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Avatar Company Analysis

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Avatar has gone through major development processes and changes in the past six years. The company’s short-term goals consisted of transiting to electronic auto via innovation and operation, raising customer awareness via marketing, committing to stable financial statements and indicators, and generally increasing the overall satisfaction with the company. The manufacturing factories of Avatar are primarily located in Asia, Europe, and America. The company was always concerned about the quality and technology innovation, thus making the company’s products advanced and environmentally friendly. The role of the government cannot be underestimated in this case – governmental support for eco-friendly products is an opportunity for the company to improve its products to satisfy or exceed environmental expectations. Another external factor which creates an opportunity for Avatar to grow is a high growth rate of developing markets. For example, the company can expand the Avatar dealership network in developing markets like India and Indonesia and can also expect minimal economic issues in major markets, based on their relative stability.

However, despite growth opportunities in developing markets, the company must ensure competence to address rising competition with regional and local or domestic automotive firms.

STRATEGY ANALYSIS

In order for a firm to gain a competitive advantage on the market, it must use its lower costs as its strategy since the company which produces with lower costs enjoys best profits. The firm can achieve low costs by either two ways: first, it can better control the goals in the chain of creating values than its competitors and second, is to revamp the firm’s’ activities altogether (Thompson and Strickland, 1998). Avatar chose to pursue a cost leadership strategy and the product differentiation strategy. The strategy of a cost-leadership is to lower the costs, and therefore, prices of products or services below competitors’ prices and aim at a broad market. (Williams & Kinicki, 2009). Therefore, all sources of cost advantage must be found and developed. If a company can achieve and preserve an overall cost leadership, it can set the prices near the automotive industry average. Simply becoming a cost leader is not enough because the company creates a risk of being pushed out of its dominating position by other competitors undercutting their prices and blocks the opportunity to increase market share. Therefore, the company must be confident in maintaining a leading position on the market before applying a cost leadership strategy. According to Porter (1998), companies who achieved success with cost-leadership strategy usually have three common factors:

  1. access to the capital needed to be able to invest in technology in order to lower the costs;
  2. very effective logistics;
  3. an overall low-cost base, including labour and facilities, and a stable way of cutting costs below the prices held by competitors.

Discussing the possibilities of differentiation, Avatar can distinguish between tangible and intangible sizes of differentiation. The differentiation of the tangible part is related to the observed characteristics of a product or service that are relevant to customer preferences and selection processes (Porter, 2015). These include size, shape, design, material, and technologies. This differentiation also includes product or service performance in terms of reliability, consistency, durability, and safety. An example of such differentiation in Avatar is the two electro class models which are the only cars on the market – E Air, which required an investment of 710 million euros and is in the growth stage, and E Biz, which required 600 million euros to launch and is currently in the introduction stage. It is important to note that all Avatar models have a battery energy capacity of 180 kWh, which is greater than competitors’ where the maximum battery energy is 140 kWh found on two models of Company C. The intangible part of differentiation, on the other hand, includes good research, development and innovation. Avatar has been actively investing in R&D as a part of innovation which had an extensive positive impact on the firm. This will be discussed more closely in section three of the report.

The target group of Avatar are young to middle age adults located in Asia, Europe, and the USA. The company’s potential customers are expected to be financially conservative and also environmentally conscious. As we can observe on the figure below, the chosen strategy and a described target group fall in the first and second category of Porter’s generic competitive strategies. The company’s aim is, therefore, to capture a wider consumer range and generate sales by offering many advantages to our customers. One of the advantages involves a low-cost product offers in the automotive industry. The other preeminence is the combination of highly efficient and uniquely made cars in terms of technology progression, safety, and reliance. Certain investments are inevitably required in order to achieve this competitive advantage. According to Miller (1987), product differentiation firms tend to invest heavily in research and development in order to enhance their innovative capabilities and increase their ability to keep up with the innovations of their competitors (Jermias, 2008). An example of this would be the Avatar E Lux model which required an investment of 840 million euros and produces an annual revenue of 1127 million euros while being in the growth stage.

Avatar’s market research showed that the demand for inexpensive, economic and environmentally friendly vehicles has increased and also according to the announcement of the UK government, the sale of conventional, petrol and diesel cars should be ended by 2040 . By 2023 Avatar invested €7,970 billion in electric cars from 2018 to follow the CO2 emission standards and become a market leader for producing the safest and socially responsible cars. The idea behind these investments was to create a strong brand within its niche and also hold a cost leadership position. However, for the cost leadership strategy to be enjoyed, the company must have a high market share and in case of Avatar the market share is 41,9% in the USA, 39,1% in Europe, and 31,5% in Asia by 2023. Activity mapping demonstrated below, or positioning map, can give an approximate position of Avatar among competitors in terms of four informative directions to visually describe the products of the company.

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