Term Paper: Zap and the Electric Vehicle

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[. . .] Increase in the industry's sales are also due to several other less than expected customers. The police and law enforcements agencies, for example, have recently turned to EV vehicles, because these are easier to maneuver in the busy cities. EV vehicles are also means for elderly citizens to get around and have a certain independence despite their physical weaknesses.

In my opinion, from what the case study has mentioned, the EV vehicle market seems to be rather segmented, both in terms of competitors and products. In terms of products, as I have previously mentioned, there is a quite large and differentiated category of EV vehicles, ranging from heavy industrial equipment to military equipment, such as tanks, from leisure vehicles (like electric bicycles and golf carts) to electric automobiles.

In terms of competitors, each of these submarket segments provides a high number of companies and manufacturers. Only for the electric bicycles we can mention at least 20 producers. Many of these are located in Taiwan or China, with the competitive price advantage deriving here from.

III.3. Competition Analysis - Porter's five forces model

Porter's five forces model refer to:

The degree of rivalry

The threat of entry

The threat of substitutes

Buyer power and Supplier power.

We will be referring to each in part in order to have a brief industry analysis from Porter's point-of-view.

The degree of rivalry

There are several elements that may determine the degree of rivalry in the industry. One of them refers to the number and size of the players in the market. We may agree, for example, that a reduced number of competitors will tend to decrease the degree of rivalry, because the companies will tend to recognize their interdependence. Similarly, if an industry has a large player and several smaller ones, the degree of rivalry will also tend to be smaller, because the larger player will tend to impose his way on the market. Where do we stand on the EV market?

In my opinion, we are rather in a situation where we have a high degree of rivalry. This may be motivated by several arguments. First of all, the EV market is formed of several components, including the electric bicycle market, the scooter market, the golf caddies market, etc. Each of these markets has a numerous number of small players, with small sales volumes. The markets are quite segmented: the electric bicycle market, for example, has no less than 23 manufacturers worth mentioning. Additionally, the EV market does not fulfill the second condition either. Indeed, there are no serious large players, as large car makers, such as Ford, are still in their early EV producing stages.

The Threat of Entry

The most important issue to be determined and analyzed here refers to the entry barriers that may discourage a company to enter the market. In my opinion, the cost of capital that a company entering the EV market will have is higher than the short-term profit it is likely to obtain. This is supposed to happen because the costs associated with starting such a business are quite high (of course, I am referring to the costs associated with building a profitable and sustainable business).

These costs are most likely to be high in terms of acquiring technology and creating the company's own research and development unit. Additionally, as I have already mentioned, the market is quite competitive, especially because of a large number of manufacturers and an increased degree of rivalry. Despite the fact that the new entry may find a profitable niche in which to operate, I would tend to assert that the entry barriers are quite difficult to overcome.

The Threat of Substitutes

The most obvious substitutes that we are likely to find are, of course, the fuel- driven vehicles or, in a more general classification, to the non- electric powered vehicles (here including normal bicycles, for example).

The substitutes I have mentioned are likely to be able to decrease the demand for EV vehicles in the future. The threat, in my opinion, does not necessarily come from the fuel powered vehicles. Indeed, as I have mentioned in the part on the external environment, the general trend, under pressure from environmentalists, is rather directed towards nonpolluting vehicles. However, nonpolluting, non- electric vehicles are possible substitutes threats. Normal bicycles, for example, are indeed a threat. People may still want to benefit from a healthy living and use normal bicycles for getting around.

Buyer Power

The buyer power has a definite influence on any industry. This may come either as "compelling competitors to reduce prices" or "to increase the level of service offered without recompense."

In my opinion, the buyers play a significant role in the EVB market. Quite differently from the pharmaceutical industry, for example, the cost of substitution, from the buyer's point-of-view, is quite reduced and the EV buyer may always find a reasonable priced substitute to turn to, including fuel powered vehicles. In the age of the Internet, the buyers are highly informed and are most likely to have adequate knowledge on the products' costs, on their reasonability, etc.

Supplier Power

In general, the suppliers' power is a mirror image of the buyer power. As such, in the EV market, we are inclined to believe that the supplier power is more reduced. Indeed, the only thing we should be analyzing here is the electricity supply. This is quite cheap and will most likely not be a factor of negotiation for the suppliers. The only way this balance of forces is likely to change in the future is if newer, more performing and more expensive batteries are developed.

III.4. Macro- Environmental Analysis

The case study provides valuable information in terms of the political, legal and economic environment that has a definite impact on ZAP's activity and position on the market. Additionally, we may have a brief discussion to include the three other components of the external environment, the socio- cultural, geographic or technological elements.

Political Environment

The political changes occurred in the last 20-25 years have certainly both increased confidence in environmentally friendly transportation and increased projected demand in this sector, at least over the next decade. For example, the 2000 Olympics in Sydney were an excellent place to promote this relatively recent idea of transportation that is healthy for the environment. Additionally, this trend is likely to be followed into the future, as governments worldwide are more and more inclined to promote environment protection policy. I should also add that the role of ecologist parties is increasing on the political scene. For example, in Germany, the Greens have scored close to 20% in state elections in the last twenty years and they are a credible political force, a party with which the two major political forces, the Social- Democrat Party and the Christian- Democrat Party, tend to form electoral and post- electoral alliances. So, this comes to show that we are likely to see, in the future, the promotion of environmental friendly policies.

It is obvious that this type of policies is going to increase demand for environmentally friendly vehicles. Not only will we see policies encouraging this kind of transportation, but, jut as efficiently, there are probably going to be policies reducing the polluting transportation as well.

Socio- Cultural Environment

From a socio- cultural point-of-view, the last decades have encountered a significant rise in groups of interests, non- governmental organizations and lobby groups that promote and sustain the idea of a clean environment. We may situate this increase in the interest for a healthy environment somewhere in the 60s, but the trend has been increasing in the last years. Pollution seems to be everyone's public enemy and, more and more, we tend to witness the renunciation of traditional forms of transport, energy, etc. In favor of cleaner and healthier ones.

This is also the case for transportation. Lobby groups and environmentally friendly organizations have not only had an impact on the political stage, influencing environmental protection policies, but have also created a wave of ecology promoters in the civil society. More and more, influenced by the groups I have mentioned here above, people begin to give up on traditional products in favor on those less polluting. In this particular case, the demand in the environmentally friendly transportation area is likely to increase due to these forces.

Legal Environment

The legal environment (which I could have discussed in the same place as the political environment, but it seemed more reasonable to do it separately) is quite significant in our discussion. The case study gave the example of the state of California, which has the highest antipollution standards in the United States. These standards meant that the automobile industry came under serious pressure in order to produce viable alternatives to polluting cars. They have not thoroughly succeeded in this sense, however, many large car producers have begun to enter the environmentally… [END OF PREVIEW]

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Zap and the Electric Vehicle.  (2004, September 21).  Retrieved April 18, 2019, from https://www.essaytown.com/subjects/paper/zap-electric-vehicle/5072317

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