Automotive

  • FordA corporate strategy article by Thunderbird students By Anne Campeau, Elizabeth Clark, Jay Jacobsmuhlen, Kyle Scott and Chad Winters

    The future of the automobile clearly does not favor the traditional combustible engine. Can Ford adjust and prosper in the new global green environment?

    Josh Watson, a 35 year old accountant from Akron, Ohio is looking for a new car in the coming model year. Watson and his wife, Lori, are looking for a car with style and safety. But most important, Josh was to see the numbers, Watson wants to be sure he gets good mileage. Lori’s priorities mirror Josh’s but she also wants a car that will be environmentally friendly. The Watsons, lifelong Midwesterners, want to buy American if they can and Lori has a personal affinity for Ford, since her father worked for the company for over 25 years. They both have heard that Ford is working to minimize the environmental impacts of motor vehicles and they have been impressed with some new vehicles Ford has been offering. Having done some research on new cars, Josh and Lori visit a local Ford dealer, Park Ford in nearby Tallmadge, Ohio.

  • TataA corporate strategy article by Thunderbird students.

    Tata has their sights on global expansion, but can they replicate their domestic success in advanced markets? Tata’s recent success with Jaguar Land Rover (JLR) certainly is a start. Acquiring JLR during the global economic recession was a big risk for Tata. The acquisition strained Tata’s cash supply and required Tata to raise billions in debt to finance the purchase. Through a series of cost cutting measures, Tata led JLR to recovery which now contributes handsomely to Tata’s healthy profits.  JLR gave Tata direct access to the luxury car market in developed countries like Europe and the U.S.

    In parallel to Tata’s effort in advanced markets, Tata has historically aggressively penetrated markets similar to India, where they are more comfortable and experienced. By focusing its international expansion on countries with markets similar to India, Tata has been able to leverage its market expertise in these emerging markets.

  • gap-china476A corporate strategy article by Thunderbird students Alistair Booth, Stephen Kill, Adeola Shabiyi and Douglas Stetzer

    Tesla caught the eye of the consumer when they released their Roadster in 2008. The Roadster, a true fully electric super car with a practical driving range, boasts a 0 to 60 mph acceleration time of less than 4 seconds and can go almost 250 miles on a single charge.[i] Tesla, however, has not been able to turn its buzz or technology into exciting growth. In 2010 Tesla reported annual revenues of $116.7 million, only a 4% increase from 2009 and a net loss of $154.3 million in 2010, almost three times the net loss of 2009.[ii] To maintain operations and development of new products and technologies, Tesla has been able to garner modest investment through venture capital, US government loans, a successful IPO, and investment from competitors and suppliers.

    Tesla and its investors are eagerly awaiting the launch of its new luxury Model S in 2012. Tesla has already pre-sold more than 3,000 Model S cars and plans to ramp production up to 20,000 cars a year.[iii] At an average sale price over $50,000, the Model S represents a potential $1bn a year or more of revenue for the company. Investors however, have pegged Tesla’s market cap at $2.3bn and still have doubts about Tesla and the potential success of the Model S.

  • Volkswagen in BRIC countriesThe automotive industry is in transition. Growing environmental concerns and ever increasing oil prices are accelerating a shift from gasoline to electric vehicles. Volkswagen AG will be ready to meet the surge in demand for these “green” vehicles (hybrid, electric, biofuel cars) and for the components that are used to make them.  Development of small, inexpensive environmentally-friendly vehicles and continued expansion of manufacturing and selling these vehicles in emerging markets are keys to the company’s success.  These two mutually-reinforcing activities give VW advantageous positioning in the intensely competitive automotive industry and will propel it to achieve its ambitious goal to become the largest automobile manufacturer in the world by 2018.

  • BYD global strategyBy Ajay Viswanathan, Jaseem Pookandy, Luca Rassenti, Pragya Uprety, Tsu-Yu Hsia and Vivek Mehta

    Shenzhen: Li is driving a group of passengers in his shiny new BYD E6 to the Bao’an International airport. Heavy traffic has depleted his E6 of all the charge and, to his dismay, he cannot find a single charging station in the 10-mile stretch to the airport. Li soon realizes he will face this problem each day, his business being severely impacted by the lack of infrastructure in his city. He has paid a steep price for an electric vehicle (EV) but now regrets the investment.

    San Francisco: Micheal, a Silicon Valley entrepreneur is evaluating options for his new “green car” purchase. At the top on his list is the Prius, but he also is contemplating waiting a little longer for new entrants from Nissan and the new Chinese auto giant, BYD. He is slightly skeptical due to the negative perception in the United States about Chinese automobile manufacturing and BYD’s problems and chooses the Prius hybrid, which works out just fine for the long weekend trips with his girlfriend.

    These scenarios sum up the problems for BYD and the electric vehicle (EV) industry at large. While it seems as though the technology is promising, China is not ready for it. China’s income levels and infrastructure cannot yet support the paradigm shift to EVs at this point in time.  While the west is much more ready for the shift to EVs, it seems as though BYD is not prepared for the quality and safety demands Western markets will impose.  The negative perception of “Made in China” will not be changed overnight.

  • Ford Motors CEO Alan MulallyBy Han-Li Chang, Juan Carlos Hussong, Karan Singh, Milena Flament, Rohan Ghotage and Torry Schoenfeld

    During its early years, Ford earned a good reputation thanks to the T-model, the first affordable, mass-produced car in automotive history. Over time, Ford’s reputation became notorious for its emphasis on affordability at the expense of quality and innovation. The 1970 Ford Pinto is a good example of bad design and low quality. Through a series of low-quality cars, Ford’s reputation deteriorated.

    As an editor of Carnews.com, a major car magazine in Taiwan, Han-Li Chang tested all of the new cars sold in the automotive market in order to present fair comments about them to aid in consumer purchasing. At that time, it was difficult to write anything good about Ford. Han-Li discovered rusty car frames and flawed transmissions on brand new Fords. While Japanese competitors were flourishing with their innovative high quality cars, Ford was still not prioritizing quality and technology.

    The automobile industry is, and has been, highly competitive. The big three American automakers, General Motors, Ford and Chrysler, have for many years adopted similar strategies. They focused on delivering the American dream car: Roomy, comfortable, big engines, and lots of horsepower.  In recent years the big three shifted many of their resources from small and mid-size cars to satisfy the SUV craze of the domestic market. Very few resources were allocated to innovation or R&D. Fuel efficiency and hybrid technology were largely ignored.