Lumos solution
- 1. Institute: IIT Guwahati Member: Prabal Jain Contact: 8472058086/ prabaljain676@gmail.com Unleashing the Innovation: Delivering more than just a car
- 2. 1. 2. 3. 4. What will it take for Chevy Volt to be successful : 3-8 Risk of this venture: 9 Cost of failure: 10-11 Cost of not pursuing this project: 12-14 Index
- 3. Status Quo GoalIssues RECOMMENDATION General Motors need to follow a 3 phase strategy: • GM suffers repeated loss in 2007 and 2008 for about $14 billion. Forced to beg public funds from govt. • Potential gamble on "Chevy Volt". Project launched in 2007 with an aggressive goal of market introduction in 2010. • GM had already incurred one failure of EV1. Besides, it had already invested billions in developing fuel cells. Rigid Planning procedure followed by the reluctant Board Company suddenly did not want to switch gears and move to Lithium ion batteries. • Success of the car which means high profit, happy customer and increase of the market cap. by increase in market share. 1. 2. 3. Product Innovation Cost effectiveness Aggressive Go to market strategy & marketing plan • • Executive Summary
- 4. The stage wise implementation of product innovation followed by cost effectiveness and then aggressive go to market strategy and marketing plan forms the basis of the strategic success for the "Chevy Volt". • Phase I ‘Make product so innovative that audience cannot resist buying’ Systematic Product Innovation methodology • Phase II ‘Try to minimize Cost Effectivenes s the cost so as to increase market share’ Go to market strategy and marketing plan • Phase III ‘Robust marketing & advertising plan to penetrate market effectively’ 3 Phase Strategy
- 5. Phase I What does innovation mean? Advantages • Innovate to enhance/update • Innovate to restructure • Innovate to renovate • Delivering upto customer's needs and ensured success • Increased savings & reduced inventory costs Improved capital utilization & automated control • • The primary power source is a large lithium ion battery. The battery can be charged by plugging it into a wall socket for six hours; when fully charged, it should fuel the car for more than 40 miles and should make up for most people’s daily commute. • In case of exhaustion, a gasoline engine kicks in, providing both drive power and recharging the lithium ion battery. GM estimates fuel economy will be over 100 miles per gallon which is way too much better than SUV (12 miles/gallon) or its competitors. Lithium ion battery cum reserve gasoline powered engine Product Innovation Methodology
- 6. • Global Warming is becoming an increasing concern, and it seems possible that tighter regulations designed to limit carbon emissions would be introduced in the future. Automobiles powered by internal combustion engines could hardly escape this trend. Chevy Volt is designed in such a way so as to have the major power consumption from Lithium ion battery thus minimizing the combustion to total downside and preserving the ecosystem. • • • • • • Federal tax credit of $7500 to customers' becuase the car is "environment friendly" is a major breakthrough. Cost of charging car overnight from power outlet < cost of filling it up with gas at $4/ gallon (surging prices). Groundbreaking surge in fuel economy from 12 miles/gallon to 100 miles/gallon. Cost of manufacturing of Lithium ion battery was decreasing leading to more good prospects for GM. Prius had fuel cell technology which was different from Lithium cell. Hence, "Chevy Volt" will be first of its kind. Bottomline: For "Chevy Volt" to be successful, it should deliver all as promised or better considering the unleash of the innovation undertaken by GM in form of above mentioned points. Analyzing the trends Environment friendly car
- 7. Phase II • Lean Approach Cutting costs and delivering value for money to consumers without reduced quality with minimal waste generation Tools for Lean Methodology Target • JIT (Just in Time) • TPM (Total Productive Maintenance) • TQM (Total Quality Management) • VSM(Value Stream Mapping) • Delivery of a car with minimum waste and maximum utility • GM should try to minimize the cost of goods and services (COGS) so as to increse their net profit. • Tax credit from the Federal Dept. adds to this and hence is an important point since the cost comes down to $ 22,500-$ 32,500. High Pre-Lean Core Styles Lean Low Poor Good Cost Effectiveness
- 8. Phase III • GM should definitely consider the fact that the "Tesla Motors" is also on their way for the creation of the "lithium sports car". Hence, GM's strategy should ensure that it launches "Chevy Volt" before Tesla does so. • Proper segmentation and analysis should be performed by GM. They should also ensure in depth penetration of target market for huge profits and hence success of "Chevy Volt". • At the pinnacle lies the boom of internet, hence onlined pre-launch order booking should be ever necessary feature which should be definitely incorporated in plan. • Promotional means should be leveraged and squeezed to take advantage of each and every opportunity such as: a • • • • • Detroit Auto Show Ads and campaigns Newspapers, magazines, radio etc. Free test drive campaigns Social Media Marketing Go to Market Strategy & Marketing Plan
- 9. • This venture is very RISKY. Consider the following points to know why it is so: GM's existent loss: Market conditions that'll affect: • • • • $14 Billion loss in 2007 & 2008 Has to repay public fund debt. Invested billions in fuel cell • Global financial crisis leading to devaluation and dropping of sales etc. Oil prices declined. People will be willing• Still struggling with loss of EV1 to drive non-electric car. Reaching Bankruptcy: Competitive threat/risk: • Tesla manufacuting the same lithium sports car. • Toyota has grabbed a good market share with Prius. Management: • GM is reluctant• Thi s project is the to switch riskiest project because the outcome of failure is direct bankruptcy considering GM's financial position now. stream from fuel to Lithium. • Reluctant board persuade. difficult to How risky this("Chevy Volt") venture is ?
- 10. Considering the fact that this venture is very risky, the cost of failure can be disastrous and terrifying which may even lead to bankruptcy of General Motors. Let us have a detailed analysis by looking at the financials of the GM, currently: Liabilities Assets • • • • $14 billion Fuel cell technology RnD Public fund debt from Govt. EV1 loss's liability • • • Liquid cash Inventory (very less) Property (Warehouses, plants, offices etc.) • Intangible assets (Patents Trademark) • Treasury stocks (if any) & Shareholder's Equity • Common Stock (downside) • No retained earnings • No dividends Costs of failure
- 11. A thorough analysis of above balance sheet depicts that GM is already in deep loss and also has a very serious market condition. Also the liabilites are very stretched and long term indicating: • GM may take good amount of time to recover • Poor market situation reveals the non-eligibiltiy of any fund approval from equity market in future. Also, if "Chevy Volt" is a failure, it will lead to the withdrawl of shares and GM may dissolve. • Hence, the anticipated cause of failure might be • Bankruptcy • Disastrous financial status of GM Costs of failure
- 12. If company chooses not to pursue this project (2007) then the anticipated situation might be descirbed as follows: Current Loss: • Bad financial condition in 2007 & 2008 leading to loss of $14 Billion. • Invested billions in fuel cells • Loss due to failure of EV1 Global Financial Crisis: • GM cannot expect to raise money through stock markets. • Oil prices decreased • Sales also decreased Considering the current situation, source of revenue(significant) is: now that the GM has declined the project, its only • Sale of existent products: There will be low sales of existent products (SUV etc.) due to financial crisis. Again, since there is a decrease in oil prices, people will prefer to buy oil driven cars, but the sales will remain low due to poor market conditions. Costs of not pursuing this project
- 13. Now, since the company will work towards fuel cell, there may be 3 cases depending on whether the company is successful in innovating a product with fuel cells or not: • Success: If GM is successful in innovating a product with fuel cell technology then it may charter its way back to profit and hence may become stable with the passage of time. But still, • GM will face tough competition from its competitor "Prius" which has significantly occupied a very good market share. • Recovery will be too slow for GM considering the financial crisis and very weak profits. • Failure: This may lead to fatal conditions such as: • • • Heavy loss for the GM Stringent market conditions which may lead to collapse of GM. Can lead to bankruptcy Costs of not pursuing this project
- 14. • Slow Death: A third situation in which GM may take too long to respond in case of • • • • • fuel cells and within this period, following may happen: Exhaustion of funds Decline of market price of share due to poor performance Withdrawl of potential employees Increasing loss of market share becuase of competitors A SLOW & PAINFUL DEATH of GM. Thi s too particular situation often occurs when company does not innovate or takes long to innovate which may eventually lead to bankruptcy. As it is said by Steve Jobs, "Innovation is the only way to win" Costs of not pursuing this project
- 15. Thank you!