In the paper, the point of view will be Google’s. Questions that will be answered in the paper including but not limited to the economical and technical viability for Google to produce Google car in a large scale, reasons that Google will succeed or fail, the best strategy for Google to adopt. For the industry analysis, Porter’s five forces (Appendix 1) will be used to explore the environment of the automobile industry and if Google will be able to enter the industry and produce automobiles on its own. The financials of Google will also be analyzed to prove if it is economically capable of investing enough capitals in the system and manufacturing automobiles. A SWOT analysis and discussion of the competitive advantages of Google will also be included to examine the internal capability of Google.
Since the idea of a Google Car was introduced, the reviews have been polarized. here are plenty of positive comments about Google Car. Google’s strong and enormous database, especially data on maps is greatly applauded and trusted to be useful and essential in developing the driverless car. On the other hand, there are skeptics who question Google’s ability to produce the automobiles because car building requires certain expertise that Google does not have. In addition, pressures from automobile manufactures, unions and insurance companies might hinder the certain legislations of manufacturing driverless cars to be approved by Congress. The actions that Google should take to rebut the doubts that public and critics have about the functions, utility, safety, etc. about the car will also suggested in the paper.
The most crucial question that the paper will try to answer is what is the optimal strategy that Google should do with Google Car. There are many possible outcomes including allying with an automobile manufacturer, purchasing a manufacturer, selling the technology of its driverless car system to interested manufacturers. All three strategies will be discussed and one final solution will be suggested for Google.
1. Muller, Joann. “Will Google Kill The Auto Industry? No, And Here’s
Why”. Forbes.com, January 25th, 2013. Accessed April 2nd,2013. http://web.ebscohost.com/ehost/detail?sid=00fae55e-c3c5-4b78-bd6e-326f38265257%40sessionmgr10&vid=2&hid=23&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=85142822 2. Academic Minds (2012). Automotive Industry Analysis-GM,DaimlerChrysler, Toyota, Ford, Honda. Accessed November 27th, 2012 from: http://academicmind.com/unpublishedpapers/business/management/2004-11-000aaa-automotive-industry-analysis.html 3. IBIS World (2012). IBIS World-Car and Automotive Manaufacturing. Accessed November 26th, 2012. http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=826 4. Investopedia (2012). The Industry Handbook: Automobiles. Accessed November 26th, 2012. http://www.investopedia.com/features/industryhandbook/automobile.asp#axzz2D0aOFEIL 5. Helft, Miguel, “Larry Page looks ahead”. Fortune, 00158259, 1/14/2013, Vol. 167, Issue 1. Accessed on March 29th, 2013.
http://web.ebscohost.com/ehost/detail?sid=dac8d930-8af3-40fa-91e3-71f73362d61a%40sessionmgr111&vid=2&hid=121&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=85623367 6. Brown, Alan S. “Google’s Autonomous car applies lessons learned from driverless races”. Mechanical Engineering. Feb. 2011. Accessed 29th March,2013 http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=405dc68c-19c8-4554-addd-6e6b7371c8fa%40sessionmgr11&vid=6&hid=10 7. Higgins, Tim. “Will driverless cars become the new road rage?” Bloomberg Businessweek. December 1st, 2011. Accessed on 1st April.
http://www.businessweek.com/magazine/will-driverless-cars-become-the-new-road-rage-12012011.html 8. Brown, Jerry. “California legalizes driverless cars” Electronics Weekly. October, 2012. Accessed 1st April. 2013.
http://web.ebscohost.com/ehost/detail?sid=405dc68c-19c8-4554-addd-6e6b7371c8fa%40sessionmgr11&vid=5&hid=10&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=82337032 9. Knapp, Alex. “Nevada passes regulations for driverless cars”. February, 2012. Accessed 1st April. 2013
Preliminary Industry Analysis
A. Competitive dynamics within the industry
The automobile manufacturing industry t is often considered as an oligopoly, where there is a medium to high industry concentration and only a handful of key players exist: Toyota, General Motors, Ford Motor, Hyundai-Kia Automotive Group and Honda (IBIS World 2012). “Automakers compete primarily on the basis of price, fuel economy, reliability, styling and utility” (IBIS World 2012). B. Bargaining power of suppliers
Due to the numerous parts that are required to produce an automobile, there are many suppliers in the supplying business and they are quite segmented, thus the bargaining power of suppliers in the automobile industry is extremely low. C. Bargaining power of customers
In the automobile industry, customers hold medium amount of power. Consumers account for a significant or almost all of the industry’s outputs and revenues, and there is low cost involved in switching, the companies have to accommodate their tastes and needs. There are numerous factors that can alter their buying decision: brands, appearances, quality, functions, environmental effects and prices. Due to different demographics of the consumers, the manufacturers have to produce various models with people’s different needs. D. Threat of New Entrants
The threat of new entrants is low because there are high barriers to enter the industry. First of all, in order to be able to compete in the automobile industry, a company has to produce massively to achieve large economies of scales to make products accessible and competitive, and since it requires enormous amount of specialized and sophisticated capitals and manufacturing facilities and experienced workforce to mass-produce, there is a huge amount of upfront cost (Academic Minds 2012). In addition, not only the manufacturing startup cost is high, the cost of research and development
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