ZAP and the electric Vehicel industry.

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ZAP and the Electric Vehicle Industry

Case Analysis

MGMT 480

Andrea Calvert

Danielle Mikolai

Marta Kotonova

Peter Kariuki

ZAP and the Electric Vehicle Industry

Introduction

"ZAP stands for Zero Air Pollution" (www.lahiji.com). ZAP focuses on production of vehicles that run on electric power, keeping the environment in mind. This case is evidence that just a few ideas and love for the environment can give the way to a great product, and many manufacturers followed. Although the economy is not too friendly to manufacturers and retailers now, ZAP can achieve success with proper management of its strengths and opportunities in the market. The following analysis covers the overall industry of EV (electric vehicles), Zap and its position in it, and recommendations for its future strategies.

Analysis of Industry

• The electric vehicles industry is very broad in scope (from military equipment to toys for children), which means that any new idea can find its place with fairly low competition overall. In ZAP's case, the idea was good because until 14, not many people knew about this opportunity in the market and it was a great way to succeed for Starr and his new company. The barriers for entry were low. The barriers now are much higher due to higher interest for the products from customers and an increased number of companies in this industry.

• Unfortunately for ZAP, the EV industry has many substitutes, especially in the focus that this company has. To name a few regular bicycles, inline skates and skateboards. The presence of substitutes in the industry is a threat for the company (Strickland, Thomson 87, 88). Right now, "the largest segment of the individual transportation industry belongs to the bicycle industry" (Strickland, Thomson C-107). The main reason for this is the cost, especially if manufactured overseas.

• Competition in the EV industry is growing now as well as the number of acquisitions. To acquire a company means to buy off another company and that way gain know-how, increase the number of customers, and lessen competition. ZAP took advantage of this and conducted several acquisitions itself (ZAP acquired EV Systems, CA; Aquatic Propulsion Technology, Inc. and many more). With this move, the company decreased its cost and this money was then used on further research and development.

• Differentiation in the EV industry started to grow with the growth of the interest in it from the customer side. Right now, ZAP is in the top ten of the industry (next to EV Rider, Bikit, Schwinn, etc.), but in order to keep its post, a lot of research is needed. In 000, compared to the sales of electric bicycles in the United States, the sales elsewhere in the world were much higher. This presents a great opportunity for ZAP, but also means a high competition possibility. (Tables C-111)

• Many manufacturers in the EV industry sell their products through the Internet, of which many are publicly traded. Selling products via the Internet reduces costs and is easier to access for customers that do not live in the area of the company or its retail centers. ZAP is not an exception. ZAP started to use the Internet in 17. In addition, using the Internet makes it easier to gather market intelligence on rival firms and potential suppliers and distributors.

• Globalization is a growing trend in the EV industry. Going global increases the number of customers overseas, a company gains valuable resources and lowers its costs, and spreads its business risk, too (Strickland, Thomson 00, C-11,114)). ZAP took advantage of this opportunity and now produces its products in Taiwan, China, etc., where the costs are lower, it opened retail stores overseas and gained more customers.

• Fourth and fifth powers of the forces of competition (Strickland, Thomson 81) are suppliers and buyers. Manufacturers in the EV industry need mainly steel, rubber and plastic in their production. All these industries are highly developed and there are many suppliers for the EV industry, which means that the suppliers do not have high control over their customers because it would be very easy to switch the suppliers, should not the conditions work for the manufacturer. (www.steelnews.com; www.tiretracking.com; www.polyonedistribution.com) The power of buyers in the EV industry is high because they can go to the cheapest producer since there are so many now. The buyer can choose the most convenient one, the cheapest one, or the one that gives him/her the best offer. Also, there are many substitutes in the market, so it would be very easy for the buyer to switch to those.

Analysis of Company

Strengths

• Zappy and Kick accounted for 85 percent of sales in 000.

• In 001, ZAP came up with new electric motor device ZapAdapt, which may be attached to manual wheelchairs.

• ZAP has 14 patents, which is good for legal protection from infringers.

• Compared to 15, in 000, ZAP became more liquid (table c-101). In addition, in 00, ZAP's cash got even lower, which is great for liquidity and so did their inventories, which lowered costs (http//finance.yahoo.com).

• The public became more aware of ZAP in 000, at the Olympics in Sydney, but also through American sitcoms, TV commercials and news (www.zapworld.com).

• ZAP reduced its cost through moving its production to Taiwan and with this money saved, it could focus more on distribution improvements

• In 001, ZAP had over 100 independent retail outlets, which drew more customers in.

• "Currently, low-speed electric bikes are regulated by the National Highway Traffic Safety Administration (NHTSA), which subjects these bicycles to the same standards as motor vehicles" (www.lahiji.com). This was a great opportunity of which ZAP took advantage and it became its strength.

• "Improved battery technology, worsening traffic congestion, and new community infrastructure (bike lanes, bike racks, secure parking, etc.) were also thought to be major attractions to prospective consumer of electric bikes" (Strickland, Thomson C-10). All this conditions suited ZAP and it turned them into its strength.

• Starr said that "… [ZAP] needs to continue to be a pioneer and a leader in the [EV] industry" (Strickland, Thomson C-10), and right now, the company is present in more than 60 countries. This strategy is being ensured through constant research, development and further acquisitions.

• As the company states itself, ZAP is environmentally friendly, saves money, saves time, helps the economy, combats global warming, and most of all, it is fun (www.zapworld.com).

Weaknesses

• In 001, John Dabels (member of ZAP board of directors) left the company to spend more time with his family. This is a danger to lose important members in crucial moments. ZAP should try to avoid these situations.

• The sales in 001 were very low compared to sales in 000. It improved in 00, but they are still low never the less. ZAP's weakness is to predict the sales and handle its inventories of some products (improving throughout 00, so to confirm, we have to wait until the end of 00).

• Although on TV and a few events, ZAP still does not have enough advertisement. It needs to reach different ranges of customers (age, status, etc.).

Opportunities

• Customers are out there talk to them and sell more. There is an opportunity to make a big profit in the EV industry because it is so broad in scope! "In 000, Peter Harrop, a consultant to the EV industry, estimated that industry sales would exceed $6billion in 000 and $6billion by 010" (Strickland, Thomson C-104).

• There are market openings overseas, like in China/East Asia. These countries have major pollution problems, so environment friendly vehicles would be welcome. Plus if products will be manufactured overseas, it would be cheaper to sell there and also, to import elsewhere in the world.

• Focus on the disabled is high nowadays. This is a great opportunity to aim ZAP's products at. Next to actual helpers, electric vehicle would be great assistance tool.

• Using electric vehicles in military, wildlife studies, underwater world and in law/police is greater than ever. For a policeman, using an electric bike is more convenient than trying to get to needed places with his own power. And it is so much easier for anybody to get to places, especially in a short range, in today's traffic jams. An electric vehicle is a great alternative to gasoline-powered vehicle, and with the latest advances in battery technology, it is safer, more compact, and more affordable, in addition to its easy and quick charging.

• To sell motors for regular bicycles is a great way to get 'already taken' customers.

• Thanks to battery technology, electric automobiles are more practical to produce. A 000 study showed that 45 million cars in the United States drove less than 0 miles per day, which proves that electric vehicles are more practical and faster in the traffic jams, plus they are environmental friendly. This is a great opportunity for higher sales not only here, but also in Europe, esp. in older parts of cities where gasoline vehicles are not permitted to drive.

• In 000, scooters (15 mph) were legalized for roads, which brought more opportunities for higher sales.

Threats

• "An onslaught of new, lower-cost competitors had entered the EV market" (Strickland, Thomson C-5, 7).

• Opportunities for higher sales bring the higher possibility of new competitors.

• Manufacturing of bicycles, inline skates and skateboards is very cheap, especially if they are manufactured overseas.

• ZAP has many competitors now, like Th!nk Mobility (an enterprise of Ford), Mercedes Benz, Trek, Schwinn, Murray, and Giant (China-based manufacturer).

• "Higher electric energy costs had the potential of altering [the perception of the expense to have an electric vehicle] in the minds of consumers" and it still is here today (Strickland, Thomson C-11).

Recommendations

• It would not be good for ZAP to go over twenty products in its product line, unless it would open some daughter companies, so risk would spread.

• To create greater public awareness, ZAP should get its name out more, for example through donations (wheelchairs to homes, mini scooters to orphanages, etc.). Another way would be through rallies/auctions where people could bet or sign up to win ZAP's products. It would make it more fun and ZAP's name would become more known, therefore through its new popularity, sales would grow.

• To get its name out, ZAP should advertise its different products on various channels (scuba discovery, sport channels; Zappy, bikes, scooters cartoon network, comedy central, and other channels that young people watch; wheelchairs, bikes soap channels, etc.).

• ZAP should stay in the industry even though its stock price was $1.80 in summer of 00 and it is only $ 1.0 now. Once market conditions improve (lower unemployment, more securities), people start relying on their environmental consciousness more again, but in order to be ready, ZAP must keep its name out on the market and keep supporting its advertising.

Conclusion

The electric vehicle industry is very broad and one company can be like a drop of water in the sea of this industry. Although a small company in the beginning, Starr found the right product to emphasize in the market and ZAP started to grow. With his great idea, he achieved the top, and based on this analysis and its recommendations, ZAP can remain the market leader.

Works Cited

AISA. Steel News. 00. Oct 17 00. http//www.steelnews.com/companies/suppliers.htm

Strickland, A. Thomson, A. Strategic Management Concepts and Cases. McGraw-Hill Irwin. 00.

Lahiji, Chris. ZAP! Bold Rocket Production. 00. Oct 00. http//www.lahiji.com/companies/zapz.shtml.

MPS Solutions, Inc. Tire Industry Links. Oct 17 00. http//www.tiretracking.com/TireIndustryLinks.htm.

Poly One. Industry Resources. 00. Oct 17 00. http//www.polyonedistribution.com/ind/index.asp?session=/1/0+441+AM.

ZAP. Newsroom. 00 ZAP. Oct 00. http//www.zapworld.com/news/reasonszap.htm.

Yahoo!Finance. Balance Sheet. 00 Yahoo. Oct 00. http//finance.yahoo.com/q/bs?s=ZAPZ.OB.

Yahoo!Finance. Historical Prices. 00 Yahoo. Oct 00. http//finance.yahoo.com/q/hp?s=ZAPZ.OB.

Yahoo!Finance. Income Statement. 00 Yahoo. Oct 00. http//finance.yahoo.com/q/is?s=ZAPZ.OB.

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