PepsiCo MINI CASE

CMR 495- Cap Stone

Mini Case Submission Requirements

Each case is worth 100 points

 

Student is to complete the analysis of the assigned case. The analysis must include the following elements:

 

  1. Introduction of the case
  2. Thesis statements
    1. Background
    2. Alternatives
    3. Purposed Solutions
    4. Recommendations
  3. Conclusions & closing remarks about the case
  • The completed Mini-Case analysis can be summarized using PowerPoint or Word (equivalent software is fine)
  • Please email me the final summary prior to class time
  • It is acceptable to work as a team on each case study, BUT each case study should reflect the work of the individual student, not the team

Mini-Case Example….

 

Mini-Case Response – Mini-Case #18

 

Introduction:

This mini-case response is concerned with Mini-Case #18: “Standards Battle:  Which Automotive Technology Will Win?” as described on page 478 in the Rothaermel 3e text.  The relevant text chapter is Chapter 7.  The material presented within the mini-case briefly describes efforts by several major automobile manufacturers and newer-entry manufacturers to address the issue of replacing the internal combustion engine as a primary source of power for personal automobiles.  The mini-case explains that there is currently no consensus among the manufacturers regarding how to proceed and that the pathway forward is not necessarily clear-cut.

 

Key problems/issues identifiable within the mini-case include:

  • Is the impending demise of the internal combustion engine a foregone conclusion and, thus, the alternative power projects by the manufacturers a necessity or is this work more exploratory in nature?
  • Assuming that the internal combustion engine does have only a short remaining lifespan, is there a solid understanding of what criteria any new power source would need to meet?
  • Is it possible to determine which company and/or technology is likely to be successful, under this scenario – or is too little known at present?

 

Thesis statement:  Based on an analysis of the available mini-case materials and the relevant literature, it is likely that routine alternatives to the internal combustion engine will be needed within a relatively short timeframe.  It is equally likely that multiple alternatives will be under exploration and offer legitimate benefits for consumers in the future with a lengthy period of technology optimization involved before a clear “winner” emerges.

 

Background:

To help place this mini-case into perspective, it is useful to step back briefly from the materials presented to examine the factors that have caused the automobile industry to reach the crossroads described in the scenario in the text.

 

The internal combustion engine has been the “gold standard” for self-propelled vehicles for more than 100 years.  Automobile manufacturers have consistently improved their offerings, resulting in higher levels of power, greater reliability, and length of service; and also, greater efficiency with less environmental pollution.  These efforts have effectively extended the lifespan of the internal combustion engine beyond what might have been predictable 30-40 years ago, but they have not permanently addressed three issues that continue to signal an impending need for change.

 

First, using an internal combustion engine requires the simultaneous use of complementary products such as oil and gasoline or diesel.  These fossil fuels are in diminishing supply, are subject to political and geographic constraints, and have a price structure that is both unpredictable and generally upward trending.  The supply is not limitless, even if there is no widespread concern of running out within a few years.

 

Second, environmental factors are continuously increasing in importance with the pollution of even the cleanest burning internal combustion engine a subject of great concern worldwide.  Global warming is perhaps the most visible symptom of this issue now that pollution controls have largely decreased visible smog in many heavily populated areas.  This situation places extra pressure on the internal combustion engine as an out-of-date propulsion system.

 

Third, alternative propulsion systems are rapidly gaining ground in terms of the underlying technology, reliability, price of entry, and availability.  There is a great deal of money to be made in reducing these new technologies to practice and even more money to be made if one specific technology becomes dominant.

 

Concurrently, personal vehicle consumers continue to become more sophisticated in their expectations regarding transportation.  New propulsion technologies are popular topics of discussion even if not yet broadly in use.  For example, the majority of consumers willing to explore alternative sources of propulsion today would be termed innovators or early adopters – a small fraction of the total number of individuals purchasing new cars (Rothaermel, 2017, p. 227, 231).  For any new propulsion system to take hold; the technology, marketing and financial “bugs” would need to be largely worked out of the system.

 

With the long-standing successful history of the internal combustion engine, consumers will also be wary until the performance/reliability equation of any new system has been fully solved.  This is largely the issue of value in the consumers’ eyes as they look for vehicles that represent daily transportation and not something “exotic” for weekend use only.  None of the new technologies available today, with the possible exception of the gas/electric hybrid models have come close to securing the stamp of approval by consumers needed for large-scale success.

 

Again, with the possible exception of the gas/electric hybrids, new propulsion technologies have not yet established a reputation for convenience with consumers.  Full electric models lack driving range and require frequent recharging.  As counterpoint to this statement, however, a study on real versus perceived lack of range in electric vehicles showed that to many consumers, their apprehensiveness about not being able to quickly recharge their electric cars when needed overshadowed any real issues related to recharging due to the actual lengths of the trips customarily taken under most driving conditions (Franke, Neumann, Buhler, Cocron, & Krems, 2012).  Hydrogen fuel cell models have no readily available way to replenish fuel at all, except under very carefully controlled conditions and locations.  By contrast, the internal combustion engine enjoys the “get in, turn the key and go” freedom that consumers favor and have become accustomed to in personal transportation.

 

Looking at the new propulsion technologies described in the mini-case, they can be classified according to the degree of innovation present within their development and knowing this classification up front helps to understand how they may be perceived.  For example, gas/electric hybrids are classified as an “incremental innovation” because they build on existing technologies and largely serve existing markets (Rothaermel, 2017, p. 232).  All-electrics and hydrogen fuel cell vehicles represent “radical innovation” since they involve entirely new technologies and/or combine existing knowledge with entirely new ways of thinking (Rothaermel, 2017, p. 232-233).

 

Alternatives:

The material presented in the mini-case write-up does an excellent job of identifying the current new technologies competing to take the market share away from the internal combustion engine, but it is much less successful in providing details regarding which alternative technology is likely to succeed in the long run.  Potential alternatives are discussed in terms of the name of the automobile manufacturer(s) best known for their development at the present time.  Three possibilities exist, each of which may be developed into a detailed alternative to the internal combustion engine:

 

  1. The all-electric alternative – this is the technology most frequently associated with Nissan and Tesla, although Chevrolet (GM) and others have viable entries in this market as well. With this alternative, drivers would not rely on fossil fuels at all.  All electric cars are efficient, smooth, and can be very reliable.  However, they are expensive to purchase and the operating range is severely limited.  Work currently underway to create a network of rapid charging stations sounds promising, but consumers rightfully question if these stations will be confined to metropolitan areas (Franke, Neumann, Buhler, Cocron, & Krems, 2012).  How long will it be before charging stations are available in less-populated regions of the country?
  2. The gas/electric alternative – this is the technology most frequently associated with Toyota, but Ford and several other manufacturers have viable products in the marketplace as well. With this alternative, drivers are not forced to rely solely on electricity since small, efficient internal combustion engines are still present to a) charge the batteries in the vehicle and b) provide direct power to the wheels if/when the use of electric motors is not optimum.  These vehicles are also expensive to purchase as compared to conventional internal combustion engine vehicles, but they do not suffer from some of the worries associated with the all electrics since it is very highly unlikely that drivers would ever be stranded with no way to operate their vehicles as long as standard gas stations still exist (Sadek, 2012).
  3. The hydrogen fuel cell alternative – this is the technology most frequently associated with Honda and BMW and is not nearly as well-developed as the two alternatives above. Rooted in the rocket industry, hydrogen fuel cells are powerful, safe to operate, and very reliable; but they are also extremely exotic for everyday transportation and there is virtually no network set up for servicing vehicles with hydrogen fuel cells or even replenishing their fuel.  Hydrogen fuel cell vehicles also carry a potential safety stigma with consumers who may not understand the technology and this will require consumer education to overcome these fears along with all of the other hurdles of the new technology (Jiang & Xie, 2014).

 

It is not possible to reject any of the possible alternatives out of hand, since given enough time and capital for development any of the three alternatives is likely to present a viable alternative to vehicles powered solely by internal combustion engines.  However, if one differentiates between long-term solutions and relatively short-term solutions, alternatives #1 and #3 begin to look less viable.  The reason for this probably has more to do with the lack of infrastructure to support large numbers of vehicles using these technologies day-in and day-out than it does with the technologies themselves.  This lack of infrastructure complicates these alternatives because automobile manufacturers are not positioned to create such infrastructure (their core competencies are far from what is needed) and diverting resources to bring about such infrastructure would slow development of the technologies themselves.  Not to overstate the infrastructure difficulties, however, researchers have shown that all-electric servicing systems can be well-integrated with existing gasoline service facilities, at least, in theory (Jiang & Xie, 2014).

 

Stated in slightly different terms, it is important to be clear that large-scale conversion to all electric or hydrogen fuel cell vehicles may be feasible, just not at this time.  This is a very different scenario than ruling out these alternatives on a permanent basis.  Sadek, for example, observes that moving directly to all-electric technologies may be exactly the right thing to do for urban areas where distances traveled are shorter and infrastructure needs may be easier to meet (Sadek, 2012).  Thus, while the development curve may be steeper or longer than for gas/electric hybrids, this is not to say that the other alternatives will not catch up or even surpass gas/electric hybrids at some point in the future.

 

PepsiCo MINI CASE Proposed Solution:

At the present time, the most specific and realistic solution to the issues plaguing the internal combustion engine is to encourage and support the development of gas/electric hybrid vehicles on a broader scale, largely following the already-successful work of Toyota, Ford, and others that have seen this technology as a viable technology.  This proposed solution is specific because it focuses resources toward one technology so that maximum forward progress can be made in a relatively short period of time.  This proposed solution is realistic because the technology is already proven with hundreds of thousands of vehicles on the road today.

 

This solution was chosen because it has the shortest pathway to reach a demonstrable improvement in self-propulsion for personal vehicles.  A number of factors support this decision, not the least of which is the aforementioned large number of vehicles already on the road using this technology.  The infrastructure to support daily use of these vehicles is already in place and public acceptance is high.  Thus, there is relatively little resistance to be encountered as this technology moves forward.  The fact that several companies are already heavily invested in the technology increases the probability that it will continue to evolve with time.

 

Reviews of the gas/electric vehicle concept and available executions have been largely favorable and reliability issues have been largely addressed.  For consumers, the comfort zone of still having the proven internal combustion engine “on board” adds an additional level of peace of mind.  Moving ahead to capture the purchases of the early majority will also stimulate the success of this proposed solution.

 

Recommendations:

Any of the proposed solutions would rely on essentially the same strategy for implementation.  These approaches could directly benefit the chosen solution in the shorter run, but also benefit the other alternative solutions over a longer time frame.  Two specific strategic action steps are suggested.

 

  1. Invest in R&D – none of the technologies discussed here are considered to be mature at present. The gas/electric hybrid is considerably further along the development track, but is still not fully optimized.  Thus, investment in both upstream R&D on the basic technologies involved and in downstream R&D (otherwise known as product development) to engineer consumer-preferred final product versions is an important first step.  Firms that fail to invest at this point will likely lag behind and could lose any hope of establishing a competitive position in the marketplace.  Government assistance through R&D tax breaks could help with this step in the strategy (Sadek, 2012).
  2. Form Strategic Partnerships or Alliances – not all firms will be able to “go it alone” with expensive new technologies, but this does not mean that they should drop out of the race. By forming partnerships or alliances, these firms should be able to leverage their own core competencies and rely on others to fill in important gaps.  Examples might include partnering with raw material or component suppliers.  Other alternatives might be to look for alliances or partnerships with firms who could help build the infrastructure for maintaining and servicing vehicles with the new technology over the expected consumer life of these products.  Rothaermel terms this approach as “open innovation” since it tends to blur the boundaries of organizations and allows them to benefit from both internal and external ideas (Rothaermel, 2017, p. 238).

 

The automobile industry at large should be encouraged to address the issues posed here.  Singling out one firm or even a small set of firms is not likely to be effective as the ultimate technology replacement(s) for the internal combustion engine will have a profound influence on the ability of all firms within the industry to do business.

 

 

 

Conclusion:

This mini-case has presented an intriguing situation for analysis since none of the available scenarios/solutions is likely to result in a “bad” outcome.  The preferred alternative, moving ahead quickly with more gas/electric hybrid technology, offers a faster solution and is likely to bring substantial reductions in the use of fossil fuels via internal combustion, plus help address the environmental concerns.  The other alternatives, however, could result in even greater gains at the cost of extended development time and should not be shelved even if they are temporarily relegated to a lower priority status.