Harvard Case - Global product development strategy at Bosch: Selecting a development site for the new low-cost ABS platform
"Global product development strategy at Bosch: Selecting a development site for the new low-cost ABS platform" Harvard business case study is written by Martin Kupp. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Sep 6, 2012
At Fern Fort University, we recommend that Bosch establish a new low-cost ABS platform development site in India. This recommendation is based on a thorough analysis of Bosch's strategic goals, the competitive landscape, and the unique advantages offered by India as a development hub.
2. Background
Bosch, a global leader in automotive technology, faces the challenge of developing a low-cost ABS platform to cater to the growing demand in emerging markets. The case study highlights the need for a cost-effective solution while maintaining Bosch's high standards of quality and reliability. The central protagonist is the Bosch management team, tasked with selecting the optimal location for this new development site, considering factors like cost, talent pool, infrastructure, and government support.
3. Analysis of the Case Study
To analyze the situation, we utilize a combination of frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High, due to the increasing competition in the automotive industry, particularly in emerging markets.
- Bargaining Power of Buyers: Moderate, as buyers (OEMs) have options, but Bosch's brand reputation and technological expertise provide a competitive advantage.
- Bargaining Power of Suppliers: Low, as Bosch has established relationships with suppliers and can leverage its scale to negotiate favorable terms.
- Threat of Substitutes: Moderate, as alternative safety technologies are emerging, but ABS remains a crucial safety feature.
- Competitive Rivalry: High, with established players like Continental and ZF, and emerging Chinese competitors.
b) SWOT Analysis:
Strengths:
- Strong brand reputation and global presence.
- Extensive experience in automotive technology and manufacturing.
- Strong research and development capabilities.
- Established supply chain and distribution network.
Weaknesses:
- High cost structure compared to competitors.
- Potential for cultural differences and communication challenges in new markets.
Opportunities:
- Growing demand for ABS in emerging markets.
- Potential for cost reduction through strategic sourcing and manufacturing.
- Opportunities for innovation and product differentiation.
Threats:
- Increasing competition from emerging market players.
- Fluctuating currency exchange rates.
- Potential for regulatory changes and trade barriers.
c) Value Chain Analysis:
Bosch's value chain includes research and development, manufacturing, marketing, sales, and after-sales service. The new development site will primarily focus on product development and manufacturing, aiming to optimize cost and efficiency while maintaining quality.
d) Business Model Innovation:
Bosch can leverage this opportunity to innovate its business model by:
- Developing a modular ABS platform: This allows for customization and cost optimization based on specific market needs.
- Partnering with local suppliers: This reduces costs and fosters local economic development.
- Adopting a lean manufacturing approach: This improves efficiency and reduces waste.
4. Recommendations
- Establish a new development site in India: India offers a compelling combination of factors:
- Cost advantage: Lower labor costs and operational expenses compared to developed markets.
- Talent pool: India has a large and growing pool of skilled engineers and technicians.
- Government support: India offers incentives for foreign investment and technology development.
- Emerging market access: India's growing automotive market provides a strategic foothold for Bosch.
- Focus on a modular product development strategy: This allows for flexibility in customizing the ABS platform for different market segments and vehicle types.
- Partner with local suppliers and universities: This leverages local expertise, reduces costs, and fosters innovation.
- Implement a lean manufacturing approach: This optimizes production processes, minimizes waste, and enhances efficiency.
- Develop a comprehensive training program for local employees: This ensures the transfer of Bosch's technical knowledge and expertise.
5. Basis of Recommendations
This recommendation aligns with Bosch's core competencies in automotive technology and manufacturing, while addressing the need for cost reduction and access to emerging markets. It considers the external customers (OEMs) and internal clients (engineering and manufacturing teams), as well as the competitive landscape. The attractiveness of India is supported by:
- Cost savings: Significant cost reductions in development and manufacturing.
- Market access: Direct access to the rapidly growing Indian automotive market.
- Talent pool: Access to a large and skilled workforce at competitive costs.
6. Conclusion
Establishing a new low-cost ABS platform development site in India presents a strategic opportunity for Bosch to maintain its competitive advantage, expand its market share, and achieve sustainable growth. This decision will require careful planning and execution, including cultural sensitivity, talent development, and building strong partnerships with local stakeholders.
7. Discussion
Alternatives:
- Expanding existing facilities in Europe or North America: While this offers familiarity and established infrastructure, it may not provide the necessary cost advantages.
- Acquiring a local competitor in India: This could provide immediate market access and expertise, but carries significant risks related to integration and cultural differences.
Risks and Key Assumptions:
- Political and economic instability in India: This could impact the investment climate and operational stability.
- Cultural differences and communication challenges: Effective management of cultural differences is crucial for successful integration.
- Talent acquisition and retention: Attracting and retaining skilled talent in a competitive market is essential.
Options Grid:
| Option | Advantages | Disadvantages | Risks |
|---|---|---|---|
| India | Cost advantage, talent pool, market access | Cultural differences, political instability | Talent retention, operational challenges |
| Existing facilities | Familiarity, established infrastructure | High costs, limited market access | Limited cost savings, lack of local expertise |
| Acquisition | Immediate market access, local expertise | Integration challenges, cultural differences | High cost, potential for disruption |
8. Next Steps
- Conduct a feasibility study: Evaluate the specific costs, risks, and opportunities associated with establishing a development site in India.
- Develop a comprehensive business plan: Outline the strategic goals, operational plan, and financial projections for the new site.
- Secure government approvals and incentives: Negotiate favorable terms for investment and operation.
- Identify and recruit key personnel: Build a team of experienced professionals with the necessary skills and cultural sensitivity.
- Establish partnerships with local suppliers and universities: Develop collaborative relationships to leverage local expertise and innovation.
- Implement a phased rollout strategy: Start with a pilot project to test the feasibility and refine the approach before scaling up operations.
This strategic move will require strong leadership, effective communication, and a commitment to building a sustainable and profitable business in India. By leveraging its core competencies and embracing the opportunities presented by emerging markets, Bosch can continue to lead the automotive technology industry for years to come.
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Case Description
The case is set in February 2008. Stefan Tammler, head of the chassis systems control division (CC) of Robert Bosch GmbH (Bosch), has to make a decision about the location for the development of the new anti-lock braking system (ABS) for the low-price vehicle (LPV) segment. The case begins with a short introduction outlining the situation. It gives a detailed background on Bosch, especially the chassis systems control division. The main part of the case focuses on the global product development strategy, highlighting especially the two development sites in Suzhou, China, and Yokohama, Japan. Furthermore, the Chinese car market is described in detail, with special emphasis on the LPV segment.
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