This business plan aims to outline the project of manufacturing and selling one-seater electric vehicles for the market of Chile. This car has two doors on each side, one seat and a trunk, which can be accessed from the cabin. This car’s weight is approximately 900 pounds, and the dimensions are approximately 7.5′ by 3.9′, which makes this car about half the size of a standard vehicle (Made-in-China, n.d.). This car can be fully charged within six hours and allows the driver to travel 37 miles after a single charge. As any transportation means, this car’s purpose is to provide one with a way of commuting that is cost-effective, inexpensive upon initial purchase and uses green energy. This electric one-seater car has a simplified design and engineering. Still, it offers the main benefit of owning a vehicle the ability to commute, and this report will detail the launch strategy of this product, including the rationale for selecting it, the target market, launch strategy, organizational structure, and cash flow.
Target Product
The target product of this business plan is a one-seater electric car. Cars that do not use fuel and instead are powered by alternative energy, for example, the energy that can be derived from renewable sources are becoming more popular with consumers (Pelegov & Pontes, 2018). There are two reasons for this: these cars require less day to day maintenance and are economically more attractive than petrol or diesel vehicles. However, there are some infrastructure-related restrictions since electric car exploitation requires a state to have a sufficient number of charging stations, outlined in the next section.
One-seater car provides some constraints regarding the target audience, however, it is assumed that it will be purchased as a second or third vehicle in a single-family to accommodate the needs of one individual. Hence, it is intended for students or single individuals who require a vehicle to commute to work or their studies and do not have family obligations that would require them to have a bigger car. Moreover, as Lee (2020) argues, the demand for cars, both used and new, is increasing due to the COVID-19 pandemic and the desire of people to have an individual transportation method, which already resulted in “demand is outpacing supply” and a shortage of vehicles on the market (para. 1). Therefore, the rationale for choosing this product is the increasing popularity of electric cars and the rising demand for cars globally.
Target Market
Chile is a target market for the one-seater electric car, which will be named EV. This state is in South America, has a population of approximately 18 million and a GDP of $15,900 per capita in 2019 (CIA, n.d.). Upon initial evaluation, Chile has one of the highest GDP in South America, which means that the potential customers can afford to purchase several cars for a single-family, one of which can be the EV car.
Besides, Chile and the United States have a trade agreement. Established in 2004, the FTA allows for a simplified procedure of selling goods between two countries (Office of United States Trade Representative, n.d.). Moreover, the proximity between the US and Chile will make it easier to ship this product and establish a partnership with a local vendor. Next, in the article “What kind of capitalism?” The author raises the question of globalism and open borders, suggesting that the global crises have caused middle and low-income states to questions the open-boarder policies since those do not benefit them (“What kind of capitalism,” 2013). However, the EV is a low-price car suitable for a low price market, hence, a state that continues to support a trade relationship but is classified as a developing country is the best selection. This will help minimize potential risks, such as having trade restrictions, embargo, or quotas for cars imported from the US.
Next, for this product, the infrastructure consisting of electric charging stations is an important consideration. Simsek et al. (2019) project that by 2030 Chilians will own 30,000 electric cars compared to 900 they currently use. This means that there is a high demand for cars with this type of engine. Moreover, the Chilian government has declared its commitment to support alternative energy development and invest in infrastructure for electric vehicles (Simsek et al., 2019). Hence, for a person living in Chile, purchasing an electric vehicle will become more attractive since they will be able to use one of the charging stations constructed by the government.
One issue is the culture of this target market since it differs from the domestic one. A culture in Chile differs from that in the US, and when entering this market, the data availability and reliability are limited. Hence, the product may have to be adopted to the local preferences of the consumer. However, these considerations will be considered in the selection of the launch strategy and marketing approach.
Country
The product will be made in the United States and shipped to Chile. Firstly, when looking at the industry, the US has a long history of auto manufacturing. Companies such as Ford are among the first manufacturers of cars for the mass audience, and Tesla is the first commercial all-electric vehicle. This means that there is sufficient infrastructure of suppliers, vendors, and qualified engineers to support the manufacturing. There are no direct competitors to the one-seater electric car in the United States, and the closest competition is the 2020 Mini Cooper Electric with a starting price of $29,000 in comparison to the $3,500 starting price of EV cars (Loveday, 2020). As for the industry background, car manufacturing within the US was first established in the 1890s, with Duryea being the first even car manufacturer registered in this state. Currently, the only company that focuses solely on the production of electric cars is Tesla.
The manufacturing should be established in the US because it allows for producing high-quality products and competing globally. According to Immelt (2012), some companies, such as General Electric, have chosen to invest in developing the US’s manufacturing capabilities instead of outsourcing them due to the high costs of labor. Therefore, the establishment of manufacturing in the US will help leverage the established supply chains for the automotive industry and avoid complex logistics connected to the need to ship the vehicles from China to the US and then to Chile.
Strategy
Some entry decisions include the consideration of how cars are sold in the local market. Typically, cars are sold through dealerships but establishing such partnerships can be time-consuming and may require substantial spendings from this company since the dealers may request money to advertise the product or to support them opening dealerships across Chile. With this one-seater car, two entry strategies out of seven potential approaches were considered — exporting and partnership with a local company. With exporting EV would be able to ship cars directly to Chile, however, there would be issues with translating the instructions and descriptions to Spanish, marketing the product without having a subsidiary in this state, and complying with local regulations. Hence, the fact that the cars would be manufactured in the United States would be beneficial for the quality and the compliance with regulations regarding safety, but would act as a barrier when entering the Chilian market since “entry into foreign markets is used as organizational capabilities behave both as a source of competitive advantage and as a constraint” (Madhok, 2017, p. 40). Hence, partnering with a local company will help overcome the constraints that EV has due to manufacturing its cars in the US.
Finally, the local regulations are the most important factor in choosing to avoid exporting since cars typically have to have a set of certifications, which prove that they are safe to drive. Partnership implies that two organizations enter an agreement to achieve a common goal. By partnering with a local company, EV will be able to avoid risks and receive support in terms of understanding the local automotive regulations and marketing for the Chile culture. In the case of EV, the common goal is to sell electric cars manufactured in the United States and sold in Chile.
The mode of entry selected for this case is high control one. More specifically, the EV will be the dominant shareholder with one partner. According to Anderson and Gatington (1986), the classical approach to selecting a mode of entry implies selecting the one with the biggest return adjusted for risks. This is a high control entry mode that will allow EV to make significant decisions regarding its cars. For example, the manufacturer will adjust some features of the vehicle, such as climate control based on the typical temperature in Chile, without having to gain approval from their partner.
Organizational Structure
The organizational structure selected to support this launch is flat because this will allow facilitating easier decision making without unnecessary bureaucracy. It is anticipated that the company will produce at least 200 vehicles per year, which will not require many employees. One issue with this structure is that the employee’s responsibilities may be unclear to them, which can be addressed through proper communication. Moreover, rapid communication is one of the central benefits of this organizational structure, which also means that the company should be able to communicate with the local partner in Chile easily and adjust the vehicles based on the cultural specifics of this market.
Other Considerations
The EV’s partner in Chile will be responsible for sales and delivering the vehicles to the customers. Initially, the sales can be made through the company’s website to save costs associated with renting space to display these cars and following Tesla’s example. In terms of marketing, the main focus will be on the affordability of this product compared to other vehicles. Also, to target a younger audience, social media strategies should be employed. The marketing strategy should be adjusted to the local culture and environment. In the case of Chile, considering the annual per capita GDP of approximately $15,000, the affordability of the EV cars should be the main focus, while in contrast, for other markets, aspects such as green energy use or easiness of driving a small car could be used when marketing this product.
For logistics, each car will be manufactured in the United States and shipped to Chile via sea, and the average waiting time for each unit shipped is approximately three weeks. Hence, the Chilian partner of EV will have to rent a warehouse in Chile where the EV cars will be stored to avoid long waiting times. In terms of cultural differences, Chile is a Latin American county with Spanish speaking citizens, which creates a cultural barrier. Moreover, the local preferences for cars may differ from those in the US, but the information obtained after marketing research can be limited, however, a local partner can help address this problem. Chile’s political environment has been stable, and this state has established trade agreements with the US. Hence, the political environment should not be a barrier for selling electric cars in this market, moreover, the government has voiced support for green energy businesses (Simsek et al., 2019).
Financial Management
For financial management, cash flow is an essential component of a business plan that allows projecting the next five years’ income and expenditures. The attached Excel document contains the anticipated cash flow, and as one can see, it is expected that this company will be able to sell 200 electric cars at the price of $3,500 each in the first year. The net income, in this case, will be $267,000. As can one see, the projections are that by year three, the annual sales will be at 400 vehicles per year with a total income of over $1 million. Each vehicle will be sold at $3,500 and manufactured for $2,000 based on the prices of products produced b Chinese manufacturers (Made-in-China, n.d.). Important expenses that should be considered are salaries, cost of parts, investment in research and development, and rent for the manufacturing facility. The initial investment will be made to purchase the machinery.
In terms of currency and exchange range, the state uses the Chilian peso, and EV will convert a single vehicle’s price into this currency. Currently, the company plans on selling its cars for the same price in different markets, and the customers in Chile will be able to pay online or through a bank. Finally, as mentioned previously, trade agreements between the US and Chile imply that there will be no tariffs. However, in terms of foreign exchange rates and market sensitivity to the currency exchange rates, the EV will focus on supporting the lowest possible price for the Chilian market.
Summary
In conclusion, this paper presents a market launch plan for a one-seat electric car that will be sold in Chile. The rationale for choosing a one-seat electric car as a target product is the increasing popularity of this type of vehicle and a trend for green energy use. The rationale for selecting Chile as a target market is a proximity with the United States, trade relationships between the two states, and the support that Chile’s government shows for using electric cars. The manufacturing of vehicles is a complex matter and manufacturing vehicles to sell them in a foreign market is even more complex, which is why the US was selected as a country of manufacturing since there are established car manufacturers and suppliers here. Additionally, this is why it is advised that a partnership with a company based in Chile should be made for this product.
References
Anderson, E. & Gatignon, H. (1986). Modes of foreign entry: A transaction cost analysis and propositions. Journal of International Business Studies, 17, 1-26.
CIA. (n.d.). Chile. World Factbook. Web.
Immelt, J. R. (2012). The CEO of General Electric on sparking an American manufacturing renewal. HBR.
Lee, K. (2020). Prices for new and used cars are soaring as the COVID-19 pandemic skews supply and demand. Business Insider.
Lovaday, S. (2020). The cheapest electric cars in 2020. US News.
Made-in-China. (n.d.). 2020 new 4-wheel cabin electric mini car. MIC.
Madhok, A.. (1997). Cost, value and foreign market entry mode: The transaction and the firm. Strategic Management Journal, 18, 39-61.
Pelegov, D., & Pontes, J. (2018). Main drivers of battery industry changes: Electric vehicles — A market overview. Batteries, 4(4), 65.
Office of United States Trade Representative. (n.d.). Chile.
Simsek, Y., Lorca, Á., Urmee, T., Bahri, P., & Escobar, R. (2019). Review and assessment of energy policy developments in Chile. Energy Policy, 127, 87-101.
What kind of capitalism? (2013). The Economist.