Feasibility Analysis Of Intel’s Entry Into Electric Vehicle Industry

Analysis of the Electric Vehicle Industry

Question:

Analyse the electric operated vehicles sector in order to determine the feasibility of entering into the new industry. Discuss the size of industry, and the value factors affecting b2b business environment.
 

Intel is the largest manufacturer of semi conductors in the world. The business model adopted by Intel is based on business to business (B2B) i.e. it sells its products primarily to other computer manufacturing companies. However, the management of the company has decided that it would enter into the battery operated vehicle segment as a part of its strategy to increase revenues and diversify business (Grosjean et al. 2012). Therefore, the purpose of this report is to undertake the analysis of electric operated vehicles sector in order to determine the feasibility of entering into the new industry. The report also discusses the size of industry, and the value factors affecting b2b business environment. In addition, the report also undertakes the analysis of key competitors and customer buyer relationships in order to successfully develop marketing plan. Further, the report has also discussed about the future growth potential of the company through forecasting techniques followed by a brief implementation plan.

Electric car manufacturing industry is in nascent stage, the industry comprises of various companies that manufactures electric vehicles, superchargers, and other spare parts specific to the need of the industry.

Intel as a part of its growth strategy has decided to enter into the electric car manufacturing industry to develop high-end vehicles systems that would be marketed primarily to other business and organizations (Carley et al. 2013).

Electric vehicle industry is expected to grow at a rate in next decade and by 2026 it is furcated that the industry would comprise 12% of the overall automobile industry. Currently, Tesla motors have 70 % market share in the electric vehicle segment, but with the entry of major automobile industry such as Ford, Hyundai, BMW, etc. the industry is experiencing greater investment and growth. Intel to establish would require strategies such as product differentiation or cost leadership. 

A through competitor analysis for Intel’s new business plan would be completed by undertaking following steps discussed below –

Competitor Identification: The major players in the electric car manufacturing industry are – Tesla Motors, Toyota Prius, Toyota Rav4 Hybrid, Chevrolet Volt, Zapworld, smart cars, etc.

Competitor analysis is a crucial component of industry analysis as it provides information about the industry in which Intel is planning to operate i.e. electric vehicle manufacturing segment.

Strengths of Competitors	Weaknesses of Competitors
Most of the competitors of Intel are well established automobile manufactures Economies of scale Large production capabilities Better inventory management and supplier relations Due to first mover advantage and brand equity among the customers competitors have greater market share that Intel would have to chip in to establish itself in the industry.	Over dependence on gasoline operated cars to maintain and develop market share Moved into the electric vehicle to mark their presence in the industry Lack of desired level of investment in Research and Development activities exception being Tesla Motor

Therefore, it is evident from the above analysis of competitors that Intel would have to heavily invest in research and development activities, devise better supply chain capabilities and also in marketing communications to spread awareness about the brand and create positive image in the market (Calabrese 2012).

Customers are very crucial factor that need to be considered before developing a marketing plan as it is the customers for whom the company produces or manufactures its products. For Intel’s battery operated vehicle segment would be the government (Wesseling et al. 2014).

Competitor Analysis

The main customers can be primarily consists of three broad sectors as –

Government: Intel aims at selling its electric vehicles to government as the company plans to capitalize on government commitment to support and implement environmentally vehicles.

Commercial enterprises: Intel can also sell its vehicles to other commercial organization that can market its vehicle to different markets and to different end users. Since Intel would require huge investments to implement its own supply chain to meet the demands of the various customers that are geographically spread, selling its products to commercial enterprise would enable the company to enter into different markets more conveniently. 

Environmental analysis is a strategic tool that enables to identify various internal and external elements that affects business operation of an organization discussed as –

PESTLE analysis

Political factors: The political factors affecting the business preposition of Intel to manufacture and market electric cars are positive as the Australian government is committed to generate employment in the country. In addition, the proposed business is expected to bring Foreign Direct Investment (FDI) into the country and with successful implementation of business plan would be a source of revenue generation for the country (Afroditi et al. 2014).

Economic factors: For Intel to foray into the battery operated vehicle segment, this an appropriate time as the company would be benefited by various firefighting approach adopted by government to stabilize the economy such as lower interest rates, special economic zones and other infrastructural support and also the fast pace of economic growth (Al-Alawi and Bradley 2013).

Social factors: The standard of living in the Australian population is high and people are well educated. In addition, automotive vehicles are seen as necessity rather than luxury, therefore, it can be inferred that the social factors would contribute positively for the development of electric cars by Intel (Hamilton and Webster 2015).

Technological factors: Intel can have an upper hand in the industry as the company is known for providing cutting-edge technology to its customers. Additionally, the company has an opportunity to establish itself in the market as the concept of electric cars is still in development stage and Intel with its drive for innovation can dominate this segment (Moritz et al. 2015).

Legal factors:. The various laws that needs to be complied are – environment protection law, privacy laws, employee protection act, worker’s health and safety, anti discrimination laws, etc. (Hollensen 2015).

Environmental factors: Intel is in favorable position as it plans to manufacture and market battery operated vehicles that runs on cleaner energy as opposed to gasoline operated vehicles that emits pollutants and degrades the environment (Vitali 2012).

Porter’s five forces

Porter’s five forces is a tool that enables a business to determine the level of competition in the market and overall attractiveness of the market (Ambec et al. 2013).

Threat of new entrants (LOW): battery operated vehicle is in nascent stage and have fewer players. Therefore, the battery operated vehicles poses little barrier to the new entrants as no company is well established and any organization that have financial capabilities and well devised business model that can be effectively implemented by the business (Barringer 2012).

Customer Buyer Relationships

Threat of substitutes (Medium): The substitutes of battery operated vehicles are many as for customers the benefits or utilities is similar whether they are using battery operated or gasoline operated vehicles. Therefore, the battery operated vehicle also faces competition from gasoline-operated vehicles and also public transport mediums (Rothaermel 2015).   

Bargaining power of customers (High): The customer have ultimate power that determines the success (or failure) of a business, the reason being that there are many options available for the customers to choose from. Therefore, it is customers who dictates their expectation and demands that has to be taken into consideration by any company to succeed in the market (Cuellar and Gomez 2013).

Bargaining power of suppliers (Medium): Battery operated vehicle manufacturing segment is highly dependent on its suppliers as the manufacturing industry requires various components to manufacture the end product. However, this dependency is reducing as many supplier companies have entered the market and the battery operated vehicles have various options to source its parts and components (Magretta 2013).

Industry rivalry (High): The battery operated vehicle industry is marked by high level of inter industry rivalry as size of this sector is relatively small and many major automobile manufacturing is trying to increase their market share by targeting the same customer groups (Upson et al.2012). 

Segmentation: In order to identify the potential customers, the company needs to segregate the target market into different categories to identify the most profitable segment of customers. Customer segmentation can be discussed in context of Intel’s proposed business as –

Macro segmentation

1. Geographic: the buyers of electric vehicles are vastly segregated in terms of geographical distribution. The major customers of the Intel are government and private commercial enterprises that can be segment based on their geographical location or area of their operations.
2. Customer type: the customers of electric cars can be divided as business-to- business customers that includes – government agencies, institutions and other business organizations. Other customer type includes b2c customers that the company is not planning to target, as it will require developing its own chain of suppliers.

Micro segmentation

1. Purchasing criteria: b2b customers are more concerned about the value they derive from products purchased as b2b businesses involver bulk purchase of items. Other purchasing criteria that influence customers are quality and speed of service delivery, customization of products as per the unique need of the buyers, and ability of the seller to respond as per the changing demands of the customers.
2. Purchasing strategy: electric vehicles are a newer concept in the market and Intel would require persuading its customers about the benefits that the company provides. Therefore, Intel can segment its buyers on the basis of their purchasing strategy i.e. whether they purchase items as one time purchase or systematically places their order as per their requirements.

Targeting: Intel can target government agencies as its customers to take advantage of the government’s commitment to move towards cleaner or greener forms of energy consumption. Apart from that large institutional customers can also be effectively targeted to take advantage of increase presence in the market and increase revenues.

Positioning: is a premarketing concept that aims at creating a favorable impression of the business in the minds of the customers. Positioning of company’s product can be achieved through educating the customers about the benefits of the products through seminars, conferences and other forms of presentations. Appropriate brand or product positioning enables the organization to attract more customers and creates a positive brand image of the company in the market (Fleisher and Bensoussan 2015).

There is huge growth potential for battery operated vehicles in the near future as most of the vehicles that are running on the road today is fuelled by petroleum products (gasoline, petrol, diesel). However, the petroleum products are depleting at a rapid rate as these are non renewable sources of energy. It is predicted that by the end of 2050 petroleum products would be completely exhausted if its consumption remains at the current levels In this context, it can be said that in the future battery operated vehicles would dominate the market as they run on renewable sources of energy and does not degrade the environment (Kolios and Read 2013).

Intel being one of the most reputed brands in innovation and technology sector can take advantage of the situation by developing high performing battery operated cars. Therefore, by successful development of battery vehicles and appropriate positioning and marketing can grow in this sector and increase its revenue as well as help in sustainable development of the society. There it would be profitable for the company to enter into this segment and take advantage of the opportunities present in the business environment (Aithal 2016).

Future Growth Potential

From the above discussion, it can be said that there is huge opportunity in the market for Intel to grow. But it would require proper implementation of the marketing plan, this can be discussed as –

The marking mix of the company includes product, price, place, promotion. The product of the company is the electric vehicles that has the USP of being environmentally friendly and operated by battery. The pricing is the other important marketing that affects the success of the company. Intel can adopt cost leadership strategy to by providing value added products at cheaper cost then the competitors, other pricing strategy can be price differentiation. The distribution channel of the company can be outsourced to third party service providers before the company establishes itself in the market. Promotion is the last but most important aspect of the marketing mix. The company can engage with the customers by online advertising, social media management, and sponsoring events.

Other important part of implementation is the estimation of financial requirements, budget scheduling and evaluation of the current performance and taking appropriate actions in case of deviations.   

Conclusion

From the above discussion, it can be concluded that electric car industry is in growth stage and there is huge opportunity in the market that is expected to grow at the annual rate 12% and gain 20% of the overall automobile industry that can be utilized by the Intel to convert them into its own advantage. From the analysis of inter.nal and external environmental forces it is clear that the overall environment is supportive of electric car industry as petroleum products are depleting at a faster rate and the world requires such cars that can run efficiently on renewable energy sources. In addition, Intel Company has all the resources and organizational competency to manufacture and market high-end electric cars, that would be beneficial for both the company as it allows them to diversify their business and provide solution to the environment degradation by gasoline fuelled cars. 

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