No Compromise
Paul and Hair realized that they needed answers to these questions in the coming days. This case study discusses the start-up, origins and strategic options facing an innovative set up and start up in automotive market and in the seat design. With the domination of the incumbent large suppliers serving the top 3 leading tier-one automakers of U. S. , Engineering faces several challenges as it seeks to introduce its new seating technology to the market.
The case can serve as vehicle to discuss important themes such as technology and business strategy, invention and innovation, bringing technology to market and profiting from innovation. Olio’s should make a Joint venture with Bistros. Olio’s has made a seat design naming “No Compromise” with progress on cost, weight and performance compared to the conventional design and also the existing all-belt-to-seat (BATS). After many functional prototypes and computer aided structural analysis, a perfect design was achieved, but few of the critical items had not yet been patented properly.
It would be extremely difficult for a brand new entrant to be ready with patented seat design and unveil the NC seat as few of the critical items had not yet patented properly and also because of some internal political issues.
So, with out any help from the established industry it won’t be possible for Olio’s engineering to prototype and test their NC seat as it is not feasible financially and many other issues. So, Bistros seating which is a wholly owned subsidiary of Johnstown America industries, ‘NC, Inch was looking in the development of all-belts-to-seat(BATS) would be the best option for Olio’s to Joint venture with.
If Olio’s engineering make a licensed agreement Myth Bistros, they can prototype and test their NC seat, make few more full time engineers work on the design and also for the prototype assistance, can make sure the design satisfies FUMES requirements etc. As Olio’s engineering Joint venturing with Bistros, they can overcome the design- engineering related challenges and can unveil the NC seat officially. This initial uplift from Bistros is essential to give a presence of NC seat in the automotive market.
But the idea of expanding the NC seat to the entire automotive industry wont be possible unless Olio’s engineering collaborate with tier-one or tier-two automotive suppliers. So, in the light of above discussion, it is necessary that Olio’s should partner with a tier-one or a tier-two automotive supplier because, at the entry level as a new entrant, It would d be extremely difficult to compete Witt the incumbents particularly in the manufacturing and distribution. In the design and development part of the ‘alee chain, entry barriers were somewhat lower. Increasingly, sophisticated software applications facilitated the development process. O, a new entrant could try to partner with one of the tier one or tier two suppliers or with an MOM, develop and rakes the seat in a Joint venture or licensing agreement with substantial resources Mould significantly reduce technological and market risks.
Few of the alternatives can be discussed here based on the case study whether it should partner with a tier-one or the tier-two automotive suppliers, consequences, advantages and ad’s-advantages for the Joint venture. Option 1: Lets take a option of Olio’s engineering Collaborating with tier-one seat supplier Company who will have huge scale advantages in manufacturing and distribution.
Moreover, they were at the far end of the learning curve In terms of sign, development and manufacturing processes. For standard products and Incremental innovations, this provided them with a significantly lower cost positions and a shorter time to market. Moreover, their strong ties with the Moms constituted a positional advantage that was almost impossible to replicate for a new entrant, and also easier to get US federal safety standards which plays a major role in finalizing the product.
The disadvantages may be in the case of having less control over the core BATS technology and low profit margin.
It would also limit the ma reek size of Olio’s. Option 2: Olio’s to collaborate with the multiple Memo’s( Original equipment manufacturer’s). If they have direct dealings with the Memo’s they will be having advantages in achieving high market share, sufficient resources, better strategies and also a secured market with less financial stress. But it has got the disadvantages too, such as having less control over the BATS technology and also having the limited market exposure with the lower margin levels. Option 3: Olio’s to enter as a tier-two/ tier-three supplier of seat mechanism or seat structures.
In general for a new entrant, it was one option to enter as a tier-two supplier of seat mechanism or seat structures to avoid major capital investments and also manufacturing could be outsourced to one of the many seat components and system manufacturers. The advantages of this strategy was that the new entrants could supply its technology to all tier-one suppliers. Moreover, the new entrants could keep greater control over its core BATS technology. How ever, no capabilities were built in integrating complete seat systems.
This could be a disadvantage as piece of the final product’s total value-added compared to a tier-one applier who in-sourced BATS technology and integrated it in to a complete set systems. Moreover, the lack of manufacturing and marketing expertise of a new entrant significantly increased the technological and market risk.
Product delay because of large capital requirement, lack of competence in manufacturing, distribution, lack of access to Moms, implementation of a SIT delivery. In all the three options discussed above, it says that Olio Engineering should partner Ninth terrine or tier-two suppliers or with an MOM.
Although it would limit the market size of Olio, I believe the advantages arising from increased resources and decreased risk would remove that detect out- at least in the initial phase. All the options got its own advantages and disadvantages in some or the other areas, if we consider the option one and two, the main disadvantages are low margin levels and the lower control on the core BATS technology. But in the option 3, even though there is a gain on the control on the BATS technology, there is significant increase In the technological and market risk which is not a safe challenge for the new entrant.
So, he best option Olio’s to consider is to partner with one of the tier-one or tier-two suppliers or with an MOM, develop and market the seat in a Joint venture or through licensing agreement with Bistros. This strategy would provide the newcomer with substantial resources and significantly reduce technological and market risks. Later after productive increase in the market share for the NC seat, Olio’s engineering can upgrade to enter the automotive marker t as a tier-two or tier one as they will be having positional advantages in relation with the Memo’s and also the tier-one and tier-two companies.
