Better Place: Shifting Paradigms in the Automotive Industry - Essay Example

Better Place Case Answer The business environment surrounding personal transportation industry provided much stimulation for Better Place. Firstly, the enhancement in technology prompted the development of efficient electrical systems and batteries that powered electric cars. Secondly, the detrimental impact of traditional internal combustion engines (ICE) on the environment encouraged Shai Agassi, the founder of Better Place, to develop an environmentally friendly car that literally made the world a “better place”. The side effects of traditional fossil fuel engines are quite known for its contribution to increase in the green house gasses. Hence, the two factors including technological improvement and environmental risks associated with ICE usage acted as the key drivers to change. The ultimate aim was to create a “better place” by not only reducing the dependence on oil but also to increase the adoption rates for electric cars. The result was the initiation of a venture that meant to offer “miles” to the target consumers. Although Better Place was focused towards electric cars, it employed a new idea to create demand for electric cars and increase customer adoption of the electric-powered automobile technology. The battery was excluded from the package with only the car being sold to the customer. Instead of selling the battery, the company chose to sell miles through service plans. These service plans would include the battery and the electrical charge necessary in order to power the electrically operating vehicles. This service was an innovation in itself as it meant that consumers were paying to travel a particular miles rather than paying for the battery which was incapable to allowing very long distance journeys. Instead of revamping the battery, Better Place focused on selling miles as were needed by the consumers. Three main plans were highlighted. Better Place leveraged technology so as to construct a recharging infrastructure that would power the electric cars. This required the use of the most sophisticated technology in order to introduce a business model that stood out from the crowd and appealed to prospective consumers. The entire innovation meant lesser burning of fossil fuels in ICE engines in the case of successful adoption of the electric car. Lesser burning of fossil fuels would mean lesser carbon footprint and hence, a reduction in the damaging effects of ICE engines. The market offering by Better Place was inspired by the climatic impact of burning fossil fuels in cars with traditional ICE engine. With the introduction of electric cars and the initiation of a new trend that worked on service plans did come with a few risks. The biggest risk was that of the adoption rate which was crucial to the sustainable development of the company. Without successful customer acquisition of the idea, the product could fail badly. Although awareness among people about global warming has changed perceptions regarding the environment and environmentally friendly usage, customer demands were still driven by oil-based transportation vehicles. The shift towards electric cars was a challenge in itself. A shift towards electric car usage required change in the preferences of the consumer, large enough to ensure sustainable growth of the business. High Risk Use of renewable energy source Poor customer adoption Low Risk Reengineering of the battery Switching stations availability Low Uncertainty High Uncertainty Figure 1. Scenario analysis matrix. Figure 1 shows the main scenarios relating to Better Place at the present. The question of acquiring a sufficiently large customer base is a very important one. Instead of revamping the battery of the electric cars, Better Place instead decided to pursue a strategy that meant to sell miles to drivers based on the distance they usually travel. This is a risky as well as highly uncertain scenario where poor customer adoption of the product threatens to fail the company. Another scenario to consider is the availability of switching stations for the subscribed drivers. As the product is to gain acceptance among consumers, there is a need to expand the network of switching stations to ensure accessibility to a battery recharge service. This is similar to having fueling stations at regular intervals. Except that this concept is new and might not have gained as much popularity to trigger dense networks of widely present switching stations and recharging centers. Answer (2) Figure 2 shows the various stakeholders involved with Better Place and how they are positioned in terms of their power and interest in the venture. The key stakeholders include customers, government, automobile manufacturers and environmental groups. High Power Government Environmental groups Low Power Automobile manufacturers Customers Low Interest High Interest Figure 2. Power-Interest Matrix for Better Place. The government is a key player in the scene because of its powerful influence n making or breaking the venture. This is because a large part of the business depends on government support in terms of licensing, environmental policies, energy partnerships, and so on. It is the single largest authority that guides almost every aspect of the venture’s sustenance. Next, automobile manufacturers in the personal transportation industry are also key actors in the system as they are working on a completely different concept of transportation. Although most automobile manufacturers have adopted ways to reduce emission of greenhouse gasses, the business model of Better Place differs greatly from other auto makers in the industry. It can also be observed that no other auto manufacturer can be rightfully categorized as a direct competitor for Better Place in terms of the market offering and the model. Hence, auto makers have little interest or power to influence Better Place on a large scale. Customer groups possess fairly ample amount of power due to their purchasing decisions and preferences. Additionally, they are one of the major stakeholders of Better Place as the company works to cater to all sorts of driver profiles. As such, customers must be kept informed according to the power-interest matrix. Then come environmental groups are major players in the situation, who can help advocate more environmentally friendly policies that can advocate the adoption of electric cars. This move can spur customer shift towards Better Place products thereby impacting the product’s acquisition and hence, the company’s sales. Hence, customers are the subjects of the power, government is the context setter, and environmental groups are major players, while other auto makers constitute the crowd (Bryson 2004, 112). All the stakeholders are involved with Better Place in some way or another and the venture needs to monitor, manage, inform, and satisfy. Bibliography Bryson, J. (2004). Strategic Planning For Public and Nonprofit Organizations (3rd ed.). San Francisco: Jossey-Bass Publishers. Read More