Internationalisation of Automotive Intelligence

(1)

Rijksuniversiteit Groningen

Faculty of Management & Organisation

Internationalisation of Automotive Intelligence

-

Case Study of MotiWise

Final Academic Thesis

Master International Business & Management November 2005

Student: Tony Blokhuis (1412582)

Supervisor: Prof. Dr. A.M. Sorge

Second supervisor: Dr. E.P. Jansen

(2)

International Business & Management Master Thesis

Internationalisation of Automotive Intelligence

-

Case Study of MotiWise

Author

Tony Blokhuis Huygensstraat 80B 1221 BA HILVERSUM

Organisation

Pon’s Automobielhandel / MotiWise Zuiderinslag 2

3833 BP LEUSDEN

Hilversum, November 2005

(3)

Abstract

Today’s markets are more and more influenced by internationalisation. Internationalisation generally results in markets getting closer together and increased competition, but also offers companies the opportunity to explore new markets and gain profits by providing products and services in foreign markets. In response to the increasing role of internationalisation in today’s markets, the purpose of this thesis is to investigative the international automotive intelligence market: analysing the market opportunities for MotiWise – an automotive intelligence firm operating on the Dutch market and part of Pon’s Automobielhandel – and how the firm can best strategically enter this international market.

It is critical to have an understanding of the challenges in the international market in order to properly enter a new market. Based on the information gathered in the external and internal surrounding of MotiWise, insight is given in what entry strategy fits best the market situation, objectives, and competences of the company. The environmental analysis is structured according to the Strategic Analysis Model of David Aaker (2004). By means of this structure gradually the important elements in the surrounding of MotiWise are identified in order to eventually provide an answer on the main research question “What international market opportunities exist for MotiWise, and how to strategically enter the international automotive market based on the company's competitive advantages?”

In this study is showed that the process described by the internationalisation theory of Johansson and Wiedersheim (1975) fits the possible internationalisation process of MotiWise.

The international automotive intelligence market is a dynamic and competitive environment, with a dominance of large market actors. MotiWise is a rather young firm with a relatively small market share, limited resources, and little international experience and knowledge of foreign markets. Based on the knowledge of the industry and the elements relevant to the company, the best way for MotiWise to enter the market is through exporting. This least-risk and resource demanding internationalisation method is the best way for MotiWise to start internationalisation as it can gradually increase its international involvement and build up experience and knowledge.

Key words: automotive intelligence, internal and external analysis, market opportunities, competitive advantages, and entry strategy.

(4)

1. Introduction

This chapter serves the purpose of an introduction and background of the content to be discussed in this thesis. First a short general background is given of the automotive industry and marketing intelligence industry, followed by an introduction of the case company – MotiWise.

The chapter lays down the basis for the research design in which the research background and problem statement are reproduced.

1.1 The Automotive Industry

Automotive marketing intelligence, as the main focus of this thesis, cannot be dealt with properly without describing the industry it is directly related to. Therefore, this section provides a general insight of today’s automotive industry, and an understanding of the developments in the automotive industry of today.

The automotive industry is considered to be one of the most global of all industries; the output of the industry is to be found all around the world. Car manufacturing is dominated by a small number of firms, whereas related activities (e.g. marketing, financial products or after sales services) are spread among a large number of companies. During the 1990s the entire automotive industry has gone through a massive boom, partly because of the rapid expansion in emerging markets like Korea, China and Mexico. For global car manufacturers the benefits of globalisation are found in the standardisation of models across different markets; economies of scale play an important role in today’s production. The globalisation process has also its impact on the industries related to the car manufacturing industry, like financial and marketing companies. Realising the automotive industry is competitive and liable to continuous developments; it is of importance to have a clear positioning in the market. The new EU rules regarding the liberalisation of the automotive industry adopted by the EU commissioner Mario Monti, covering the way cars are sold and repaired across the EU, initiated significant changes in the automotive industry. (Source: Website European Union)

Information has always been a crucial basic aspect in making decisions and marketing products.

Due to the increased competition and developments in the industry, tailor made solutions for clients and customers in the automotive industry have become more important. The role of

(7)

automotive marketing intelligence has therefore grown and is likely to play an even more important role in the near future.

1.2 Automotive Marketing Intelligence

The automotive industry covers, next to the core business of car manufacturing, a great variety of activities, services, and products directly related to the industry. Since information and data is crucial for the core business and related businesses of the automotive industry, an important role is set aside for Marketing Intelligence (MI). The automotive marketing intelligence services and products play a crucial role in catering the after-market, decision making and market knowledge. One can imagine that data and information as a product or service can be very fragile; the output entirely depends on the quality of data and information. Yet, data and information are the basis upon which crucial decisions are made, if not all decisions. Just a few examples of business decisions based on data that show the importance of this knowledge are

“What is our target group? Is there a gap in the market for our products? Are more or less investments needed in resources and staff?” It is obvious that in order to guarantee the quality of the outcome on these questions, the output is highly dependable on the quality of the initial data and information as input.

Being active in a highly competitive industry misjudging the market situation or trends may lead to serious drawbacks and is therefore something to prevent. This is where marketing intelligence can play a significant role. Marketing intelligence covers various areas, with an important aspect to continuously develop, maintain and manage a competitive sales network, forecast and adjust to trends, changes and developments. Daily car manufacturers and importers must make key decisions for their sales channels defined by e.g. how many dealerships, what size, what car models, what location, and what level of support is required. Besides the need of knowledge, the different market actors need to be familiar with up-to-date and accurate information of their overall (sales) performance. Together with a growing need for marketing intelligence within the automotive industry, the need for technology solutions has grown. Marketing intelligence tools used in the past to serve the industry are now not useful any longer. The software applications that are presently available (e.g. software platforms - Internet based Web portals) for providing the marketing intelligence services are constantly developing in order to support the growing requirements for analysis and workload.

(8)

Describing marketing intelligence from a theoretical perspective, a well enclosing definition is:

“Marketing intelligence is the process of systematically gathering, selecting, unlocking, analysing, interpreting and distributing internal and external data and information.”¹

- MI is a continuous process.

- MI is a management tool with the purpose to feed direct marketing decisions and situations.

- MI aims on tactic as well as strategic decision making.

- MI is multi-disciplinary and links information referring to market development, competitors, new techniques, marketing and strategy.

Marketing intelligence from a more practical perspective is about providing insight in the market using existing sources of information to get an understanding what is happening in a market place, what issues are at stake, and what the possible market potential is. Marketing intelligence can offer competitor advantage when having the ability to make decisions faster and more accurately than competitors, reach more effectiveness based on the information advantage, and save costs because of direct and focussed investments. Marketing intelligence can be used to lay down the foundation of strategic and operational marketing decisions. (Source: Website Dobney). The benefits of marketing intelligence can be reproduced as:

- understanding of market developments and its impact;

- predict and foresee market developments and operate pro-actively;

- faster and more accurately decision making compared to competitors;

- continuous access of need-to-know information about external factors;

- better founded decision making.

In sum, marketing intelligence is a unique marketing tool that provides the means for companies to more effectively market their products and services in achieving overall business objectives and goals. In today’s automotive market the needs are continuously developing: market actors have to make business decisions concerning different issue, e.g. services, products, market segments, and quantities. Marketing intelligence can structure the enormous amount of information in order to help the companies make and execute strategic business and marketing decisions more easily.

1 Website RTE Market Intelligence

(9)

1.3 Case Company – MotiWise

Active in the Dutch automotive intelligence industry, MotiWise is a new organisation within Pon’s Automobielhandel dealing with specifying, unlocking, enriching, and distributing market intelligence and knowledge of the automotive industry. MotiWise’s activities comprise gathering and analysing market data information and transferring this into measurable, practical information, accurate leads for direct marketing purposes, and statistical products. By enriching data, and linking (technical) vehicle information and personal details of vehicle owners, this information provides an important analytical, forecasting and measuring tool for a variety of companies. Next to the field of enriching data, providing statistical services, and address selections for direct marketing the value of these intelligence services is pointed out by the ability of customers to, among others:

- analyse customers specific market - target best practices

- find (potential) customers quickly and accurately

- deliver the right service to the right client/prospect at the right time

MotiWise has been founded in 2003 (by then named as Prospect BV) and is part of Pon’s Automobielhandel (PAH) in Leusden. PAH is the original key business of Pon Holdings, the exclusive car importer of Volkswagen, Audi, and Porsche on the Dutch market. Pon Car and Pon Mobiel are two other business units operating under Pon Holdings and are responsible for the import of Seat and Skoda, respectively. Pon offers a diversity of services to its dealer network including marketing support, technical support, product training, automation, business management and quality programs. In all activities the aim is to optimise professionalism, internally as well as towards the dealers. In the Netherlands, the home country, MotiWise is the fourth company that, by means of a ministerial declaration, is approved to make use of the

‘RijksDienst voor het Wegverkeer’ (RDW) database for commercial purposes. The RDW is the administrator of the car registration database, in which all the personal and technical details of the owners and vehicles are registered. Before four years the Rai DataCenter (RDC) was the exclusive party approved to make use of the RDW database; as such the company was in a monopolistic position providing automotive data and information in the Dutch market. The RDW database forms a unique source of high quality information. Since a few years the RDW provides the data directly to those intelligence organisations which present more than five percent of the automotive market. In 2001 two other players – Stidenda with its executive organisation AS2P and NewMotive with its executive organisation VWE ExtraNet - have entered

(10)

the market with a ministerial approval for making use of the data and personal details for commercial purposes. MotiWise has an exclusive contract with ‘Stichting Automotive Belangen Nederland’ (SABN). SABN is an independent entity that has a ministerial declaration for making use of the RDW database and personal details of drivers. MotiWise, the executive organisation of SABN, is the fourth company to have the RDW database at its disposal for providing its own produced products and services.

Reasons for Pon to set up a new company in automotive intelligence derive from both internal and external circumstances that asked for a new approach of gathering, storing, and exploiting prospect details. Internal issues that can be addressed are an incomplete view of the prospect data buying and usage, high costs, limited efficiency in storing and exploitation of the data, continuously changing and developing ICT-landscape, and the need for more one-on-one sales promotions since sales results were under pressure. External issues that can be identified are the fact that the RDW no longer provides complete personal details per 1 January 2007, new market entrants (service providers), increasing competition, and market development.

Furthermore, the growing importance of one-on-one marketing, new rules and regulations in the automotive industry, and the WBP (Wet Bescherming Persoonsgegevens). (Source: Internal publication MotiWise)

Services & Products

Market data and information is the basis of decision making, and further planning and strategising. Because the automotive industry is highly competitive, information is even more important. With its services and products MotiWise anticipates on the need for accurate market information such as sales, predicted demand, and (regional) statistics. By gathering, selecting, unlocking, analysing, interpreting and distributing internal and external data MotiWise provides different (automotive) organisations of the information and data they need in order to map, watch and structure revenues, market share and overall performance. As described, automotive intelligence products and services can be divided in market analysis, evaluation and communication. MotiWise’s products and services can be distinguished in four categories: 1) addresses, 2) statistics, 3) market research and 4) consultancy. The category ‘addresses’ covers the selection of addresses of car owners used for direct marketing activities. The address selections are based on various (tailor-made) criteria and provide personal details of the driver and specifications of the car owned. Examples of direct marketing activities where address and vehicle information is valuable are new car introductions, advertising campaigns focussed on car

(11)

owners of competitive brands in the same segment, or new services offered by dealers.

Statistics come in a wide range: from market share statistics to brand switch and turnover statistics. Based on statistics provided, dealers and importers gain insight in their business, market position, sales and revenue to be expected, and overall performance in the market.

These statistical reports can be customised for each client and provides accurate and important information for dealers and different car brands (importer). Market research is conducted in a diversity of fields, among which trends, behaviour, and marketing campaigns. Based on market research and experience in the automotive industry, advice is given in the different fields of business, where the consultancy services are interrelated with the three other product groups.

Target group MotiWise

The customers served by MotiWise are to be found in the area of car importers (the different car brands) and dealer organisations. As described, MotiWise is part of Pon’s Automobielhandel which explains its basic target group of the car importer (Volkswagen, Audi, Seat, Skoda and Porsche) and the related dealer organisations. The strong relationship between these customers and MotiWise offers a lot of advantages: the strong need for accurate market information of car importers and dealers can be filled in by the products and services provided by MotiWise.

1.4 Business Outline

The business outline provides a scheme which represents the input, resources, environment and output applicable to MotiWise. As can be seen in figure 1, MotiWise’s database consists of different sources: the RDW database and the information available from the dealer management system (DMS) of the different Pon brands) are integrated in the database. The database forms the basis for transforming raw data into enriched automotive intelligence output.

Setting up the business outline, the processes of the organisation needs to be clear. Processes are chains of activities and logically structured and aimed at achieving results (output) for the customer. The process is built on four elements input, resources, environment, and output. A process exists because of the output it brings; the result to the customer. Essentially everything is about output, and thus designing a process one needs to think from back-to-front: what is the result (output) that needs to be produced and what activities are necessary to accomplish that?

Each activity that does not add value is unnecessary and should therefore be skipped from the process. A distinction needs between input and resources. Resources consist of facilities such as housing, machinery and materials but also information supply and documents, and can

(12)

independently perform activities or used by actors to perform activities. Resources are not directly used up in the process. An important resource is human capital: people perform activities within a process and are considered as actors with a specific role. The division of tasks, qualifications and responsibilities of these actors is crucial for an efficient and effective proceeding of the process. Inputs, on the other hand, are elements which are put in the process and used up in order to be transformed in output. The output of a company needs to apply to certain elements in order to succeed, think of effectiveness, reliability, usability, maintenance, flexibility and efficiency. (Sheer, 1999) These elements to which the output of a company needs to apply are graphically presented in Figure 2.

(13)

10

Figure 1. Business outline Source: Own

RDW Other sources DMS

Data Ware House

R e so u rc e s

(Labour, Money, Materials, Equipment)

Services / ProductsCustomers AdressesDealer organisations StatisticsCar importers (brands) Market ResearchFinancial institutions ConsultancyInsurance companies

Co mp e ti to rs

(National & International Competition)

MotiWise

(14)

Figure 2. Business Process Output

Source: Sheer, 1999

Output

Effectiveness

Reliability

Usability

Maintenance

Flexibility

Efficiency

Better

More reliable

Controllable

More flexible

Cheaper Customer

focussed

Faster

Applicable, Accurate, Safe

Mature, Reliable, Error prevention

Understandable, Explicit, Attractive, Usable

Stable, Changeable, Controllable, Testable

Applicable, Conformity, Changeable

Resource & Time usage

Output

Effectiveness

Reliability

Usability

Maintenance

Flexibility

Efficiency

Better

More reliable

Controllable

More flexible

Cheaper Customer

focussed

Faster

Applicable, Accurate, Safe

Mature, Reliable, Error prevention

Understandable, Explicit, Attractive, Usable

Stable, Changeable, Controllable, Testable

Applicable, Conformity, Changeable

Resource & Time usage

(15)

2. Research Design

In this chapter the research design is set out which covers the background of the research and the research problem. The research background and problem lead to the research goal and problem statement of this thesis, including the main research question and related investigative questions. The research design is concluded with the delimitation of the study and the structure of the paper.

2.1 Research Background

The internationalisation of firms is occurring at an ever-increasing pace. In the past twenty years, firms have changed their orientation from domestic to international; they have shifted from multi- domestic marketing to global marketing.² The world is changing and developing; innovations are rapidly followed up by one another and technology is constantly moving ahead. This has obviously an impact on today’s society. Due to globalisation markets are getting closer together, resulting in global competition. International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organisations. The fact that transactions are carried out across national borders highlights a key difference between domestic and international business. International activities are subject to a new set of macro-environmental factors, different constraints, and involve quite frequent conflicts resulting from different laws, cultures, and societies. (Dunning, 1993; Levit, 1983).

With the current strong political and economic trends towards globalisation, all firms are facing the effects of increased international competition. Internationalisation is therefore an issue that is becoming relevant to the majority of firms and is not restricted to certain market orientations, industry sectors or company sizes. As a consequence, internationalisation is becoming an increasing important issue and a topic for support services, particularly for small and medium sized enterprises (SME). (Coviello & Munro, 1997). Aims for a firm to start operating on an international level are diverse; one can think of advantages of scale, cost reduction and extension of market share. Many firms start their international operations when they are still comparatively small and gradually develop their operations abroad. Nevertheless, relatively a lot SMEs not continue the internationalisation process because they cannot or will not commit any

2 Malhotra, N.K., Agarwal J., Ulgado, F.M. 2003. “Internationalization and Entry Modes: A Multitheoretical

Framework and Research Propositions,” Journal of International Marketing, 11(4), 1-31.

(16)

more (extra) resources to the internationalisation operations. This results from either a lack in actual resources or knowledge of how to run the business on an international level. (Buckley, 1993).

Figure 3. Internationalisation studies

Source: Laine & Kock, 1998

Internationalisation is an important issue and also extensively dealt with in the literature, which becomes clear from Figure 3. The figure presents several studies that have been conducted in the field of internationalisation; these studies cover obviously only a small number of all studies carried out in the field of internationalisation, but offer a clear overview of the different approaches. The study of Aharoni is known to be an important study since it laid down the basis for further studies on the internationalisation process of companies. Johanson and Wiedersheim-

(17)

Paul (1975) and Johanson and Vahlne (1977) conducted another study of great influence. They developed the Uppsala model that describes different steps in the process of internationalisation.

Figure 4. The Establishment Chain

Source: Johanson and Wiedersheim-Paul (1975)

Although the theory of Johanson and Wiedersheim-Paul (1975), and further developed by Johanson and Vahlne (1977), on the international process is broadly accepted, there are some critics on the original model as it was created in the 70’s. One aspect of criticism is that companies nowadays have more resources and take larger steps within the internationalisation, compared to incremental steps of the 70’s model. This means that a firm not necessarily follows a gradual internationalisation path. Another aspect of criticism is the limitation of the study; it is based on four Swedish cases. Furthermore, market conditions have become more stable and market knowledge can be acquired in other means than experience only. (Laine, A., & Kock, S., unpublished). Nonetheless, the model is still very much applicable in today’s market and especially for SMEs.

In the literature various definitions on internationalisation are given. Internationalisation can be described as “the process of increasing involvement in international operations.” (Welch and Luostarinen, 1998). Calof and Beamish (1995) define internationalisation as “the process of adapting firms’ operations (e.g. strategy, structure and resources) to international environments.”

The United Nations Economic Commission for Europe (UNECE) produced a clear definition which, in the context of this paper, well covers the term internationalisation: “Internationalisation

(18)

of enterprises is the group of manoeuvres or co-ordinated actions, which an enterprise may take to penetrate other markets or to benefit from resources originating from other markets.”

2.2 Research Problem

As described in paragraph 1.1, the automotive industry is a fast moving industry in which internationalisation plays an important role; market situations are changing, with expanding markets, growing international competition, and opportunities for increasing revenues and profits. Since internationalisation is not longer only applicable for large, multinational companies, it is of interest to explore what the opportunities for a small company in the automotive intelligence industry are, and how the international market can best be entered when internationalising.

Being established on their (small) domestic home markets, small companies also more and more tend to see the possibility to extend their products and services to different markets.

Motivations behind this development differ from profit advantage, increasing sales markets, spreading initial costs or risks to economies of scale. Dealing with this subject, it is important to recognise that small companies looking into the possibility of internationalising have to take different grounds into account compared to large organisations. Small firms might not have enough resources to conduct research in the new markets, and to penetrate and establish itself in this new market. In combination with a lack of knowledge and experience, a lack of resources can increase the chance of failure. When first internationalising, firms often start with exporting their services (see internationalisation model) in order to reduce and spread the involved risks.

Since internationalisation is clearly not a definite success story, before a company decides to internationalise it is important to first thoroughly explore market opportunities and the competences of the firm. Since internationalisation also plays a growing role of importance in today’s automotive intelligence business, the main focus of this study is to explore the opportunities for internationalisation in this market, and how MotiWise can best strategically enter itself on the based on its competitive advantages. When internationalising, it has to be taken into account that it concerns a specific situation. Since the data, information, products, and services of MotiWise are applied to the Dutch market, it concerns the internationalisation of products that are interesting for foreign companies active on the Dutch market, or use the products, knowledge, or technology otherwise.

(19)

2.3 Problem Statement

The problem statement is based on the research background and central problem discussed. To provide an answer on the main research question, three investigative questions are defined.

Answering the investigative questions needs to help formulation conclusion on the main research question.

2.3.1 Main Research Question

The main question derives from the increasing role of internationalisation in the market; as such explore the opportunities for MotiWise in the international environment based on the external and internal factors applicable to the company.

2.3.2 Investigative Questions

Exploring the opportunities in the market and how MotiWise can best enter the international market of automotive intelligence requires an understanding of the external and internal factors relevant to the company. This need for knowledge results in the following investigative questions.

In order to get an understanding of the internal environment of the firm, the next step is to explore the determinants relevant to MotiWise in its internal surroundings.

Investigative Question 1

What external factors in the automotive intelligence industry are of influence exploring the opportunities for the internationalisation of MotiWise?

What company specific factors are of influence exploring the opportunities for the internationalisation of MotiWise?

Main Research Question

What international market opportunities exist for MotiWise, and how to strategically enter the international automotive market based on the company's competitive advantages?

(20)

The analysis of the factors relevant to MotiWise in its external and internal environment needs to provide insight in the opportunities of the market, and the capabilities and constraints of the company. Based on this information the competitive advantages of the company can be identified, which leads to the third investigative question.

2.4 Research Goal

The objective of this research is to identify the opportunities in the international automotive intelligence for MotiWise, and what might be the best way the strategically enter the international environment. By exploring the external and internal environment of MotiWise, insight needs to be given in the opportunities of the market and the company’s competitive advantages; based on which decisions can be made how the company can best strategically enter itself in the international market of automotive intelligence. In sum, this study needs to give insight in the opportunities for MotiWise to enter the international environment and in what way this can possibly be best conducted and accomplished.

2.5 Research Delimitation

Conducting this research, certain delimitations are taken into account. The study is based on the perspective of the case company - MotiWise. The strategic decisions and propositions made in this paper are based on this company-situation information. MotiWise is a relatively young SME in automotive intelligence, which means that it deals with limitations. In comparison with established (large) international actors in the market, the company has limited resources and less experience and knowledge. As marked in the research goal and research question, in this thesis the focus is on the opportunities in the international automotive intelligence market and how MotiWise might best enter this market. Market entry is only a small part of the internationalisation process firms go through; since internationalisation is such a broad subject with several aspects, for the ongoing process of this paper it is important to hold on to this more specific focus.

What are the competitive advantages of MotiWise in automotive intelligence business?

(21)

2.6 Paper Outline

The following figure presents the structure of this paper.

Figure 5 Paper Outline

Source: own

_{Chapter 1}

Introduction

Chapter 3 Methodology

Chapter 4 Theoretical Framework

Chapter 5 External Environment

Chapter 6 Internal Environment

Chapter 7

Market Opportunities & Competitive Advantages

Chapter 9

Conclusion and Future Research Chapter 2

Research Design

Chapter 8 Entry Strategy

(22)

3. Methodology

The aim of this chapter is to explain the research methods, introduce the frameworks used in the research and to present the reasons for the course of action. In this chapter the research strategy, research method, process of data collection, and the interpretation of the research findings are described.

3.1 Research Strategy

Setting up the research process, depending on the purpose of the investigation there are several strategies for doing this. The literature of Yin (1993, 1994) is well known for describing the research processes. Yin thoroughly describes the different strategies which can be taken when conducting research. In general, five research strategies can be distinguished: survey, experiment, archival analysis, history and a case study.

To trace the opportunities for MotiWise in the international market of automotive intelligence, the best research strategy is the single case study (use of one singular case study company). A case study refers to the collection and presentation of detailed information about a particular participant or small group, frequently including the accounts of subjects themselves. As a form of qualitative descriptive research, the case study looks intensely at an individual or small participant pool, drawing conclusions only about that participant or group and in that specific context. A case study is a method of direct observation in which the relationship between theory and real context can be nicely formed. The case analysis needs to create insight in a variety of information, (unstructured) facts, opinions, data and incidents. As in a practical situation, a case analysis also works within the limitations inherent in evidence and conclude with consistent interpretations. The main advantage of the case study is the practical case which can directly be analysed and related to the underlying theories; the observed results of the case study can directly be read and serve thus as a direct and simple method. The research method also gives the flexibility for doing research, with room for the researcher to address issues which in his perspective are relevant for the study. (Yin, 1993).

(23)

3.2 Research Method

Real-world situations include dynamic, ongoing processes that never takes place completely sequentially or rationally. Because of these insecurities, events never turn out exactly as anticipated. First of all it is important to comprehend the case situation. This means that the basic situation of the problem and background of the research needs to be familiarised; including keeping in mind the key issues or problem(s), the availability or lack of information and resources. The type of research in this stage is to be called explorative research; it serves the purpose of becoming familiar with the problem and the background of the study. (Yin 1994). For this study the explorative research has the function of becoming familiar with the automotive intelligence industry and the case company. The explorative research comprises the external analysis and internal analysis in the paper. Next to the practical information gathered by explorative research, it is also used selecting those theories and frameworks that are appropriate in the context of this study. Explorative research thus plays a crucial role in this research and paper; it forms the foundation for analysis. Secondly, defining the actual problem sets out the course of further research and analysis. At this stage the actual problem, cause of problem and for whom it is a problem needs to be understood. Once the above basic information is known, the next step is to find data and information and to fit this together in order to conduct an analysis. Based on data gathering, structuring and analysis, further action is taken. This means interpreting and concluding upon the data and information found. The type of research conducted in this section is descriptive research. The used theories and frameworks selected by means of the explorative research, provide a useful tool to structure, describe, and analyse the empirical findings.

3.3 Data Collection

In order to solve the research question, several methods of data collection are used. The data collection is a combination of desk and field research. Desk market research is the systematic and objective process of collecting primary and secondary data, facts from first party and second party sources, about desired customers, markets, and marketing activities.³ Field market research is the logical, systematic, and objective process of collecting subjective data directly from a variety of selected market participants to obtain up-to-date "quality" market intelligence from your customers, potential customers, and competitors.⁴ In this study, desk research includes the resources acquired from libraries, publications, and Internet. Field research, on the

3 Website Kochgroup

4 Ibid.

(24)

other hand, comprises of resources and information acquired on the internal and external environment of the company, e.g. organisational factors, customers, and competitors. These resources can give more knowledge on issues like trend information, market requirements, new processes, competitive strategies and other key data.

3.4 Interpretation of Research Findings

Because this research is a case study and therefore depending on the analysis, interpretation and conclusions of and made by the author, reliability and validity need to manage this particular issue. The interpretation of the quality of the research findings is based on the validity and reliability of the research and findings. (Source: Gill & Johnson, 1997)

3.4.1 Reliability

Reliability concerns the accuracy of the actual measuring instrument or procedure. Without the ability to use research tools and procedures that yield consistent measurements, it not possible to draw proper conclusions, formulate theories, or make claims about generalising the research.

The reliability of this research is related to the fact that it concerns a case study analysis; the research conducted from the perspective of MotiWise might lead to a subjective factor in the study. Secondly, there is the chance of misjudging or wrongly interpreting data that can lead to differences in findings and results. In order to avoid errors like these, the research is carried out according a strict conceptual and theoretical framework that serves the purpose of structuring the research and prevent irrelevant findings and results. The fact that a subjective focus or twisting results would be of no use in the course of this research the reliability of this study is considered to be sufficient.

3.4.2 Validity

Validity refers to the degree to which a study accurately reflects or assesses the specific concept that the researcher is attempting to measure. It is concerned with the study's success at measuring what is set out to measure. Validity is subdivided in internal and external validity.

Internal Validity

Internal validity refers to 1) the way the study is conducted, e.g. the study's design, the care taken to conduct measurements, and decisions concerning what was and wasn't measured, and 2) the extent to which alternative explanations for any causal relationships have been taken into account they explore.

(25)

In studies that do not explore causal relationships, only the first aspect should be considered when assessing internal validity. (Merriam, 1988). For this study, the second aspect of the extent of alternative explanations for causal relationships is therefore excluded in this research. As shown in the conceptual model of this paper, the different sections of this thesis and the situation analysis are logically interrelated and form the foundation for further research and analysis. By describing the different determinants and criteria that apply to the analysis of this study, which ultimately lead to decisions on the possible strategic market entry of MotiWise, knowledge will be gathered in different fields in order to solve this central problem of the thesis. This study tries to satisfy the internal validity through linking and relating the different sections of the thesis and thus describing the areas important to MotiWise when studying the competitive advantages of the firm and its strategic market entry.

External Validity

External validity refers to the extent to which the results of a study can be generalised or are transferable. In most discussions, as in this paper, the external validity focuses on generalising.

(Merriam, 1988). As mentioned, the case study is a very useful research strategy, but has its own limitations. The area of research is narrowed down since it is limited to an individual or small group so it is difficult to generalise the results. Since this study is conducted from the perspective of the case company MotiWise, the results of this particular study are also difficult to generalise.

(26)

4. Theoretical Framework

This chapter provides the theoretical background of the study; a description of the used literature and theories applied to the purpose of this research. The strategic analysis model of David Aaker (2004) serves as the underlying model to structure the research. Based on the different theories and gathered information the conceptual model of this study is established.

4.1 Strategic Market Management

The objective of this study is about identifying the opportunities for MotiWise in the international automotive intelligence market and how the company can best strategically enter this market based on its competitive advantages. In order to give an answer on the main research question, both the external environment and internal environment of the company need to be studied. The strategic analysis model forms a good starting point for this research. Strategic market management is a system designed to help organisations and/or management to gain insight and knowledge, make strategic decisions and create strategic visions. (Aaker, 2004). Competitive advantages of a company have a critical role in making strategic decisions. When making important strategic decisions, strategic market management can play a crucial role.

As mentioned, the model of strategic analysis by David Aaker (2004) forms the basis for further research and provides a useful structure for the course of this paper. Figure 6 shows the model in which the external and internal analyses provide the input for the strategy development and strategic decision making as output.

(27)

Figure 6. Strategic Analysis Model

Source: Aaker 2004

Performance analysis:

Profitability, sales, customer satisfaction, product quality, brand association, new products, employee performance

Determinants of strategic options:

Past and current strategies, organisational capabilities and constraints, financial resources and constraints, strengths, and weaknesses

Customer analysis:

Segments, motivations, unmet needs

Competitor analysis:

Identity, strategic groups, image, objectives, culture, strengths, weaknesses

Market analysis:

Size, projected growth, profitability, trends, key success factors

Environmental analysis:

Political, economic, cultural,

technological, information-need areas

Opportunities, threats, trends, and strategic uncertainties

Strategic strengths, weaknesses, problems, constraints, and

uncertainties

Strategic Analysis

External Analysis Internal Analysis

Strategy Identification and Selection

(28)

4.2 External Analysis

The external analysis involves an examination of the relevant elements external to an organisation. As presented in figure 6, by means of a customer analysis, competitor analysis, market analysis, and environmental analysis the opportunities, threats, trends, and strategic uncertainties and choices in the external environment should become known. Opportunities are trends or events that can lead to a positive change in sales and profit patterns. Opposite opportunities, threats in the external environment are trends or events that, lacking the right response, can lead to negative change in the sales and profit patterns. Strategic uncertainties and choices are important to identify because they have the potential to affect the activities of the company in the market.

4.2.1 Customer Analysis

Customer analysis deals with identifying the customer segments, customer motivations and unmet needs of business. Identifying segments is important since it defines alternative product/service markets and in this way structures strategic decisions. After identifying the customer segments in the market, the next step is to consider the motivations of these customers. Some motivations will help to define strategy, others may not define a strategy or differentiate a business, but could represent a dimension for which adequate performance must be obtained. An unmet need is a customer need that is not being met by the existing product offerings.⁵ Unmet needs are strategically important because they represent opportunities for firms to increase their market share, break into a market, or create own new markets. From another perspective, unmet needs can also be a threat to the established companies in a market since they disrupt their established position. Technology plays a key role in applying to the unmet needs: stretch the technology or apply new technologies in order to expose unmet needs.

4.2.2 Competitor Analysis

The competitor analysis starts with the identification of competitors, both current and potential.

Most often there exist significant differences between competitors in a market, e.g. positioning and strategy. This also results in the fact that some competitors compete more intensely than others. In case there are many competitors active in the industry, a useful way to structure competitors is combining those with the similar characteristics (e.g. size and resources), strengths (e.g. brand name, distribution) and strategies (e.g. high quality), and divide them into

5 Aaker, D. 2004. Strategic Market Management

(29)

strategic groups. In order to develop a strategy it is important to have an understanding of certain factors of the competitor. The most important factors that need to be identified in this respect are performance (sales, sales growth, and probability), image and personality (position and segmentation), objectives, current and past strategy, culture, cost structure (cost advantage), and its strengths and weaknesses. The competitor’s strengths and weaknesses are of special interest when conducting the competitive analysis; based on this information an organisation can exploit the weaknesses of the competition with its own products and services or try to neutralise the competitor’s strength.

The competitive analysis can be conducted very extensively, yet in order to keep it clearly set out and still gather the most important information, it can be useful to keep certain questions in mind when structuring a competitive analysis. The questions are subdivided into two categories:

1) identification of competitors, and 2) evaluation of competitors. Examples of questions are the following.

Identification of competitors:

• Against whom is the company usually competing?

• Who are the main / serious competitors?

• Are there providers of substitute products?

• Can these competitors be grouped into strategic groups on the basis of their assets, competences and/or strategies?

• Who are the potential competitive entrants?

• What are their barriers to entry?

• Can something be done to discourage new entrants?

Evaluation of competitors:

• What are their objectives and strategies, their level of commitment and their exit barriers?

• What is their cost structure; do they have a cost advantage or disadvantage?

• What is their image and position strategy?

• Which competitors are the most successful over time?

• What are the strengths and weaknesses of each competitor or strategic group?

4.2.2.1 Competitive Strategy Options

A firm positions itself by leveraging its strengths. Porter (1980, 1985) has argued that the strengths of a firm fall into one of the headings: cost advantage or differentiation. By applying

(30)

these strengths in either a broad or a narrow scope, it results in three generic strategies: cost leadership, differentiation, and focus. The fact that the strategies are called generic is because of the strategies are not firm or industry dependent. Figure 7 presents Porter’s generic strategies (Porter, 1980).

Figure. 7 Generic Strategies

Target Scope

Broad (Industry wide)

Narrow

(Market segment) (differentiation)

Focus Strategy (low cost) Cost Leadership

Strategy

Differentiation Strategy Advantage

Product Uniqueness Low Cost

Focus Strategy

Source: Porter 1980

Cost Leadership Strategy

The cost leadership strategy focuses on being a low cost producer in the industry for a certain level of quality. A firm with this specific strategy sells its products either at average prices to earn a profit higher than its competitors, or below the average market price to gain market share. One of the biggest advantages of the cost leadership strategy is that when the industry matures or even in the event of a price war, the company is able to produce more cheaply than its competitors and is thus able to remain profitable for a longer period of time. This strategy usually targets a broad market. Firms that succeed in cost leadership often show the similar characteristics:

• high level of expertise in manufacturing

• efficient distribution channels

• access to capital required to make a significant investment in production assets

Internationalisation of Automotive Intelligence

Rijksuniversiteit Groningen

Faculty of Management & Organisation

Internationalisation of Automotive Intelligence

-

Case Study of MotiWise

Final Academic Thesis

Master International Business & Management November 2005

Student: Tony Blokhuis (1412582)

Supervisor: Prof. Dr. A.M. Sorge

Second supervisor: Dr. E.P. Jansen

Internationalisation of Automotive Intelligence

-

Case Study of MotiWise

Abstract

TABLE OF CONTENTS

1. Introduction

R e so u rc e s

Co mp e ti to rs

MotiWise

Output

Output

2. Research Design

3. Methodology

4. Theoretical Framework

Strategic Analysis