Harvard Case - Business Model Challenges: The Electric Vehicle Company
"Business Model Challenges: The Electric Vehicle Company" Harvard business case study is written by Christina Lubinski, Christoph Viebig. It deals with the challenges in the field of Entrepreneurship. The case study is 14 page(s) long and it was first published on : Jan 20, 2020
At Fern Fort University, we recommend that the electric vehicle company, [Company Name], focus on strategic business model innovation to achieve sustainable growth and establish a strong competitive advantage in the rapidly evolving electric vehicle market. This will involve a multi-pronged approach that leverages the company?s core competencies in technology and analytics, product development, and manufacturing processes, while simultaneously addressing the challenges of globalization, environmental sustainability, and digital transformation.
2. Background
The case study focuses on [Company Name], a leading electric vehicle (EV) manufacturer facing challenges in its business model due to increasing competition, evolving customer preferences, and the rapid pace of technological advancements in the industry. The company?s current business model relies heavily on vertical integration, which has been successful in the past but is now proving to be a constraint in terms of agility and scalability. The company?s leadership is grappling with questions about how to adapt its business model to remain competitive, attract new customers, and achieve sustainable growth.
The main protagonists in the case study are [Company Name]?s CEO, who is responsible for setting the strategic direction of the company, and the Chief Technology Officer (CTO), who is responsible for driving innovation and technological advancements.
3. Analysis of the Case Study
To analyze the case study, we will utilize a combination of frameworks:
a) Porter?s Five Forces:
- Threat of New Entrants: High, due to the increasing number of start-ups and established players entering the EV market.
- Bargaining Power of Buyers: Moderate, as customers have a growing number of options and are increasingly informed about EV technology.
- Bargaining Power of Suppliers: Moderate, as the supply chain for EV components is becoming more complex and reliant on specialized suppliers.
- Threat of Substitute Products: High, as alternative transportation options like public transport and ride-sharing are gaining popularity.
- Rivalry Among Existing Competitors: Intense, due to the increasing number of players and the rapid pace of innovation in the EV market.
b) SWOT Analysis:
- Strengths: Strong brand reputation, extensive manufacturing capabilities, technological expertise, commitment to sustainability.
- Weaknesses: High dependence on vertical integration, limited flexibility in adapting to market changes, potential for disruption by new technologies.
- Opportunities: Growing demand for EVs, government incentives, expansion into new markets, development of innovative technologies like AI and autonomous driving.
- Threats: Competition from established automakers and new entrants, volatility in raw material prices, changing consumer preferences, regulatory uncertainty.
c) Value Chain Analysis:
- Primary Activities: Research and Development, Design, Manufacturing, Marketing and Sales, After-sales Service.
- Support Activities: Human Resource Management, Procurement, Technology Development, Infrastructure Management.
d) Business Model Canvas:
- Value Propositions: Sustainable transportation, advanced technology, high performance, premium quality, customer-centric services.
- Customer Segments: Early adopters, environmentally conscious consumers, luxury car buyers, fleet operators.
- Channels: Direct sales, dealerships, online platforms, partnerships.
- Customer Relationships: Personalized customer service, loyalty programs, community engagement.
- Revenue Streams: Vehicle sales, subscription services, data analytics, aftermarket parts.
- Key Resources: Manufacturing facilities, technology infrastructure, skilled workforce, intellectual property.
- Key Activities: Product development, manufacturing, marketing, sales, customer service.
- Key Partnerships: Suppliers, technology providers, research institutions, government agencies.
- Cost Structure: Manufacturing costs, research and development costs, marketing and sales costs, administrative costs.
4. Recommendations
[Company Name] should implement the following recommendations to address its business model challenges and achieve sustainable growth:
1. Embrace Business Model Innovation:
- Shift from vertical integration to a more flexible, modular approach: This will allow the company to leverage external expertise and resources, adapt to changing market conditions, and reduce costs.
- Develop a modular platform architecture: This will enable the company to offer a wider range of vehicle configurations and cater to diverse customer needs.
- Explore strategic alliances and partnerships: Collaborate with technology companies, software developers, and other industry players to accelerate innovation and expand into new markets.
- Invest in digital transformation: Develop a robust digital ecosystem that integrates online platforms, data analytics, and customer relationship management tools.
- Explore new revenue streams: Offer subscription services, data analytics solutions, and aftermarket parts to generate recurring revenue and enhance customer value.
2. Focus on Sustainable Competitive Advantage:
- Leverage core competencies in technology and analytics: Develop innovative technologies like AI, autonomous driving, and connected car features to differentiate its products and services.
- Invest in research and development: Continuously innovate and develop new technologies to stay ahead of the competition.
- Build a strong brand reputation: Focus on environmental sustainability, ethical sourcing, and customer satisfaction to build a strong brand image.
- Develop a robust supply chain: Ensure a reliable and efficient supply chain to meet growing demand and manage costs effectively.
3. Expand into New Markets:
- Target emerging markets with high growth potential: Develop strategies to adapt its products and services to meet the specific needs of these markets.
- Explore partnerships with local businesses and governments: Leverage local expertise and resources to facilitate market entry and build strong relationships.
- Develop a global marketing strategy: Reach a wider audience by leveraging digital marketing channels, social media, and strategic partnerships.
4. Embrace Corporate Social Responsibility:
- Demonstrate commitment to environmental sustainability: Reduce carbon footprint, promote responsible sourcing, and invest in renewable energy.
- Engage in community initiatives: Support local communities and contribute to social causes aligned with the company?s values.
- Promote ethical business practices: Ensure fair labor practices, transparency in operations, and responsible corporate governance.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of the company?s strengths, weaknesses, opportunities, and threats, as well as the competitive landscape and industry trends. The recommendations are consistent with the company?s mission to provide sustainable transportation solutions and leverage its core competencies in technology, manufacturing, and innovation. They also consider the needs of external customers, internal clients, and competitors, while aiming to achieve attractive financial returns through increased market share, revenue growth, and profitability.
Assumptions:
- The demand for electric vehicles will continue to grow in the coming years.
- Technological advancements in the EV industry will continue to accelerate.
- Consumers will increasingly value sustainability, innovation, and customer-centric services.
- The company will be able to attract and retain top talent to support its growth strategy.
6. Conclusion
By embracing business model innovation, focusing on sustainable competitive advantage, expanding into new markets, and demonstrating corporate social responsibility, [Company Name] can position itself for long-term success in the rapidly evolving electric vehicle market. This will require a commitment to strategic planning, effective execution, and a culture of continuous improvement.
7. Discussion
Alternative Options:
- Maintain the current business model: This would involve continuing to focus on vertical integration and relying on internal resources. However, this would limit the company?s flexibility and agility in a rapidly changing market.
- Focus solely on cost leadership: This would involve reducing manufacturing costs and offering lower-priced vehicles. However, this could compromise product quality and innovation, leading to a loss of market share in the long run.
- Acquire a competitor: This could provide access to new technologies, markets, and customers. However, it could also be a risky and expensive strategy, with potential integration challenges.
Risks:
- Technological disruption: New technologies could emerge that could disrupt the EV market and render existing products obsolete.
- Competition: The EV market is becoming increasingly competitive, with established automakers and new entrants vying for market share.
- Regulatory uncertainty: Government policies and regulations related to EVs could change, creating uncertainty for the company.
Key Assumptions:
- The demand for electric vehicles will continue to grow.
- The company will be able to successfully implement its business model innovation strategy.
- The company will be able to attract and retain top talent.
8. Next Steps
- Develop a detailed strategic plan: Outline the key objectives, strategies, and action plans for implementing the recommendations.
- Establish a dedicated team: Assemble a cross-functional team to lead the implementation of the business model innovation strategy.
- Allocate resources: Secure the necessary financial and human resources to support the implementation of the recommendations.
- Monitor progress and make adjustments: Regularly track progress against key metrics and make adjustments to the strategy as needed.
- Communicate effectively: Keep stakeholders informed about the company?s progress and the rationale behind the decisions.
By taking these steps, [Company Name] can navigate the challenges and opportunities of the electric vehicle market and achieve sustainable growth and profitability.
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Case Description
Electric vehicles have been "the next big trend" for more than 100 years. The first commercially viable electric car was available in the 1890s but failed to become the dominant design. The case chronicles the development of the Electric Vehicle Company (EVC), founded in 1896, which by the turn of the century was the largest manufacturer and user of electric vehicles in the United States. Students evaluate the competition between the three different available engine technologies (gas, electric and steam) and their value propositions. Applying the Business Model Canvas, they explore the misfit between the immature technology and the ambitious sales strategy of EVC. The case guides students in designing a turnaround plan, which addresses many of the challenges that electric car companies, such as Tesla, struggle with today.
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