Case1 Elio Eng

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Background Elio engineering,Inc is a private company categorized under engineering services and manufactured automotives bodies vehicle bodies and trailers, automotive chassis, product and material trailers. Elio engineering is a company that designs the new technology of the seat in the automobiles which is called No compromise or NC NC seat is a part of All-Belt-To-Seat(ABTS) The firm was founded by Pual Elio and Hari Sankara.

Timeline 1996, Pual Elio designed a revolutional bike which got a patent. 1998,Pual met Hari Sankara who was his mentor in Structural design and Analysis department of Johnson Controls,Inc. July 1998 , Pual invited Hari to join his idea about the NC seat and they founded Elio Engineering Nov 1998,They went to present the NC seat to Bostrom Seating, the seat supplier for heavy truck and bus industry, that was looking to develop the ABTS.

Timeline Early1999,Bob Glaspie joined in as the 3rd member of the team. Feb1999,Bostrom made a licensing deal with Elio. Mar1999Bostrom planned to unveil the NC seat at an annual trade show in Kentucky

Elios Technology A new seat which progress on cost,weight and performance called No Compromise or NC which was a part of special class of automotive seats in the industry called All-Belt-ToSeat(ABTS)

Conventional Car Front Seat Technology Weakness Strength

The seat material can be break, fracture or buckle after the force impact that reached its failure level. Often resulting in fatal injuries to passengers.

Its components and materials are inexpensive and light weight. Ease to manufacture and assemble

All-Belt-To-Seat (ABTS)integrates the seat belt directly into the seat. Weakness Cost Strength Easy to use,Comfort Higher comfort level More attractive appearance Hugs the passengers from the back impact.

DifferencesABTS The shoulder belt and lap belt originate from the auto body. Is very heavy and expensive. Is installed only in luxury and high-end sport automobiles. NC Originate from the seat. Light weight, low cost and strong

Potential to share all segment of the auto market

Key benefit of Elio The new technology doesnt permit extremely failure A special new load level recliner mechanism ensure that the seat doesnt fracture at the failure level When the force diminishes, the seat structure is still fully functional.

Barriers and Risks

Bottlenecks to commercializing the Technology Federal safety requirement Raw materials requirement such as brake friction and Urethane Large capital requirement Working under a stringent requirement Seat styling also become talent

Relevant supporting technology1 .Concurrent Engineering Understand standard points of technology and products Communicate information troughs the process The benefits are reducing cost and decreasing time-to-market. Using software program such as CAD

2.Materials Science-often found by trail and error -provide from aboard -outsource specialists -ensure quality

Manufacturing Issues ABTS seats are base on existing technology Independent entrant were that manufacturing was not its core competence. Fairy large capital requirements of building a new plant.

Capabilities requirement for players in automotive seats Concurrent engineering In-house design Interior systems capabilities The strong capabilities of Johnson Controls

CustomersThe ultimate user is the buyer of a new car. OEM customers of seat system supplies make the buy decisions. The seat system is part of the total interior design of the car.

CustomersMost OEMs used a sophisticated market segmentation of car purchaser based on: Demographic parameters Needs or lifestyles Try to match the car interior accordingly.

Market Share The Big Three U.S. auto manufacturers,Ford, GM,and Daimler Chrysler,each has so much power that it has been able to squeeze the operating margin of major U.S. seat system suppliers down to about 2 to 5 percent.

Benefit of NC Seat

Competitors Many competitor already had an ABTS seat in their product portfolio or were currently working on the technology. The designs currently available on the market were not cost-effective solutions. Industry experts who had the opportunity to see Elios design acknowledged that the Elio mechanism was a breakthrough innovation. It was expected to have cost and functionality advantage over competing technologies.

Competitors The North America automotive seating market was also highly concentrated. Two tier-one player,Johnson Controls Inc.(JCI) and Lear Corp.

JCI had excellent seat system and total car interior engineering capabilities and strong expertise in concurrent engineering and software tools. JCI was strong at effectively integrating strategic acquisitions into its organizational structure.

Lear was inclined to outsource more of the design and manufacturing work and merely act as a seat system integrator.

Entry the Markets For standard products and incremental innovations, this provided tem with a significantly lower cost position and a shorter time to market.

Barriers to Entry (BTE) It would be extremely difficult for a brandnew entrant to compete with the incumbents. In the design and development part of the value chain entry barrier were lower. Increasingly, sophisticated software applications facilitated the development process.

How to entry?The first was to enter the market as a tier-three or tier-two suppliers of seat mechanism or seat structure.

Advantages The new entrant could supply its technology to all tier suppliers. The new entrant could keep greater control over its core ABTS technology. Disadvantages The new entrant was likely to receive a relatively small piece of the final products total valueadded compared to a tier-one supplier who insourced ABTS technology. The lack of manufacturing and marketing experts increased the technological and market risk.

How to entry?A new entrant could try to partner with one of the tier-one or tier-two suppliers or with OEM and develop and market the seat in a joint venture or through a licensing agreement.

Advantages This strategy would provide the newcomer with substantial resource and significantly reduce technological and market risk, an exclusive partnership with a tire-one or OEM would limit the size of the total market for the new entrant. It could leave the new entrant with less control over its core ABTS technology and depending on its bargaining position, with a potentially lower margin

Dicision Time Elio joint venture with Bostrom Should? Should it partner with a tier-one or a tier-two automotive supplier? Elio Auto market ?

1. joint venture with Bostrom Should Elio? Should -Bostrom -recourses,technology -Bostrom

1.Should Elio joint venture with Bostrom ? -trucks and buses -

1.Should Elio joint venture with Bostrom? Should not - Aotomobiles -

- - -

1. Should Eliojoint venture with Bostrom ?

2.Should it partner with a tier-one suppliers or a tier-two automotive suppliers? Should - tier-one suppliers tier-two suppliers joint venture - ,

2.Should it partner with a tier-one suppliers or a tier-two automotive suppliers? - partnertier-one suppliers ABTS

Elio Auto market ?