Reference no: EM133960932

Question

By 2018, some 3 million electric vehicles (cars and vans) had been sold worldwide; many of these were in Asia. Experts are predicting that the market will reach 125 million by 2030 as technological and other innovations, as well as governmental pressures and interventions, drive market growth. Competition for market leadership comes from successful and wealthy entrepreneurs such as Elon Musk and James Dyson, with no background in motor vehicles, but also from the established global car producers. BMW, Volkswagen, Toyota, Nissan, Renault, Hyundai and Kia all manufacture electric vehicles, albeit in modest volume relative to their petrol and diesel cars. Realistically it would be difficult for them to ignore the pressure for change. Musk and Dyson have both pledged to invest hundreds of millions of dollars. Yet these various competitors will see different opportunities for creating value as the market emerges. This case invites you to contemplate one or more possible business models. While the core product would appear to be an electric car, the challenge is quite complex. The cars are battery powered, which means the car designers/manufacturers will need to make their own batteries or secure a supply chain. Given that everything really depends on the batteries as a power source, one might ponder the extent to which this is something they really need to control. The batteries have to be plugged into an electricity supply to charge them up. At the moment, the charge is the only source of power; running the engine discharges the battery, and there is no system for using the engine power to recharge. And they are not hybrid. While technology now allows for a few hundred miles from each charge - and this number continues to increase - it is much less than that obtained from a tank of petrol or diesel. When the charge has expired the vehicle has to have access to a charging point. Petrol stations are ubiquitous in most developed areas. Once one's low fuel light comes on, one should generally be able to find a petrol station not too far away. And refuelling takes just a few minutes, normally. But what will constitute the parallel infrastructure for charging a battery? - which takes a few hours to fully charge. People in theory could do it at home, say in their garage overnight. But not everyone has a garage. Many people without private drives streetpark where they can find a place - and in many parts of the world, large numbers of people live in high-rise apartment blocks. Some retailers such as Ikea provide charging points - but not very many at any one place. It has been suggested that electric cars enjoy popularity where people's employers provide charging points where they can leave their vehicle charging while they are at work. This makes sense, but is it feasible to rely on this as the market grows? So, who are the target customers? To date, age and socio-economic background do not seem to be significant deciding factors. Economics cannot be ignored. The cars are relatively expensive to buy, but they are cheaper both to run and to maintain. Passion for the environmental cause, given the low carbon emission from electric vehicles, will attract some buyers, naturally. Theories about the diffusion of innovation are clearly relevant, but as the market grows, who will be the critical adopters that manufacturers have to persuade? At what point will postulated legislation (that prohibits new petrol and diesel vehicles) become a reality and a serious constraint that drives demand by limiting choice? By the time this happens, will technology and learning have driven down costs? At this point the balance of the inter-related decisions (whether to 'go electric' followed by which model to pick) changes, and this change will offer different marketing opportunities and challenges. Tesla is one of the best-known brands. Based in California, but exporting around the world from America, Tesla is over 15 years old. It was founded in 2003 by two entrepreneurs: Martin Eberhard and Marc Tarpenning. Very quickly others joined the business, including Elon Musk who became the CEO and a leading investor. Musk was born in South Africa but relocated to America as a student. After graduating he started a web software business which he sold in 1999 (when he was 28 years old) to Compaq for $340 million. He then started an online bank which (after a merger and name change) became PayPal, which was also sold - this time to eBay, for $1.5 billion in 2002. Musk has an additional passion for passenger space travel; and in this respect he is competing with Jeff Bezos (Amazon) and Richard Branson (Virgin). Tesla currently sells three models of cars, with two more in active development. They make their own batteries and are investing in other products related to solar power. Their first European showroom was in London in 2009; this was quickly followed by Japan a year later. Tesla actively partners with Toyota and Mercedes. James Dyson effectively reinvented the vacuum cleaner, although his company makes other products - as explained in the Chapter 5 case on Dyson. He plans to be selling electric cars by 2021 and is investing heavily to make this happen. He already has serious research facilities dedicated to the vehicles in the UK; his manufacturing will be in Singapore, where engineering capability is available. But Singapore is not a low-wage country. A large slice of Dyson's R&D spend is on batteries. He has bought a solid-state battery business and is developing this; he is also investing in the more traditional (for electric vehicles) lithium batteries. Solid state battery technology is at the moment unproven, but it offers the potential for shorter charge and longer discharge times. Dyson has yet to build a prototype car. His past business decisions suggest he will be positioned towards the top end of the market; and there are further rumours that he is particularly keen to develop driverless options. Global pressures linked to energy sources and emissions means that the potential for electric cars is huge, and will continue to grow for years to come, as new petrol and diesel cars are phased out. The market will grow dramatically, faster in some parts of the world than others. All the major vehicle manufacturers will need to engage in some way if they are to survive. The challenge is also likely to attract more wealthy business people. Logic and history would suggest that they cannot all be 'winners'. So who will triumph? Why and how? Instructions: You have been hired by Dyson Company to conduct a strategic analysis of the electric car industry (including possible threats of substitutes) and the strategic capabilities and resources of the Dyson Company. Dyson wants your perspective on possible strategies they can use to compete in the industry in the near future.

1. The key business environment factors (PESTLE) that have a significant impact on the industry (factors with less impact need not be mentioned).

2. Determine whether the industry is attractive or not, considering the threats of new entrants, the level of rivalry among existing competitors, the bargaining power of buyers, the threat of substitutes and the bargaining power of suppliers (Porter's Five Forces Analysis)

3. Research the strategic capabilities and core competencies of the client company and evaluate these by determining whether they are valuable, rare, inimitable (difficult to imitate) and if the client is organized to exploit these resources (VRIO analysis).

4. Summarize the above findings into a TOWS matrix (threats, opportunities, relevant strengths and weaknesses, discussing any insights arrived from the analysis.

5. Based on their TOWS analysis, students should explore whether any of Porter's generic strategies can apply to the situation. Students should be ready to give sufficient examples of these chosen strategies in the context of the case study.