Research Paper on A123Systems

Free Research Paper on A123Systems:

Business Strategies for A123 SYSTEMS, INC
Rediscovering company’s mission and vision
A123Systems, INC. is one of the world’s leading suppliers of lithium ion batteries. Nanoscale materials, developed at the Massachusetts Institute of Technology and used in A123Systems’ production, provide products with outstanding performance and obvious advantage over company’s competitors. There are numerous aspects, in which A123Systems is ahead of both its competitors and technology area as a whole. Company’s slogan “A123 has the power to change the game” says it all. Slowly but surely, A123Systems brings changes into the world of private users, corporations and government. Technology world is rapidly changing, and companies are trying to innovate and introduce new products to the market in order not to lose its position and growth. A123Systems discovered something truly surprising and enraptured. It created a product, which is able to change the whole concept of technology in the future. Company, focusing on the production of batteries, has set its values clearly and follows the necessary steps to achieve its initial goals.

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Three main areas, on which A123Systems puts the biggest emphasis, are: power, safety, and life. Providing power solutions to its customers, company makes sure all three criteria are met. Power is a significant aspect of the product like Nanobattery. The purpose of the entire business is to create a tool, which will provide modern machinery with a more powerful and quicker performance. Using A123Systems Nanobatteries is that tool, which made it possible. Even though the safety of the product is constantly being disputed, A123Systems ensures excellent abuse tolerance with every new product released to the market. One of the most important A123Systems’ goals is to produce a battery, which will be both powerful and environmentally friendly. Finally, the life of Nanobatteries is the last but not least feature that makes A123Systems’ products leading on the market. Company developed a product, which has 10+ years projected calendar life, excellent lifecycle while keeping it an environmentally friendly chemistry.

The most suitable vision for A123System, taking into consideration its current achievements, is the one that will aim at further developments and getting involved in new business sectors. At the same time company should not shift the initial values set by its management team in the past. No matter how developed and successful company will be, these 3 core values must always be kept in its employees’ mind. At this point, A123Systems already has applications to such areas like transportation, portable power (power and hand tools), grid stabilization and government activities, and this is not where the company is going to stop. Company must aim at going deeper into already existing applications. At the same time it must develop further and expand to more and more new areas of the business.

In the future A123Systems aims to become number 1 power supplier in the world. Company’s high quality batteries will become an inseparable part of every object connected to the power. Transportation will become faster and technology more powerful, which will make people’s life easier. Already now, company’s focus group is very wide and diversified. It should continue working on satisfying needs of existing customers, attaining their loyalty, and attracting more new customers in the future.

While achieving high places in the market, A123Systems will not forget about its initial goals; power, safety and life. Company will continue working on making its batteries even more powerful and long-lasting. At the same time it will be working on making its products even safer for the customers. The vision of A123Systems must be to never stop innovating and developing its products. Company, who is surprising its customers in the course of ten years already, must keep its position and reputation as the leader in providing innovative and creative solutions for everyday business and life.

Making people’s life easier, providing them with top quality products at a low cost, is the main value of A123Systems. In the course of 10 years company has made safety, power, quality, duration and availability inseparable features of its batteries. A123Systems will continue strengthening the connection between these crucial components.

As a result, A123Systems’ consumers will enjoy living an easy life in the healthy environment, surrounded by powerful and fast machines. Company’s profits will continue rising due to the constantly increasing consumption of its products and shareholders will observe company’s growing value.

Industry Analysis
A123Systems develops, manufactures and sells products that no other company does. This makes A123Systems unique and successful in its business. Competitors, offering wide range of high power technologies, experience significant performance disadvantages in comparison with the new Nanophosphate electrode technology offered by A123Systems. However, in the next five to ten years situation can change significantly. Success of A123Systems and its new Nanobatteries will eventually attract competitors, making A123Systems’ position in the market less stable. Company must develop strategies to stabilize its current position in the market and continue growing and innovating while being pressured by a large amount of competitors.

In order not to lose its leading position on the market, A123Systems must take appropriate steps to expand and develop its business scope. Entering partnerships with companies-giants in auto and high-tech manufacture, while the market is not filled with competitors, will stabilize company’s situation for a certain period of time. For example, entering a partnership with one of the leading car manufacturers and supply it with its batteries would help to minimize the risk of being affected by competitors entering a Nanoproduct industry. Finally, diversifying business and entering into new markets will provide A123Systems with more competitive advantage.

A123Systems must also concentrate on its current and future customers to gain their trust and loyalty. Customers vary in their readiness to accept new things appearing on the market. A123Systems introduced to the world a completely new approach to the technology and its possibilities. It usually takes people some time to go for trying something new, and A123Systems has to put a lot of effort to encourage its potential customers to test and evaluate its products. After the customer is attracted, company must work on keeping him or her through offering new products, maintaining and repairing the purchased one, etc.

One of the biggest advantages of A123Systems is its low production costs, which leads to a low price of an end product. This is another factor affecting customers’ willingness to buy Nanobatteries, taking into consideration its high quality. Company must emphasize its availability to the customers, who want to use more powerful and safer products.

A123Systems must build strong and long lasting relationships with its suppliers. For company, which has its own production, it is very important to have all the necessary tools and materials for stable functioning and delivering products for its customers within a set time frame. Making suppliers a vital part of A123Systems will increase their involvement in the business process. Backward integration can be examined in the future to achieve lower input costs and an absolute control over supply process.

Overall position of A123Systems on the market looks considerably more stable and promising, comparing to its competitors, at present. Company produces batteries, which can be applied to a wide variety of businesses and used for many purposes. It offers high quality and safety rate, considerably low prices and greater performance to its customers. It is still unique on the market and will stay such if will continue growing and developing.

Business-level Strategy
A123Systems must concentrate on providing value to its customers, and making sure they understand the essence of the company existing on the market. It should clearly ascertain, who its customers are, and what needs do they have. Company must set finding the way to satisfy its customers’ needs as number one priority. As was mentioned above, a company’s focus group is relatively big and diversified. That means that the variety of needs, company has to satisfy, is very wide and complex. A123System must be able to differentiate its customers and their needs.

Customers are a powerful force, which affects company’s performance and position. They need a product at the lowest price possible. Through introducing a high quality product available for most of customers, willingness to switch to another producer decreases. Being a cost-leader on the market is a great competitive advantage gained through adjusting costs to the customer’s ability to purchase.

For a new company like A123Systems it is very important to draw its customers’ attention away from the fact of the company’s novelty. The best way to do it is to emphasize the advantage of using this particular company’s products. High quality and low prices will give a priority to the company, no matter how new and unknown the product is. However, A123Systems must continuously be emphasizing the positive sides and qualities of its product. It must draw customers’ attention to the safety of Nanobatteries and its friendly approach to the environment. A123Systems’ main consumers at this stage are early adopters. The cost is relatively unimportant factor for them, however, if A123Systems wants to widen its customers’ variety, it should carefully think through its prices. It is very important to make a good impression on early adopters, who are using company’s products in order for them to spread a positive message to the potential customers.

In case of A123Systems, which is using cutting edge manufacturing techniques, the price is not easy to change. In that case A123Systems can create a value through sustainability. Convincing its customers of the uniqueness and good reputation of the company will help A123Systems to gain value and customers’ interest. This, however, is not the most secure way to stay a market leader in the future with the growing competition.

A123Systems’ most important factor, which makes it a market leader, is the uniqueness of the materials used for the manufacture. Material differentiation provides A123Systems with a stable position on the market for a certain period of time. Company should put more stress on the uniqueness of its products and the advantages of using it.

Core competencies
Material differentiation is one of the most vital A123Systems’ competencies. It offers a wide range of products, produced from innovative and unique materials developed by the company. Its cutting edge manufacturing techniques allow company to offer its customers low prices and high quality in one product. These factors can be used to increase customers’ perception of the company and their willingness to consume exclusively its products.

The company has a big advantage over its competitors due to the state-of-the-art cell design used in its production. It allows A123Systems to develop unique chemistry and manufacture products of outstanding performance. The latest and advanced technology in aggregate with professional and skillful manufacturing engineers works everyday on further developments and improvements of the products. Greater production performance can be achieved through collaborating with leading high technology, computer and chemistry developers. Working closely together and sharing knowledge with experienced companies in other industries will provide A123Systems with greater amount of important information necessary for building competitive advantage.

Backward integration can be another useful option for gaining competitive advantage. This will help to get an absolute control over supply process and reduce input costs. Since A123Systems has its own development and production, tight control over supply chain will ensure a secure business practice.

Systems integration can be developed further. At present, A123Systems’ business includes development, manufacture, packaging, and delivering processes. Making diverse components work together, assists the company in off-the-shelf delivery to its customers. As was mentioned above, company should broaden its variety of activities. This can be done through introducing a service, for example, or entering a new industry. Company’s service can focus on assisting customers with installing, handling and maintaining purchased batteries. Service can also provide A123Systems’ customers with the maintenance and repair processes.

Entering a new business must be carefully thought through before accomplishing. Since A123Systems offers batteries for almost every piece of technology, it can start producing more complex devices itself. A good example for this would be KillaCycle, the quickest and most powerful electric motorcycle. The motorcycle was built by a small team owned by Bill Dube, however, the key to its success is motorcycle’s battery, produced by A123Systems and installed into the motorcycle’s system. Since A123Systems have significant developments in the transportation area, company can get a big share in this industry through producing its own pieces of machinery, acquiring a relatively successful car manufacturer or entering into partnership with the latter. Product diversification will open new markets for the company, which will result in more customers, greater and more stable position and higher profits.

A123Systems is a leader, when talking about production costs, due to its cutting edge manufacturing techniques. However, this situation can change significantly within next five to ten years. With the entrance of potential competitors to the market, the fight over cost leadership will affect the company and its position. As was stated above, switching costs in A123Systems would be a process demanding a lot of effort and scenarios from its management. This can be done mainly through changing certain aspects in the supply chain like backward integration.

Finally, A123Systems has to build strong and long lasting relationships with its partners. Already now company has such partners as Chrysler, Cobasys, IHI, etc and it must continue entering profitable partnerships in the future. The partnership with experienced and successful company is not only useful in avoiding the pressure from the new companies, who are entering a market, but also for sharing the important information and gaining knowledge from the corporation well established in its industry.

Business imitation
A123Systems’ innovative approach to the technology world will apparently attract many competitors, willing to take away a big portion of shares from the company. Nanophosphate technology surprises with its superiority and success, but also attracts more and more business people’s attention. The products A123Systems is offering are unique and of a great performance, which makes the company unique by itself. However, the situation can be changed drastically in the future, and A123Systems can be strongly affected by the new companies entering the market and trying to reach leading positions in it. A123Systems must stay focused and ready for the strong attack by other companies willing to produce Nanobatteries. It should be prepared to protect itself from the competitors’ attacks by developing strategies helping company to survive in the time of the fast growing markets.

Techniques for producing Nanobatteries were the initial development of A123Systems and therefore are not easy to imitate. The combination of superior information, powerful production tools, skillful and professional employees, and products with an outstanding performance will demand a lot of time, money and effort from A123Systems’ competitors. Nevertheless, company must consider all the possible changes it may be faced with due to the increased competition. It must also develop strategies to keep its share on the market and continue growing while competing.

A123Systems must start developing techniques that will ensure its future position and success of its business. With the increasing competition manufacturing costs will play more and more important role in creating customers’ value. A123Systems has a significant advantage over its competitors due to the manufacturing techniques it is using. However, company must clearly differentiate its resources and market position from its competitors’ to reduce the possibility of imitation.

In case supply chain from external sources will remain as a part of company’s manufacturing process, A123Systems must change the approach to its suppliers. Getting suppliers that are unique will ensure the competitive advantage of A123Systems. Uniqueness of suppliers can be expressed in many ways. They can differ from the course of the business A123Systems is running but applicable to Nanobatteries manufacturing. No matter, who the suppliers will be, the most important task for A123Systems is to build a strong and trusted relationship with them. While being in a strong relationship with its suppliers, company has to make sure it will be able to switch to another supplier any time without serious loss.

Furthermore, A123Systems must create a special service attached to its products, which will bring greater customers’ satisfaction and their loyalty. This will reduce the possibility of A123Systems’ customers switching to another company producing Nanomaterials. It will also introduce A123Systems to another market, providing it with a greater scope of activities.

Finally, copying a partnership with leading and representative companies will be an impossible task for potential A123Systems’ competitors. The competitive advantage is build out of many factors intersecting with each other. It is not only the cost leadership or profitable partnership that makes company strong and competitive on the market, but the combination of those. Company must develop its every sector, making sure it is better than its competitors in every way.

Diversification
There are many new businesses A123Systems can enter. Due to the big number of applications it has in the world of technology, company has a wide assortment to choose from. Nanobatteries can be applied in transportation, power tools, governmental developments, etc. Company also has a number of services it can offer to its clients. However, company must be careful before entering a new market and think all the possible outcomes through before making a serious step. The possibility of maintaining a newly acquired business should be take into consideration and carefully examined.
Recently A123Systems has entered a partnership with Chrysler, and before it has provided KillaCycle with its battery made out of Nanomaterials. In case of KillaCycle, it was clear that the speed and the power of the vehicle was mainly a merit of its powerful battery. Battery is one of the most essential parts of any machinery, and A123Systems is one of the best manufacturers of this part in the industry.

One of the areas A123Systems can confidently enter is a car industry. The main advantage of Nanobatteries is their power and power is the one criterion, which is extremely important for the cars manufacturers. In addition to power, Nanobatteries are durable. It takes short time for Nanobatteries to get charged, and they last much longer than its analogies.

Perhaps, the best way for A123Systems to diversify is to acquire already existing car manufacturer. It will cost less, because equipment and workforce will already be provided to the acquirer by purchased company. A123Systems will have an access to the knowledge and experience gained by the company while working in the industry.

By acquiring a car manufacturer, A123Systems will be able to introduce innovative transportation to the market. Its battery can provide cars, motorcycles, tracks and public transportation with the increased power and outstanding performance. The exploitation of A123Systems’ cars will be environmentally friendly and affordable to almost every customer. Aviation industry could profit from using Nanobatteries produced by A123Systems as well due to their lightness, duration, charging abilities and safety.

Another industry worth of A123Systems’ management’s attention is power and hand tool industry. The demand for power and hand tools is continuously growing and is becoming one of the most promising and profitable businesses. Similarly to transportation industry, power and hand tool industry is a very attractive area for such company as A123Systems to enter. Similarly to car manufacturer, power tools’ manufacturer can be acquired by A123Systems. It can also receive all the necessary information for running this business from the experienced and knowledgeable purchased company. However, the variety of products, usually produced by hand and power tools manufacturers, can be too wide for A123Systems to control and maintain. Acquirer must be careful when choosing a company to purchase and must preferably acquire one that has a comparatively little product line.

Finally, A123Systems can offer a number of services to its customers, which will ensure their satisfaction and loyalty in the future. Good service will not only satisfy company’s customers but also will serve as some kind of reminder. It will always keep customers aware of the innovations introduced by the manufacturer to the market. The service must be carefully thought through before being introduced. One of such services could be a battery replacement and repair service. It is very important to let customer know that he or she will be able to receive maintenance service from the company after the purchase of a certain product. This will be more convenient for both company and its customer. The customer will be using company’s service and at the same time will be bound to the seller for the period of exploiting its product. This service will increase company’s value for the customer and will reduce the possibility of switching to another company.

Another service A123Systems could deliver is consultations services. Since company develops and produces batteries from Nanomaterials, it has a big knowledge in this field and can share it with other businesses or private individuals. A123Systems’ team consists of many professionals highly experienced in Nanotechnology and could provide with quality consultations. This strategy will increase even more the number of company’s customers and will open for the company a completely new market full of possibilities.

Finally, A123Systems could provide Nano-testing services. Due to its knowledge in Nanotechnology field, it can assist its customers in testing other products made of Nanomaterials. Company can also have government as its customer for verifying Nanoproducts, which are about to be released to the market.

Organizational structure and control systems
Setting a certain organizational structure within the company is very important for achieving its goals and working on its vision and values. Especially when entering a new market, the communication within an organization is extremely crucial. It is very important to strictly divide responsibilities among company’s employees to achieve high speed of operations flow. It also allows corporation to set a certain culture and working atmosphere within the working groups and company’s departments. Making sure employees are moving toward company’s main goals and creating a value for its customers is an extremely necessary process.

Since A123Systems is both a supplier and manufacturer of its Nanobatteries, the operational efficiency is very important for the company. Functional structure, where employees in certain division perform tasks only set for them, will be an optimal way to increase company’s efficiency. The communication within the group will be simplified due to the expertise of every worker in it. However the disadvantage of this structure is a difficulty in the communication between the divisions. The division cannot be left to be on its own without people responsible for observing its activities. For that reason, company must decide whether it needs a faster performance or a better reporting and communicating process.

Depending on whether A123Systems is going to expand its business’ focus, it could apply functional or divisional structure. Divisional structure will serve for managing different products separately. Division made according to the product, which it will be responsible for, will have all the resources and information needed to run the business. All the activities and achievements will be communicated between top management of each division.

Another possible structure for A123Systems, in case it is going to diversify, is matrix structure. This will be a perfect structure for the organization functioning in many markets with broad variety of products. Each division is going to have one product, which it will be responsible for. In each division there are going to be its own departments like marketing, accounting, finance, human resource, R&D, etc. This will result in having many small companies within one big organization. The activities and achievements will still be communicated among them; however each division’s management will be relatively independent in making decisions on a functional level.

The last structure will be appropriate for A123Systems only in case it will grow and enter new markets. In case the company will diversify and expand its business scope, matrix structure will be useful for making sure all the products produced by the company are being watched and controlled by the top management. In case it will concentrate on producing and supplying batteries only, functional structure will suit the company the most. The values and vision will slightly vary from division to division, and matrix structure will provide A123Systems with the opportunity to let each division to work for achieving its own goals and objectives.

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