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By Nirali Thakkar

Judith Sobotie

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Question 1Describe Elio Engineering.(Pg -14)

Elio Engineering was started by an individual name Paul Elio who had an idea that of the ABTS(All-Belt-To-Seat) called “No Compromise seat” or NC seat.

Cost effective solution for the automotive seating industry

No capital to build-and-test.

Relied on simulation software to provide proof of concept.

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Potential sources of competitive advantages of ElioEngineering:

State-of-the-art technology

The broadly patent mechanism is based on cable and drum elements as opposed to gears.

It does not permit catastrophic failure

Fewer and lighter parts

The belt is routed from bottom to the top which reduce the load carrying requirement of back frame by approximately 20 percent.

Lighter, stronger and cheaper due to high strength-to-weight ratio of its mechanism

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How sustainable they are? Why/Why not?

No capital source for manufacturing and distribution

If Elio Engineering entered the market alone they would fail due to the lack of resources. The core value of this company is wrapped around one patent. They do not have the means to fully protect and produce the product by themselves which could lead to a larger company buying them out.

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Question 2How would you characterize Elio Engineering’s position in its industry?(Pg – 13-15)

Elio’s vision can be described as “ the ability to design and manufacture, new advanced , high-tech and safe ABTS(all-belts-to-seat) called “No compromise” seats for the entire automotive industry in other to potentially save millions of lives.”

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Question 3What is the structure of the automotive seat industry in 1998? (Give your analysis using Porter’s framework) How attractive was this industry in 2015?-(Pg-17)

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Current Market looks fairly attractive:

Bostrom Seating: According to first quarter of 2015 revenues were $220.3 million compared to $198.1 million in the prior year period, an increase of 11.2 percent. (http://ir.cvgrp.com/phoenix.zhtml?c=180209&p=irol-newsArticle&id=2044356)

Johnson Control Inc. : (http://www.johnsoncontrols.com/content/dam/WWW/jci/corporate/investors/2013/JCI%20Annual%20Review%20and%202014%20Outlook.pdf )

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Question 4How well is Elio Engineering’s technical strategy aligned with the requirements for a successful entry into the automotive seat market? What, if anything, should they change? – (Pg-30)

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Table of Technical Strategic alignment 10

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Question 5Prepare a table that shows comparisons of NC Seat, Conventional, and ABTS seat-(Pg – 15,16)

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Seat Cost Seat Component/ Mechanism

Seat Belt Advantages Disadvantages

Conventional

$500 avg Frame, recliner and seat tracks, gears mostly manual.

Attached to door pillars & floor.

Components & materials are inexpensive and light weightEase to manufacture & assemble

Seat material can be break,fracture which often result in fatal injuries

ABTS $750 avg Fundamentally same concept (conventional), stronger to meet safety regulations

The shoulder belt and lap belt originate from the auto body

Strong, Attractive,easy to use, comfortable and hugs the passenger from back impact

Expensive & heavy

NC Cheaper compare to ABTS

Fewer and lighted parts (single sided recliner), based on cable and drums, no gears, easy adjustable, load-leveling recline

The belt is routed from bottom to the top

High strength-to-weight ratio, no catastrophic failure, Light weight, low cost and strong, easy to assemble

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Question 6Based on the Financial Statements and Technology Analysis, prepare an evaluation table (strength/weakness OR pro/cons) for evaluating the four seat manufacturers. (P-ref 31)/Financial Statements.

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Table of financial statement and Technical analysis14

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Question 7Prepare a SWOT table for evaluating ElioEngineering’s new seat. (using Visio drawing tool): Market related, Organizational Related, Technology related, etc (pg-31)

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Market RelatedStrength•The mechanism of Elio’s seat is broadly patented•Inexpensive, lightweight, easy to manufacture and assemble•Does not permit catastrophic failure- the seat does not fracture after the peak load

Weakness•Lack of manufacturing and distribution assets•OEM seat design requirements, certification requirements, supplier preferences and end user taste

Opportunities•Potential to share all segment of the auto market

Threats•The automotive seating market was heavily concentrated – heavy competition and high barriers of entry at tier-one level.

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Organizational RelatedStrength•Fewer and lighter parts•Inexpensive•Simple design

Weakness•Lack of manufacturing and distribution assets•Strict federal safety standards set by National Highway Traffic Safety Administration (NHTSA) and codified in the Federal Motor Vehicle Safety Standards (FMVSS) • The seats should pass various crash tests

Opportunities•Enter the market as a tier-two or tier-three supplier or •Partner with one of the tier-one or tier-two suppliers or with an OEM through a licensing agreement

Threats•Few of items has not been patent protected.•Internal political issue

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Technology RelatedStrength•Does not permit extreme failure•New load-level recliner mechanism ensure that seat doesn’t fracture at failure level•When force diminishes , the seat structure is still fully functional•Broadly patent

Weakness•Federal Safety Requirement•Urethanes used in design have not gone through heat test 66 degrees C

Opportunities•Develop a technology that will benefit the end user and reward the innovator.•ABTS technology with cheaper price and better design

Threats•ABTS is already present in the market in luxury automobile or sports driven vehicle

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Question 8Give your assessment and recommendation options. What are Elio Engineering’s strategic options in entering the automotive market now?-(P- 29)

(a) Joint venture with Bostrom

(b) Partner with a tier-one or tier-two automotive supplier

(c) Other options

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Joint venture with Bostrom –(Pg 26):

This could provide a market opportunity for them, as Bostrom owns 50% of the U.S market share of the Truck market. Bostrom has three main channel of distribution namely:

Direct installation in new vehicles by OEMs (Original Equipment Manufacturers)

Stocking distributors and truck dealers.

Also Elio has successfully partnered with Bostrom before on a truck seat contract ( Pg 14. ) and lastly the size of the USA truck market in 1999 was estimated to be around 500, 000 units and as said early Bostrom was commanding 50 percent of this. Which meant that Elio stood to gain 2 to 5 percent royalties on sales in the truck industry.

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Partner with a tier-one or tier-two automotive supplier (P- 29)

The partnering with tier-two is more in house design, as it is more about already established relationships while tier one will limit the market size and will require a longer time to create or grow new partnership.

Other options

Elio could open up the ability of sales towards their patents as it will generate profit.

Establish good ties with the OEM manufacturers

Include the use of Experts and Financial backing (private investment)

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Thank you

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