ELIO ENGINEERING CASE ANSWERS

ADITYA SINDHU (160101157)

Q.1.) Should it partner with a tier-one or a tier-two automotive supplier?

A.1.) As far as partnering with tier 1 is concerned, the advantages stated include:

 High volume manufacturing and distribution

 Experience in product design & development and manufacturing power,
 Easier to get us federal safety standards Strong relationship with manufacturers
Reasons not to partner constitute the following two chief reasons:

 The time required to partner with a Tier one would set Elio back an entire year building
a new relationship. Further, an exclusive partnership with tier one will limit the market
size and will require a longer time to create or grow new partnership.
 Tier Ones are likely to go with an inhouse design. Such a partnership could leave the
new entrant with lesser control over its core ABTS technology.
As for tier 2, the core advantages are more control over the ABTS technology as well as a
more diversified market, opening more avenues for product. However, in this case the
disadvantages are immense which include the following:

 Product delay due to large capital requirement,

 Lack of competence in manufacturing,
 Lack of access to manufacturers and unable to implement KIT delivery
 Low product value added

Therefore, considering both the alternatives and their respective disadvantage, going with
tier 1 makes better sense for Elio.

Q.2.) How well is Elio Engineering’s technical strategy aligned with the requirements for a
successful entry into the automotive seat market?
A.2.) According to the article, Olio Engineering has taken some right steps to ensure they are
aligned with the requirements for the successful entry into the automotive seat market so
far.
They have obtained and registered a strong patent which would prevent other companies
from copying their designs. They have the product that meets all the safety standards, low-
cost and is durable also.
However, some of the manufacturing and other weaknesses in their strategy include the
following:
  Manufacturing: Lack of manufacturing knowledge, lack of processes to ensure quality
control for mass manufacturing and ensure efficiency in production at the same time.

 Materials: The Urethanes material used I production has to be tested on extreme

conditions

Q.3) Should Elio approach an automotive manufacturer directly?

A.3) Yes, Elio should approach a manufacturer directly. Some of the reasons why Elio should
do so are the following:

 Much larger profit margins because it will essentially exhume the cut that 1 st and 2nd
tier OEMs keep for themselves
 A large manufacturer will ensure that the production and material standards are
ensured resulting in higher efficiency manufacturing of the ABTS seat
 Larger manufacturers will ensure cheaper price owing to production efficiency
 Larger manufacturers will already have all regulations and other safety necessities in
place, for example the federal safety requirements for the material.
 Large manufacturer already has strict federal safety standards set by National
Highway Traffic Safety Administration (NHTSA) and codified in the Federal Motor
Vehicle Safety Standards (FMVSS)
 They posses the necessary financial backing and one of the best facilities for expensive
but necessary tests like the safety crash test
 They can enter into R&D contract with Elio wherein apart from the due licensing fee
of the ABTS seat, they can succinctly fund Elio for future R&D projects and also provide
them with their in-house testing facilities for doing so, which are at a much standard
then what tier 1 or 2 like Bostrom are currently capable of offering.
The only major disadvantage of a manufacturer can be limited market for the project (as no
other competing automaker can be sold to) and the ability of the automaker to make an
indigenous product similar to the NC seat. However, with careful selection of the automobile
manufacturer, like for example a manufacturer such as GM or Ford controlling almost 30 %
market share in the US and with powerful patent protection of the product, these apparent
lacking points can be effectively handled.