Exam: An Analysis of Better Place Company
Introduction
Better Place develops and sells battery-charging and battery-swapping services for Electric cars. The company has progressed slowly and faced numerous challenges since the inception in 2008. The company has registered a loss of $500 million and a less than significant sale of about 750 cars in a period of six years in its main market-Israel (Gunther). The company is on the verge of bankruptcy and this has been caused by negative effects mainly from its macroeconomic environment.
In spite of the current challenges that Better Place is facing, the industry in which the company operates is attractive and has a bright future. According to environmentalists, the adoption of electric cars in place of oil-dependent cars is good for the environment. Economists also contend that the use of electric cars is also good for the security of a nation as they reduce the dependence on oil imports. The successful adoption of Electric cars is challenged by the fact that batteries are too expensive and charging them takes an exceptionally long time of 30 to 90 minutes. Better Place’s founder Shai Agassi accurately identified these challenges where his company would own the batteries, charge them and offer battery swapping services to electric car owners at designated stations comparable to gas refilling stations.
The external (macro) environment regarding the business venture undertaken by Better Place is complex. The company has to partner with automakers to make cars that are compatible with their battery-swapping technology. Only the Renault has agreed to makes such cars with the release of the Fluence- a family sedan that has received mixed views and acceptance from the public. Wide scale acceptance of the electric car and its technology would spell the collapse of combustion-engine cars and this would result in a massive disruption in the auto industry. This means that stakeholders are slow and critical in accepting the technology introduced by Better Place thereby hampering its rapid adoption.
Lack of cooperation with regulatory authorities slows down the implementation of the business and they instead introduce new threats. For instance local authorities in Israel put expected roadblocks in the setting up of battery-switching stations which limited the number of stations that Better Place could set up. The external environment has not created new opportunities for Better Place. In Israel, when employers provide electric cars to their employees, the employees are required to pay a usage tax which reflects the full value of the car inclusive of the battery. This practice undermines Better Place’s efforts to drive down the cost of maintaining electric cars.
Better Place is depleted in its resources and competence to neutralize the threats present in its macroeconomic environment. The departure of the company founder Mr. Shai Agassi in October 2012 spelt doom for the company in turning around the fortunes of the company soon after word-of-mouth had began to spread regarding the advantages of electric cars over combustion-engine ones. Other than Renault, other automakers are reluctant to manufacture cars compatible with Better Place’s batteries.
Better Place has inadequate resources to launch a comeback plan. The company is facing bankruptcy after losing more than $500 million. Following these unfortunate developments the company has put on hold its global rollout. This hampers its potential to overcome threats to its ultimate collapse. An article by Gunther stated that Better Place was financed by major financing institutions and investors such as Morgan Stanley Bank, HSBC, and Vantage Point Capital Partners among others. The imminent loss of credit worthiness due to bankruptcy means that Better Place will face hard times trying to access resources to revamp its operations.
Aggressive marketing and investment in competent human resource and especially the executive management seem to be the ways through which Better Place can reverse its fortunes and overcome current threats.
Competition in the provision of services to aid in the adoption and operation of electric cars is increasing. Several companies such as Électricité de France in France, Coulomb Technologies in USA among others have installed charging stations similar to Better Place. Companies such as Tesla Motors are partnering with others in order to provide battery swap services to their electric car models. These efforts by competitors place Better Place at a disadvantage in terms of ability to respond to market dynamics. The upcoming companies are mostly partnerships and this enables them to pool more capital and human resources to run their businesses. Moreover, the new companies are being started in countries such as France, USA and the UK where the regulatory framework is supportive unlike Better Place whose main market- Israel has an unsupportive regulatory framework. The competition from similar companies is therefore likely to overwhelm Better Places efforts to revamp its business.
Automobile manufacturers are a key stakeholder in the implementation of Better Place’s mission and vision. They have to make cars that are compatible with the battery-swapping technology that was developed by Better Place. Only Renault has agreed to make a car named fluence that is supportive of Better Place’s battery-swapping technology. The rest of the automakers fear the disruption of their current businesses. The vision and mission of Better Place would be supported by the government as it means more security in terms of reduced reliance of imported oil. Better Place makes it affordable for people to afford purchasing and maintaining electric cars in place of oil-dependent vehicles. This reduces government expenditure on importing oil and regulating its usage. Environmentalists are key stakeholders and in this case they would be supportive since electric cars eliminate carbon emissions from automobiles.
Conclusion
Better Place has a novel idea to offer battery-swapping services to electric car owners. Following poor acceptance and lack of a supportive regulatory framework mainly in its main market of Israel, the company is on the verge of bankruptcy with a loss of $500 million. The failure by automakers to make cars that support Better Place’s technology, and the departure of its founder Mr. Agassi the company will find it tough to compete in the market. The company may get support from the government whose reliance on oil imports will be lessened as well as environmentalists whose efforts to control carbon emissions would receive a huge boost following wide scale adoption of electric cars.
Works Cited
"Better Place - Wikipedia, the free encyclopedia." Wikipedia, the free encyclopedia. N.P., 5 Mar. 2013. Web. 17 June 2013. <http://en.wikipedia.org/wiki/Better_Place>.
Gunther, Marc. "Why a Highly Promising Electric Car Start-Up Is Failing by Marc Gunther: Yale Environment 360." Yale Environment 360: Opinion, Analysis, Reporting & Debate. N.P., 5 Mar. 2013. Web. 17 June 2013. <http://e360.yale.edu/feature/gunther_why_israel_electric_car_startup_better_place_failed/2624/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+YaleEenvironment
