do these businesses engage in fierce competition in the automobile sector? If so, do they compete with one another and cut costs to increase their market share?
Do businesses compete to offer more services or to innovate constantly? Describe the competition amongst the current rivals of your business (which provides engines to the car manufacturing industry).
Examine potential threats posed by new competitors Determine if it is simple or difficult for new businesses to start supplying engines to the car manufacturing sector. Then, use the form below to present your conclusions. Always keep the following questions in mind: Are there numerous laws or legal obstacles that businesses must overcome before they can start providing engines to the car manufacturing industry?
Does acquiring the knowledge required to create products or offer services to the market come at a significant cost?
How many businesses are ready to join the automotive sector? Describe the dangers posed by new competitors in the car manufacturing sector.
Examine the Suppliers’ Bargaining Power Analyze the potential influence raw material suppliers may have on pricing increases. Be careful to respond to these inquiries: Are there numerous suppliers, or just a select few, that offer the raw components for your product?
Does supplier competition influence the price of some raw materials? Is it probable that the price of raw materials will increase if one supplier effectively has a monopoly on certain of them? In general, how will supplier negotiating strength impact the price and simplicity of getting the materials required to sell in the automobile industry? Describe the car manufacturing industry’s suppliers’ negotiating position.
Examine the Risk of Replacing Products Analyze the danger posed by replacement items for the car sector. Make sure you respond to the following inquiries:
Are new items in this sector on the horizon that might challenge those already on the market?
What may these rival products be?
Are these potential rival products’ production costs lower than those of the market’s present offerings?
Are these potential rival items superior in other ways?
Could these potential rival items drive your business off the market? Describe the danger posed by alternative items for those made in the automobile sector.
Examine the Buyers’ Bargaining Power The more pressure customers may apply to your business to offer goods and services for less, the less customers you have. As you assess the negotiating capacity of purchasers, take into account the following: The number of organizations or consumer groups that now purchase the engines that your business produces for the automobile manufacturing sector. If there are just a few clients, are they able to exert pressure on the manufacturer to decrease the price of the goods. Exist any groups that allow a sizable consumer base to get together and exert pressure on a company to lower the price of its goods? Describe the buying power of the market in the production of automobiles. Describe the buying power of the market in the production of automobiles.
One of the most notable social trends affecting consumer behavior is the idea of going green. As climate change and environmental concerns increase in their seriousness and impact, consumers seek to buy green products that might help mitigate or combat the problem. In response, many companies are developing new green products—including electric cars. The first electric car actually was built in 1891, but it lost popularity when Henry Ford introduced the gas-powered Model T. Electric cars regained consumers’ interest as Toyota developed its Prius in the late 1990s. The original Prius actually was a hybrid, powered by both gas and electricity; its success prompted other companies such as Honda, General Motors (GM), Ford, and Chevrolet to innovate their own hybrid models, as well as some all-electric versions. By the early 2000s, though, all the major automakers had terminated their all-electric programs. It was not until 2006, when Tesla Motors revealed its Roadster, that a modern version of the all-electric car became a distinct and appealing possibility.
Tesla remains the gold standard for electric cars. The Model S all-electric sedan is the top-ranked ultra-luxury vehicle. Yet its high price has kept the brand from being a very widely purchased car. For example, a new Tesla Model S 75D starts at $75,700, and models with longer ranges without recharging start at $98,700.71 Even if more customers might want to purchase an all-electric car, few of them can afford a Tesla. In response, Tesla innovated a less expensive entry model, the Model 3, that starts around $35,000.72 In parallel, other companies have released their more economical all-electric options: the Chevrolet Bolt starts around $37,000 and offers a battery life comparable to that of the Tesla Model S.73 General Motors also recently decided to compete with Tesla directly. One of Tesla’s greatest advantages has been its over-the-air software, which automatically and regularly updates the cars’ software when they are plugged in overnight. Recognizing that it already installs OnStar Page 170as a safety service standard on any GM vehicle, GM has found a large fleet of connected cars at its disposal already. Therefore, it plans to use OnStar as a means to compete directly with Tesla’s software.
Furthermore, GM’s latest all-electric car seeks to do more than address just the problem of climate change; it wants to help drivers overcome the problem of congestion in cities. Its all-electric E100 will cost only $14,000 before incentives; with the incentives, the paid price drops to close to $5,000.75 But it is being launched only in China, under the company’s Baojun brand. The Chinese car market is the largest in the world, and the electric car segment is the largest growing segment in China, due in part to the subsidies and incentives offered by the national and local governments. Accordingly, China already makes up 40 percent of the worldwide electric car market. The E100 has been designed specifically to meet the needs of consumers living in Chinese cities, in that it is compact, seating only two adults, and easy to maneuver in the heavily populated streets. Furthermore, its top speed is 62 miles per hour, and its battery can last for about 96 miles, and then takes only about 7.5 hours to charge. It might not be an ideal option for someone living in a rural area who needs to travel long distances, but it is perfect for a city dweller. Finally, although the car does not cost much to own, the E100 still provides some key luxuries: the interior features a digital dashboard, a seven-inch touchscreen center console, and Wi-Fi capabilities.
Launched in China by General Motors, the inexpensive Baojun electric car is designed to overcome the problems of congestion in cities. Imaginechina via AP Images Within the week of its announcement, more than 5,000 people had registered to buy the first 200 models of the E100, spurring the company to make another 500 cars available quickly. Although the E100 will be available only in the Guangxi region of China in the immediate term, GM plans to expand its availability throughout the country as soon as possible.
1. Discuss how specific environmental issues examined in this chapter impact the development and sale of electric cars.
2. Which market do you believe will be more successful, Tesla in the United States or GM’s E100 in China?
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Dion is an engineer with Tesla Motors who helps to design electric motors. It has always been his dream to start his own business, but as he has gotten older, he has not gotten around to it. He is also an avid cyclist who rides near his home in Palo Alto, California. It is hilly terrain and as he has gotten older, he has found it more difficult to navigate the steep terrain.
He has thought about buying an electric bike that would give him an additional boost with an electric motor. However, he has not been satisfied with any of the many brands of electric bikes he can find. The ones that work well are astronomically expensive and the less expensive models are poorly constructed and have short battery life.
One day at Tesla headquarters, Dion is having lunch with three of his colleagues when he raises his frustration with his inability to find the right electric bike. The other three are also avid cyclists, so they launch into an intense discussion. Mark, who works in Tesla’s marketing department, thinks that there is a demand for a high-quality electric bike at a reasonable cost. “There are social trends that could drive that demand,” he says. “First, commuting by bicycle is becoming more popular, and many who are new to it need that extra assistance to make it a comfortable experience. Also, as the population ages, older cyclists are looking for ways to keep cycling as much as they did when they were younger. An electric bike could help them do that.”
Dion responds that some of the new electric motor technologies he has been working on could be repurposed to create a high-quality electric bike at a reasonable cost. “I have been experimenting with some designs, and I think it is workable.” Rosalinda, who manages production of the Tesla Model S interjects, “You know, I came across a defunct bicycle factory about 20 miles north of here when we were looking at potential sites for expansion. It would be perfect to manufacture the bike you are describing.”
Dion can’t hold back any longer and blurts out, “Let’s start our own bicycle company and make this bike!” Sandra, who works in the finance department, scrunches up her face and says, “Whoa there, partner. Where is the money for this venture going to come from? While our salaries and stock options have made us comfortable, we don’t have the resources to manufacture and market this bike.”
The group agrees that they would love to start a new company, but they must figure out how to solve the finance problem that Sandra pointed out in order to do so. Later that day, Dion can’t get the idea out of his mind. Then, a potential solution comes to him. He remembers Brenda Zhang, who rode with one of his cycling groups, Palo Altitude. She is a partner in a large venture capital firm that invests in promising start-ups. Dion isn’t sure if she even remembers him, and she only knew him as a cyclist, not an engineer. But he thinks it’s worth a try.
He sends the following email:
To: Brenda Zhang From: Dion Morris Re: Electric Bicycle Start-Up
Several of my colleagues at Tesla and I have come up with a new design for an electric bicycle that would be relatively inexpensive, very efficient, as well as durable. I know this is coming out of the blue, but I am hoping you will remember me from our rides with the Palo Altitude group. We are looking for start-up funding, and I thought a fellow cyclist like you would see the potential market for a high-quality, inexpensive electric bicycle. Please let me know what you think.
Later that day, he is surprised to find the following email in his inbox:
To: Dion Morris From: Brenda Zhang Re: Electric Bicycle Start-Up
Of course, I remember you, Dion. You were always at the head of the pack in our rides. I am intrigued by your idea and would like to set-up a meeting to discuss it. I need to start doing my homework on the venture to see whether I and my partners are willing to provide funding. In preparation for our meeting, I would like you to prepare a memo that addresses the following issues:
Why do you think you can create a successful start-up? What traits will you need to be an entrepreneur?
What kind of leadership style would you use, and why?
Describe your product and why you think there is a market for it.
What legal form do you think best suits your start-up and why?
What kind of financial document should you provide so that I can evaluate the viability of your start-up?
What are the characteristics of your target market?
Explain specific types of marketing the business should pursue.
What other sources of funding might be available for you, whether or not we invest in your start-up?
How would you organize your management team, and who in your group would lead each function in the organization?
What brand name do you propose for your electric bike, and why did you choose it?
Please send this to me by next week, at least a day before our meeting. I look forward to our discussion.
You are a good friend of Dion’s. He respects you for your degree in Business and Management and your good business sense. Dion feels inadequate in the details of business and asks you to draft the requested memo for him.
How to Set Up the Memo
You will use the attached project 2 memo template. The memo template should be single-spaced with a blank line between paragraphs. Write clearly and concisely in 12-point Times New Roman. The final product will be in a business memo format, no longer than eight pages in length (excluding the cover page and references page).
Include a title, the course number and section, your name, and the instructor’s name on your title page.
Instructions
Draft the requested memo under Dion’s name. Draw on the learning resources that are in the classroom to influence your answers. This is not a research-based project, so don’t use any sources other than the course materials.
Review/Proofread your Memo
Read through your memo to ensure all required elements are present and clear.
Submit the Memo in the Assignment Folder
The document you submit to the Assignment Folder will be considered final and ready for grading. Please double-check that you are submitting the correct document.
Project 2 template – Contemplating Starting a Business
Title of Paper
Student Name
School Name
Company Name
Memo
To:
Brenda Zhang
From:
Dion Morris
Date:
[Date]
Re:
[Subject]
Business Summary
Business Summary
[Write a quick overview of the proposed start-up.]
Business Details
[Write responses to Brenda’s questions, using concepts from the course materials to inform your answers.]
Why do you think you can create a successful start-up? What traits will you need to be an entrepreneur?
What kind of leadership style would you use? Why?
Describe your product and why you think there is a market for it.
What legal form do you think best suits your start-up and why?
What kind of financial document should you provide so that I can evaluate the viability of your start-up?
What are the characteristics of your target customer?
Explain specific types of marketing the business should pursue.
What other sources of funding might be available for you?
How would you organize your management team, and who in your group would lead each function in the organization?
Refer to Dion’s coworkers from his initial conversation.
What brand name do you propose for your electric bike, and why did you choose it?
Conclusion
[Write a concluding paragraph or two that emphasizes the reasons Brenda’s firm should invest in your venture.]
Examples of References
Grady, J. S., Her, M., Moreno, G., Perez, C., & Yelinek, J. (2019). Emotions in storybooks: A comparison of storybooks that represent ethnic and racial groups in the United States. Psychology of Popular Media Culture, 8(3), 207–217. https://doi.org/10.1037/ppm0000185
(sample citation of a journal article)
Sapolsky, R. M. (2017). Behave: The biology of humans at our best and worst. Penguin Books.
(sample citation of a book)
UMGC. (n.d.). The Law of Demand. Document posted in University of Maryland Global Campus BMGT 110 2208 online classroom, archived at http://campus.umgc.edu
(sample citation of this course’s readings)
Woodyatt, A. (2019, September 10). Daytime naps once or twice a week may be linked to a healthy heart, researchers say. CNN. https://www.cnn.com/2019/09/10/health/nap-heart-health-wellness-intl-scli/index.html
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