The chapter discussed several examples of companies that have used IT for competitive advantage

Onstar1. The chapter discussed several examples of companies that have used IT for competitive advantage. Is there anything about the OnStar system that makes it a good example as well? Is OnStar a feature that is likely to give GM a competitive advantage for an extended period of time or is it likely to give, if anything, a temporary advantage?

OnStar provides emergency road assistance and driving direction. Similarly about flight reservation, wireless applications are on the way too. If flights get delay than it informs the passenger that you can have half hour more to relax.

The technology is great. GM has used the technology to support its own brands, and not establish itself as a separate brand. They were giving up a competitive advantage. GM’s brands need everything they can get, and that’s why they have used OnStar for.

For example: Auto analyst at investment bank, points to a recent agreement with Lexus, in which the OnStar service will be branded Lexus link, as an example of how the OnStar brand has been used.

It does not have any temporary advantage because the technologies that are succeeding in wide adoption frequently display simple interfaces and low barriers to use. In the case of instant messaging, e-mail, and Web browsing has an excessive features. Reading the manual is rarely a priority. So OnStar has a new generation features in it. And it will grow up day by day.

2. Evaluate the OnStar system from the perspectives of the five-force model and the three generic strategies. Explain how OnStar might alter the five forces in GM’s favor. Where would you place the OnStar system in the three generic strategy grid illustrated in Figure 2.8?

GM has proven to be an industry leader by installing the OnStar system. OnStar has been used to assist subscribers in everything from emergency services to tracking stolen vehicles; getting the doors opened when the keys are accidentally locked inside; finding the nearest ATM machine; guiding the driver to the local zoo or gasoline station; and arranging dinner reservations and theater ticket purchases. If an OnStar-equipped vehicle is in a crash that deploys an airbag, the car itself automatically “calls” the Center and an advisor immediately calls the vehicle to see what kind of assistance is needed. This transformation will bring with it many issues, and safety is one of the biggest. Today, the desire to communicate from the vehicle is so great that more and more drivers are using cellular phones each day. And, they are not always using them in a safe manner. GM is ahead of its competitors in providing safety.

With the help of OnStar the user do not have to worry about the cell phones. Since Safety is a big issue, it drives the customer to make a powerful decision about buying a car. By introducing OnStar GM is proving to be the best in he industry thus reducing the threat of being behind in competition. Since GM is the leader in using this technology, there will be followers and many companies will end up using this technology. But being ahead in the market GM as a greater advantage. OnStar is the only company that provides GM with this great service, so OnStar is the channel leader and can control the demands. GM and OnStar have a strong relationship, due to this strong bound the image of GM is improving. By providing such high tech services, GM is controlling the decision of the Buyer, with the help of OnStar technology GM is attracting the buyer and promising a strong faithful relationship.

Since research has shown just a few weeks ago, that by the year 2005, the global market for telematics will grow to $8 billion, compared to $1 billion this year, GM with help of OnStar lies in the High Growth and High Potential area on the three generic strategies grid. GM is investing a lot of money in the technological transformation and being very innovative, GM’s CEO believes that believe the automobile itself is being transformed into a communications and entertainment platform as well as a transportation platform. With this belief GM is following the right path towards technological growth.

3. Is OnStar a good example of company incorporating emerging technologies into its product strategies? Why or why not? What features do you think a system such as OnStar might offer five years from now? Is GM taking any risks by placing such a large bet on OnStar being accepted by the marketplace? What are those risks, if any?

OnStar service was originally offered in Cadillacs in 1996 as an emergency concierge and road service. It uses global positioning system (GPS) to provide directions and to locate the vehicle. A cellular connection to the call center enables driver to request roadside assistance. GM plans to upgrade the onboard cellular system into a platform for delivering web-based email and content, and voice-activated calling to its OnStar menu. OnStar combines GPS, cellular, and Internet technologies to come up with a service that is needed and useful to the driving consumers.

One possible enhancement to OnStar in the future is autopilot. Sensor detection technology combined with GPS for directions, and voice activated command menu will make physical intervention by the driver unnecessary. Autopilot vehicle will appeal to very busy individuals who will use the driving time as opportunity to do other tasks.

Introducing new technology is always a risk. Being the first can offer immediate but temporary competitive advantage. Competition can copy the technology and even better it. In the long run, GM runs the risk of another technology replacing OnStar. Also, this technology might become prevalent and standard in every vehicle. Eventually, GM will lose the competitive advantage initially gained and must look for some other ways using technology to enhance features on its line of cars.

4. If you were a product designer for Ford Motor Company, what would your reaction be to GM’s rollout of OnStar? Do you think that systems such as OnStar will become an entry barrier? Log on to the Internet and see if you can find out what the other major automobile manufacturers, both US and non-US, are doing in response to the OnStar system. Draw a conclusion as to which responses you think will be most effective.

If I were a product designer for Ford, I would see this as both an advantage and a disadvantage. The advantages being that Ford’s product design team could learn from the mistakes that GM made and not repeat them. We could also find ways to survey users of GM’s OnStar system to get feedback so that we produce a superior product. The disadvantages would be that GM has the ‘brand’ recognition in OnStar and anything that comes out may be seen by the public as ‘Ford’s OnStar’ system. Another disadvantage would be the simple fact that they came out with it first which could draw some market share.

I don’t think that systems such as OnStar will be an entry barrier for new car companies to enter the marketplace. I assume that there are already many entry barriers which the large and powerful car companies have developed that prevent newcomers from entering in the market. And the system was relatively cheap to develop, compared to the cost of developing a new vehicle so if GM’s competitors can afford to develop new cars, they can certainly afford to develop a system of their own.

Ford Motor Company has partnered with Qualcomm to develop Net Car, Ford’s answer to GM’s OnStar. They planned to have the system in cars sold in Asia and Europe sometime this year. Daimler-Chrysler is is also working on a system of their own. On the other hand, some companies such as Audi, Acura and Lexus have made deals with GM to offer OnStar in their vehicles.

I think that the three companies that have partnerships with GM may be most effective because they don’t have to spend the time and money on developing their own system, GM has already done it for them. There are many pieces to a system such as OnStar from partnerships with cellular companies, satellite GPS companies, voice recognition software companies, companies who provide the traffic updates and internet connections – the list could on and on. Since GM has already done all this work, Audi, Acura and Lexus will not have to spend money on the development costs. They may pay a premium for the service from GM but it will most likely be less than creating there own system.

5. What would your reaction in OnStar be if you were a marketing strategist for a cell-phone, Internet Portal, or GPS service provider? Would you consider OnStar to be competitive threat to your company? If so, why, and what would not consider OnStar to be a threat, why not?

OnStar takes advantage of cell-phone, Internet, and GPS systems to offer many services such as road side assistance. If I were to be a market strategist for any cell phone, Internet Portal, or GPS service provider, I’d look at OnStar as a golden opportunity to expand current business. It would be an opportunity to expand into new industry and thus gain new customers. In fact, if the company I worked for did not take this opportunity I would advise them that they would have to scramble to catch up later on.

OnStar can be a threat if our company is ill-equipped to handle and adjust to this new technology. However, if my company took advantage of this technology and became a pioneer in it then it will be very easy to become a market leader and generate a great deal of profit from it. Therefore I would not view it as a threat and rather look upon it as an opportunity to enhance the company’s profit and image as a technological leader.

6. What additional applications could you suggest to GM as areas it could focus on to use IT for competitive advantage that might give it an equal or better payoff that what it is hoping to get from OnStar? Can you think of applications that would let it gain manufacturing or supply chain efficiencies? Can you think of applications that would give it efficiencies in distribution? Could GM go to a mass-customized, direct-sell model like Dell Computer’s and deal directly with its customers, bypassing the dealers the way the airlines have bypassed the travel agents?

I would suggest applications that aid in the safe operating of the vehicle. Possibly a system that detects problems with parts before they fail. And applications that offer assistance when driving, for example if another car on the highway was getting to close to yours or one that detects road conditions such as black ice which is almost impossible to see. I think the concentration must be on applications such as these, it’s seems as though some companies are getting carried away with email and internet options which I feel can be very distracting unless it would work in a strictly voice-operated manner.

I am sure that GM uses applications which help them gain efficiencies in manufacturing, supply chain and distribution. One suggestion would be to have a system that tracks what models are popular in which areas and continuously allocate the cars around those regions.

I don’t think that the direct sell would work for GM mostly because of the distribution and delivery of the vehicles. First of all, you could not totally get rid of the dealers because there would be no place to test drive the vehicles. Secondly, it would be very costly to deliver cars to the buyer’s homes. I think you could have some combination of the two, in fact Volkswagen does have a system like this. You can configure the car you want and they will deliver it to your nearest dealer, but I think they probably find the closest thing to the car you requested at another dealer, make any needed changes and ship it to your nearest dealer.

Bibliography: