Answer

The Product Launch of the SEAT Minimo into Manchester, UK

Contents

1.0 Introduction. 3

2.0 Five Forces Analysis of Manchester. 3

2.1 Supplier Power. 4

2.2 Buyer Power. 5

2.3 Competitive Rivalry. 5

2.4 Threat of Substitution. 5

2.5 Threat of Novel Entry. 6

3.0 Value Chain Model 6

3.1 Primary Activities. 7

3.1.1 Inbound Logistics. 7

3.1.2 Operations. 8

3.1.3 Outbound Logistics. 8

3.1.4 Sales and Marketing. 8

3.1.5 Services. 9

3.2 Support Activities. 9

3.2.1 Infrastructure. 9

3.2.2 Human Resource Management (HRM). 9

3.2.3 Technology. 10

3.2.4 Procurement. 10

4.0 Modes of Entry into the Manchester Market. 10

4.1        Subsidiary. 10

4.2 License. 11

4.2        Export. 11

4.4        Joint Venture. 12

4.5        Foreign Direct Investment (FDI). 12

5.0 Level at Which Minimo Embodies Creating Shared Value (CSV). 13

6.0 Conclusion. 15

The Product Launch of the SEAT Minimo into Manchester, UK

1.0 Introduction

This paper conducts a further research and analysis of the feasibility of Manchester, UK as the preferred market for the product launch of the SEAT Minimo. The analyses conducted in this paper are Five-Forces Model, Value Chain Model, and modes of entry into the Manchester car-sharing market. The paper concludes by a reflection on the extent to which I believe the SEAT Minimo serves as an embodiment of creating shared value (CSV).

2.0 Five Forces Analysis of Manchester

According to Bruijl (2018), 5-Forces framework is employed as a simple model for evaluating and assessing the competitive position and strength of a firm or business organisation. This model is founded on the conception that there exist five forces that influence the attractiveness and competitive intensity of a market (Bruijl, 2018). Porter’s five forces assist organisations in identifying where power lies within a business circumstance. This knowledge is significant in comprehending the strength of a company’s present competitive position, as well as the strength associated with a position into which a business organisation may opt to move.  By comprehending the position of power, the model can also be employed in identifying areas of strength, improving weaknesses, and avoiding mistakes (Bruijl, 2018; 50Minutes.com, 2015). The five forces in this framework are supplier power, buyer power, competitive rivalry, threat of substitution, and threat of novel entry. The figure below represents the 5-forces model:

Figure I: Five Forces Model

Source: 50Minutes.com (2015)

2.1 Supplier Power

This component of the 5-forces model focuses on the assessment of the ease of suppliers to drive up or determine prices. The factors that determine the supplier power in an industry are the number of suppliers of every essential input, relative strength and size of suppliers, cost of moving from supplier to supplier, and uniqueness of suppliers’ services or products (Ortega et al., 2014). Owing to the increase in globalisation, UK’s automobile sector is associated with many suppliers from the UK and across the world. As such, the suppliers’ bargaining potential is limited. According to Palmer et al. (2018), even though certain manufacturers have joined forces with Original Equipment Manufacturers (OEMs) from India and China, some automobile companies source their raw materials from the UK.

2.2 Buyer Power

The buyer power analysis is associated with the assessment of the ease of buyers to lower or reduce prices. The factors that influence buyers’ bargaining potential are quantity of buyers within the market, significance of every individual buyer to the company, and cost involved in moving from one supplier to another supplier. In situations where, there are few buyers within the market, their bargaining potential is limited. With increasing access to extensive information, as well as choice of a range of brands and vehicle models in Manchester and across the world, buyers have a higher bargaining potential.

2.3 Competitive Rivalry

This primary driver is the quantity and capability of rivals within the market. In circumstances where many competitors offer undifferentiated services and products the market attractiveness is reduced. UK serves as a home to about 50 manufactures of cars, who sell about 200 models of cars (Palmer et al., 2018). Apart from local car producers such as Ford and General Motors (GM), foreign firms also provide intense competition. As such, the internal rivalry among firms is inevitable, and SEAT Minimo will have to experience stiff competition in the Manchester market.

2.4 Threat of Substitution

Ortega et al. (2014) define substitutes as commodities or services that can be utilised or consumed in place of other services or products. In situations characterised by the existence of substitute products in the market, the likelihood of buyers switching to other options in reaction to price increase is high. As a result, the bargaining potential of suppliers along with the market’s attractiveness is reduced.  In the UK, particularly Manchester, there exist a range of substitutes when it comes to urban transport including public transport and private cars, rented cars, Taxis, ride-hailing, trains, and personal vehicles among others (Palmer et al., 2018). As such, Minimo has to contend with these substitutes when operating in this market.

2.5 Threat of Novel Entry

Profitable markets often attract novel entrants, which in turn erodes the market’s profitability. Unless the existing firms or incumbents possess durable and robust entry including economies of scale, patents, government policies, capital requirements, then the market’s profitability will reduce to a competitive level (Ortega et al., 2014). Since automobile sector is capital intensive, it demands enormous investments in terms of cash. The existing automobile firms in the UK have augmented their manufacturing, which compels novel entrants to join the market on large scale (Palmer et al., 2018. As such, Minimo can enter the market on large, especially given that it has the capital or financial potential needed to accomplish this goal.  It is also vital to note that the threat of entrant will be limited considering that the car-sharing sector is newly established and large organisations have not dominated it.

3.0 Value Chain Model

According to Masiero et al. (2017), value chain comprises the whole range of operations or activities from the service’ or product’s conception to its ultimate delivery to customers. In situations involving the production or manufacture of products, the value chain commences from the acquirement of raw materials (Masiero et al., 2017). As such, the value chain of companies such as SEAT, which are involved in the manufacture of products such as Minimo, comprises all process involved down the chain up to the selling of final product to consumers. It is significant to note that the execution of a value chain analysis enables companies to assess areas of problem down the value chain, with the aim of making improvements. The typical value chain of an automobile is shown below:

Figure II: Value Chain Analysis

Source: (Pratab, 2019)

The value chain comprises primary activities and support activities. In the automobile market, primary activities include inbound, operations, outbound logistics, marketing and sales, and service, while support activities include infrastructure, human resource management, technology, and procurement as shown in figure II.

3.1 Primary Activities

3.1.1 Inbound Logistics

Inbound logistics constitutes the first stage in the production line. The first step of this activity involves the acquisition of raw materials from suppliers (Pratab, 2015).When operating in Manchester’s carsharing market, Minimo’s inbound logistics will take into considering the reception of vehicles within the company’s warehouse facilities. There will also be frequent acquisition of automobile spare parts for the repair and maintenance of Minimo’s fleet of cars. Contrary to its rivals, the vehicle’s value addition will depend on the provision of reliable, comfortable, and quality cars. Considering that the firm owns its cars, it can customise them, as means of providing reliability, comfort, and entertainment through the advanced 5-G technology.

3.1.2 Operations

 Operations constitute the second stage of the automobiles’ value chain. This stage covers the primary stage of productions. Pratab (2015) defines operation as the process of transforming raw materials into the ultimate product. Minimo’s operations will largely depend on the employment of the firm’s app in permitting customers to order for rides. Consumers will employ the app in ordering rides and seeing price charges and wait time. Moreover, the app will display the details of the driver and car, panic-click section, payment system, and contact information. It is also vital to note that the app will permit clients to rate their rides and drivers when they reach their destinations. As such, all these features will add value to service delivery.

3.1.3 Outbound Logistics

Outbound logistics is associated with the moving out of the ultimate goods from the units of manufacturing to retailers (Pratab, 2015). Minimo’s outbound logistics will include showrooms, as opposed to franchises, which can subject the company to the loss of complete control of its operations.

3.1.4 Sales and Marketing

For vehicle producing firms, marketing is critical component of the value chain (Pratab, 2015). Minimo’s marketing component will include sales force management, distribution, customer relationship management, promotions, and advertising, which will be focused on ensuring that the vehicle reaches the targeted segment of clients and creating awareness about Minimo’s unique features. Marketing will also be focused on driving up profitability and sales.

3.1.5 Services

Pratab (2015) considers services the ultimate value-adding activity of the value chain. This component includes the support provided to customers following the product’s sale. Minimo’s services will include continued support to clients concerning vehicles’ maintenance. Support activities will ensure customer retention and better brand image for Minimo.

3.2 Support Activities

3.2.1 Infrastructure

Pratab (2015) asserts that organisational infrastructure play a vital role in the business’ success. This component includes organisational management, culture, structure, and finance among other resources. Minimo will focus on effective management of its infrastructure to enhance profitability.

3.2.2 Human Resource Management (HRM)

The presence of skilled personnel contributes to the success of automobile business by designing and producing quality vehicles (Masiero et al., 2017). Minimo will invest in human resources as a means of ensuring effective management of human capital and employee motivation. Adequate caution will be emphasised in the critical processes of HRM including recruiting, training, and managing performance.

3.2.3 Technology

According to Pratab (2015), technology plays a vital role in the automobile sector in all value chain stages. Minimo will leverage technology in all areas such as passenger safety, emissions control, rider convenience, and vehicle design among others.

3.2.4 Procurement

  Procurement management serves as a significant support activity to automobiles’ value chain (Pratab, 2015). This component entails the acquirement of raw materials by firms from suppliers. Minimo will engage in effective management of procurement as a means of saving costs and ensuring high quality inputs that can generate robust and efficient vehicles.

4.0 Modes of Entry into the Manchester Market

When business organisations choose to venture into foreign markets, one of the key presenting questions often concerns the best way for targeting such a market or the most appropriate entry mode (Shen et al., 2017). There are various modes of entry that SEAT Minimo can embrace when it comes to joining the Manchester market including subsidiary, licensing, export, joint venture, and foreign direct investment.

• Subsidiary

Starting a subsidiary is considered the most advanced step in the process of establishing a company a foreign market. This process involves the ownership of a novel company by the parent firm. According to Shen et al. (2017), entering a foreign market as a subsidiary can be accomplished in two ways including acquiring a formerly established company or founding a novel company. These options are suitable for high-tech, multinational companies, as this entry mode limits the risk of their core competence leaking outside the company. Nevertheless, SEAT is not a high-tech company and hence this entry mode would not be appropriate for the company. This mode of entry also enables the parent organisation to exercise more authority over its activities abroad. Nonetheless, setting up a subsidiary is considered the most expensive mode of entry into a foreign market, considering that the parent firm is responsible for all risks and costs involved in operating abroad (Shen et al., 2017). As such, this entry mode is not appropriate for SEAT Minimo.

4.2 License

According to Shen et al. (2017), licensing implies that a firm sells permits to a different company to produce its services or products. The licensor is paid royalty by the licensee, who is granted the right to employ the licensor’s intellectual property including trademarks, designs, formulas, and patents over a specific period (Shen et al., 2017). Licensing is appropriate for companies that lack adequate capital to enter a novel foreign market (Shen et al., 2017). As such, licensing implies reduced risks and costs associated with the establishment in novel countries. Nevertheless, this entry mode subjects companies to limited control over the processes of marketing and production, as well as strategy. In addition, firms employing this mode of entry many not employ profits in one country in supporting competitive trials within another country (Shen et al., 2017). This entry mode may also subject companies to the risk of losing their technologies and production tools employed as competition tools. Therefore, this entry mode is unsuitable for SEAT Minimo.

• Export

Export is the most adopted mode of entry into foreign markets. This entry mode is associated with limited risks and costs, and requires limited knowledge concerning the foreign market (Shen et al., 2017). Export is considered the most appropriate way of testing the novel market and increasing their profits and revenues. This entry mode does not require enormous investments in the commencement of an establishment. Nonetheless, this mode of entry is associated with drawbacks such as tariffs and transport costs, which can make export unprofitable, especially when these costs are extremely hefty (Shen et al., 2017). The employment of an agent is also risky considering that some agents can choose to sell rival products alongside the company products, which in turn limits revenue generation (Shen et al., 2017). As such, this entry mode is inappropriate for SEAT Minimo.

• Joint Venture

Shen et al. (2017) consider joint venture as cooperation of two existing independent firms that start a novel business together for a given purpose. The most frequent structure involves every company owning half share of the novel firm. Joint venture is most effective in situations where the firm selects a partner that already operates on the market of choice. The company then employs the local partner’s competition knowledge, business systems, country’s language, and culture. This cooperation permits the foreign firm to acquire market knowledge, access distribution system and customers, and attain a greater authority over local activities (Shen et al., 2017). Joint venture can assist companies to overcome political obstacles when entering new or foreign markets (Shen et al., 2017). This entry mode also enables the company two share risks and costs of operation with the local firm. However, joint venture compels firms to share unique competence, knowledge, and technology with others, which can limits its competitive edge. Moreover, this entry mode can limit SEAT Minimo’s control over its operations, which makes it unsuitable for the business.

• Foreign Direct Investment (FDI)

FDI is an internationalisation approach characterised by the company establishing a physical presence via the purchase of assets including equipment, workforce, technology, and capital. FDI occurs when companies pursue direct investment in facilities to produce and market their products within foreign countries (Shen et al., 2017). Even though this entry mode is considered the most complex and advanced among other modes of entry, it permits high control strategy level considering that the company invests with its share capital or own capital abroad. Moreover, this entry mode permits companies to access raw materials, and receive administrative and technical knowledge, as well as reduce production costs. Examples of FDI include mergers and acquisitions (M&A) and greenfield.  M&A entails direct investment where a firm purchases an existing company or business, whereas greenfield involves refers to a direct investment with the aim of building a novel facility as opposed to acquiring an existing business (Shen et al., 2017).  This entry mode is the most suitable approach for SEAT Minimo when it comes to entering the Manchester market, as it will grant the company adequate control of its resources, access to raw materials, and technical as well as administrative knowledge needed for its operations within the market.

5.0 Level at Which Minimo Embodies Creating Shared Value (CSV)

According to Baumstark (2015), the creating shared value (CSV) concept describes the novel form of capitalism that integrates social issues into strategies of firms and thus guarantees the society and companies profit. Yang and Yan (2020) define CSV as activities arranged or organised to accomplish three purposes including the creation of cluster, products, and value chains, with a positive impact on organisational benefits and social benefits. Societal value is created in three ways including reconceiving markets and products, establishing supportive clusters of industry at the firm’s locations, and redefining the concept of productivity within value chain. Each of these three components constitutes the virtuous circle for attaining shared value and is associated with the development of opportunities for other parties by enhancing the value associated with all parties involved (Yang & Yang, 2020).

Minimo serves as a perfect representation of creating shared value (CSV). By developing Minimo, SEAT accomplishes the concept of CSV in two ways including balancing between social and economic benefits, and integrating social concerns in its business model. When it comes to the aspect of striking a balance between social and economic benefits, this vehicle has unique design features and capabilities that enhance its ability to create shared value and attain a competitive edge over rivals, while ensuring that the society also benefits from its innovative design. Yang and Yan (2020) emphasises creating shared value by coordinating social concerns and business activities as an opportunity to transform the model of business for sustainable development. Environmental degradation and pollution happens to be among the major concerns of the 21^st century society (Manisalidis et al., 2020; Fournier et al., 2015). Nonetheless, Minimo has made significant steps in addressing the issue of environmental pollution in its design. The vehicle has zero emissions, which enables it to enter all city centers regardless of the stringency levels of their emission legislations (SEAT, 2015). Minimo’s hybrid feature, which integrates the characteristics of motorcycles and passenger vehicles, emphasises its primary objective of comfortably transporting two individuals in the lowest of footprints (SEAT, 2015).  Moreover, the vehicle’s compact dimension permits it to limit footprints to 3.1 m², which significantly lower than that of a normal city car that stands at approximately 7.2 m² (SEAT, 2015). Apart from creating shared value by balancing social and economic benefits, Minimo ensures the creation of shared value by social concerns into its strategy. SEAT Minimo creates shared value by integrating a range of design features that can meet the needs of different users even when they are involved in shared-vehicle agreements. This all-electric quadricycle has been designed to assist users in meeting the challenges associated with city driving including the absence of parking spaces, increasing fatigue arising from traffic jams, and emission regulations (SEAT, 2015). The SEAT Minimo integrates the benefits of a motorcycle’s smaller dimensions, and the comfort and safety associated with larger commuter vehicles, which in turn enable it to limit many points of pain involved in commuting around cities such as Manchester united. The vehicle’s design is agile and narrow, which in turn enhances the ease of navigating around urban areas (SEAT, 2015). Furthermore, the vehicle is practical and enclosed, which increases safety and its capability of serving a range of drivers along with their needs (SEAT, 2015). Minimo’s efficient battery swap system also permits quick and efficient refueling of the vehicle which in turn reduces the time of charging for private customers and costs of operation for the carsharing service provider (SEAT, 2015). According to Cision PR Newswire (2019), Minimo’s battery swap system, which ensures complete recharge of the car in few minutes, lowers the operating costs of the carsharing about 50 percent. As such, it can be noted that SEAT constantly pursues the creation of shared value through its car design.

6.0 Conclusion

This paper has executed an effective research and analysis of the Manchester shared-car market as the chosen market SEAT Minimo. The outcomes of the analysis conducted by the 5-force model, value chain model, and entry mode reveal that Manchester, UK provides a suitable market with limited obstacles for Minimo and that the car provides value through its app and design that meets the needs of different drivers and users, ensures effective navigation of crowded urban places and limited impact on the environment. Furthermore, the findings show that FDI presents a suitable mode of entry into the Manchester shared market, as it will grant Minimo enough control over its resources, technical and administrative knowledge required for its business operations, and adequate access to raw materials within the market.

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