Smart Cars - Classification and Definition of the Industry

INDUSTRY

Classification and definition of the industry

The relevant industry for Smart Car is worldwide automakers because the target audience will be cost-conscious Americans. In 1999, the American car market was filled with many foreign imports that directly competed against and in some instances beat American domestic car producers.

Analysis of existing competitors

Today there are other low cost automobile manufacturers marketing to the United States. None, however, produce anything like SmartCar. The modular/custom design has no known peer in the U.S at this time. Daimler-Benz owns Chrysler so we can assume that at least one of the big three domestic automakers will probably not be directly competing against Smart Car. It is not known whether Smart Car’s prospective competitors could create price competition by lowering prices enough to hinder its entrance in the market. In the event of the Smart Car’s introduction. There likely would be advertizing battles. These battles might feature competitors stressing the need for accident safety. This would exploit a visual defect of Smart Car that is deeply seeded in the heart of many Americans: “I like good gas mileage and new trends, but I want to drive a vehicle that will allow me to survive a crash with an SUV.” Could Japanese automakers, GM, Ford, VW or Volvo create something similar to compete? Perhaps. But that assumes they believe that America will support the design and concept in the first place. If they are skeptical, then it may be more advantageous to lower prices and the MPG on present models and stress crashworthyness.

Americans tend to love differentiation through uniqgue customization. This will be a major selling point for the Smart car to Americans. Government regulations may be a significant hindrance to its entry. Complex and strict government regulation often limits the entrance of competitors to a market and this may be true here especially with regard to crashworthyness. However, the Smart Car is presently accepted and sold in Europe. Also Chrysler corporation (owned by Daimler) would know something about how to comply with the existing rules. The last question facing Daimler is whether logistically it could make a Smart Car in America. To do it, it would need a steady and geographically close supply of parts and modules, like it does in Europe. It is not known whether European suppliers will be willing to invest to make this new product happen, or conversely whether Smart Car can find existing suppliers in the United States.

Analysis of potential new entrants

If the Smart Car is introduced will any major automaker step up to make something similar? To make something similar, it has to be customizable as it is being ordered. It has to be produced quickly. It has to have low gas mileage. It has to have a supply of products that can be integrated into a variety of vehicles. General Motors is a competitor that has, to some degree, used these techniques in the past, in that its cars use interchangeable GM parts which lowers the overall price of the vehicles. It could do the same thing here and try a modular base. The problem is that in 1999 GM is not doing as well against other automakers as it has in the past and may not be ready to provide the money and support for a such a large endeavor. Toyota is known for making good cars with decent MPG ratings. They too might be lured into competing against Smart Car. The down side for Toyota is that they really do not make inexpensive cars – they make higher priced but well made luxury cars. Honda or other Japanese makers might be more willing to defend their “turf” of inexpensive, high MPG cars. Competition would probably come from a major automaker because of the economy of scale necessary and the need to have existing relationships with suppliers who would be willing risk something and try the new venture. High brand equity, experience and large financial resources also indicate a need for a major automaker as a competitor of Smart Car, if there is to be one.

Analysis of substitute products

In the automobile industry there are no known products that are as customizable as the Smart Car. The purchaser gets to design his own car from the factory. This is unique and hence there is no other known car that you can design from the ground up, or at least, you are expected to design from the ground up when you order it. Further the high MPG rating and space saving attributes are not found in most of today’s cars. But other goods might act as substitutes lowering the amount Daimler can charge for its vehicle. For instance, hybrid vehicles appeal to the environmental conscious