Harvard Case - Re-THINK-ing THINK: The Electric Car Company
"Re-THINK-ing THINK: The Electric Car Company" Harvard business case study is written by Joseph B. Lassiter, David Kiron. It deals with the challenges in the field of Entrepreneurship. The case study is 24 page(s) long and it was first published on : Feb 24, 2010
At Fern Fort University, we recommend that THINK Mobility pursue a strategic shift towards a focused, niche-oriented business model centered on sustainable urban mobility solutions. This involves leveraging their existing expertise in electric vehicle technology and design to develop a range of innovative, purpose-built electric vehicles targeting specific market segments like last-mile delivery, urban transportation, and micro-mobility. This approach would allow THINK to capitalize on the growing demand for sustainable transportation solutions while simultaneously mitigating the risks associated with competing directly against established automotive giants in the mass market.
2. Background
THINK Mobility, a Norwegian electric car company, faced significant challenges in the early 2000s. Despite pioneering electric vehicle technology and garnering early success, the company struggled to achieve profitability and scale due to factors like:
- Limited production capacity: THINK?s manufacturing processes were inefficient and unable to meet the demands of a growing market.
- High production costs: The company?s reliance on complex and expensive components hindered its ability to compete on price with traditional gasoline-powered vehicles.
- Lack of brand recognition: THINK struggled to build a strong brand identity and attract a loyal customer base in a crowded market.
- Financial constraints: The company faced persistent financial difficulties and struggled to secure the necessary funding for expansion and development.
The case study follows the journey of THINK Mobility as it navigates these challenges and seeks to establish itself as a viable player in the evolving electric vehicle market.
3. Analysis of the Case Study
Strategic Analysis:
THINK?s initial strategy of competing directly with established automotive giants in the mass market proved unsustainable. The company lacked the resources and economies of scale to compete effectively on price and volume. This highlights the importance of identifying a clear strategic niche and leveraging core competencies to achieve competitive advantage.
Financial Analysis:
THINK?s financial struggles were driven by high production costs, limited sales volumes, and insufficient funding. The company?s dependence on external financing made it vulnerable to market fluctuations and investor sentiment. This emphasizes the need for sound financial planning, cost optimization, and a sustainable business model.
Marketing Analysis:
THINK?s marketing efforts were hampered by a lack of brand awareness and a limited marketing budget. The company struggled to differentiate itself from competitors and connect with potential customers. This underscores the importance of effective branding, targeted marketing campaigns, and building strong customer relationships.
Operational Analysis:
THINK?s manufacturing processes were inefficient and lacked the flexibility to adapt to changing market demands. The company?s reliance on complex and expensive components further hindered its ability to achieve cost competitiveness. This highlights the need for streamlined operations, lean manufacturing practices, and a focus on cost optimization.
4. Recommendations
1. Redefine the Target Market:
- Focus on niche markets: Instead of competing in the mass market, THINK should target specific market segments with high growth potential and a strong demand for sustainable solutions.
- Examples: Last-mile delivery, urban transportation (e.g., ride-sharing fleets, public transportation), micro-mobility (e.g., electric scooters, e-bikes).
- Develop purpose-built vehicles: Design and manufacture vehicles specifically tailored to the needs and requirements of these niche markets.
2. Develop a Sustainable Business Model:
- Optimize production costs: Implement lean manufacturing practices, explore alternative sourcing strategies for components, and leverage partnerships with suppliers.
- Focus on profitability: Prioritize margin over volume, and develop a pricing strategy that reflects the value proposition of THINK?s sustainable solutions.
- Explore alternative revenue streams: Consider subscription models, leasing options, and partnerships with fleet operators.
3. Build a Strong Brand Identity:
- Emphasize sustainability: Position THINK as a leader in sustainable mobility solutions and highlight the environmental benefits of its products.
- Develop a compelling brand story: Communicate the company?s values, mission, and commitment to innovation.
- Engage with target audiences: Utilize targeted marketing campaigns, social media platforms, and partnerships to reach potential customers.
4. Foster Strategic Partnerships:
- Collaborate with technology companies: Partner with companies specializing in software development, battery technology, and autonomous driving systems.
- Engage with fleet operators: Develop partnerships with ride-sharing companies, delivery services, and public transportation providers.
- Explore joint ventures: Collaborate with other companies in the electric vehicle ecosystem to leverage complementary strengths and expand market reach.
5. Embrace Digital Transformation:
- Leverage data and analytics: Collect and analyze data on customer preferences, market trends, and operational performance to inform decision-making.
- Develop a strong online presence: Create a user-friendly website, utilize social media platforms, and explore digital marketing channels.
- Invest in software development: Develop mobile applications and web-based platforms to enhance customer experience and streamline operations.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: THINK?s core competencies lie in electric vehicle technology and design. By focusing on niche markets, the company can leverage these strengths to develop innovative and sustainable solutions.
- External customers and internal clients: The recommendations address the needs of both external customers (e.g., fleet operators, urban commuters) and internal clients (e.g., employees, investors).
- Competitors: By focusing on niche markets, THINK can avoid direct competition with established automotive giants and focus on developing unique solutions.
- Attractiveness: The recommendations are based on the growing demand for sustainable transportation solutions and the potential for significant market growth in niche segments.
6. Conclusion
By implementing these recommendations, THINK Mobility can transform itself from a struggling startup into a leading provider of sustainable urban mobility solutions. By focusing on niche markets, optimizing its business model, building a strong brand identity, and embracing digital transformation, THINK can achieve sustainable growth and profitability.
7. Discussion
Alternatives:
- Merging with a larger automotive company: This could provide THINK with access to resources, manufacturing capacity, and brand recognition. However, it could also lead to a loss of control and a dilution of the company?s unique identity.
- Focusing solely on the mass market: This would require significant investment and a major shift in strategy. THINK would need to compete directly with established players, which could be a risky and challenging endeavor.
Risks and Key Assumptions:
- Market demand: The success of THINK?s strategy depends on continued growth in the demand for sustainable transportation solutions.
- Competition: New entrants and established players could emerge in the niche markets targeted by THINK.
- Technology advancements: Rapid advancements in battery technology, autonomous driving, and other related fields could impact THINK?s competitive advantage.
Options Grid:
| Option | Advantages | Disadvantages |
|---|---|---|
| Niche Market Focus | High growth potential, reduced competition, leverage core competencies | Limited market size, potential for saturation |
| Mass Market Focus | Larger market share, economies of scale | High competition, significant investment required |
| Merging with a Larger Company | Access to resources, brand recognition | Loss of control, dilution of identity |
8. Next Steps
Timeline with Key Milestones:
- Year 1: Redefine target market, develop a sustainable business model, and build a strong brand identity.
- Year 2: Launch initial products in niche markets, build strategic partnerships, and invest in digital transformation.
- Year 3: Expand product portfolio, increase market share, and achieve profitability.
By taking these steps, THINK Mobility can position itself for long-term success in the evolving electric vehicle market.
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Case Description
On January 5, 2010, 48-year-old Richard Canny was on his way to meet the Governor of Indiana. He was reading his newly issued press release, announcing that THINK planned to start automobile production in Elkhart County, Indiana and to launch its THINK City battery-operated electric vehicle (EV) in the North American market. The announcement boldly outlined plans to invest $43.5 million in a factory that could begin assembling vehicles in early 2011 and that was sized for a manufacturing capacity for more than 20,000 vehicles per year. A proven automotive industry executive, but a first-time entrepreneur, Canny was CEO of Think Global AS (THINK), a privately held Norwegian maker of battery-operated electric vehicles (EVs) that were rechargeable through residential electrical power outlets. With this announcement, Canny was committing the company to support the broad North American launch of its line of EVs, among the very first commercially available, highway-approved safe cars in the world that produced zero greenhouse gas tailpipe emissions.
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