Local Motors Case Study Analysis

Topics: Automotive industry, Renault, General Motors Pages: 8 (3188 words) Published: March 15, 2015

Local Motors: Designed by the Crowd, Built by the Customer
Case Study Analysis

Table of conten

Table of content2
Local Motor’s business model vs. “typical” models3
The CANVAS model3
Customer Segments3
Value propositions3
Customer Relationships4
Revenue Streams4
Key Resources4
Key Activities5
Key Partnerships5
Cost Structure5
Evaluation of the business model5
Customer involvement according to NIKE6
“LM template” in the clothing industry7

The financial crisis starting in 2008 and the following recession hit hard the US auto sector. Traditional car makers had to realise that substantial changes were needed in order to maintain their strong position in the market. Consumer preferences shifted towards more fuel-efficient and smaller cars which were more inexpensive to maintain. The changing business environment made possible for several start-ups to outstand from the crowd and make their success in the car industry with offering innovative solutions for car purchasers. Local Motors (LM) in one of these new car-makers with a unique and novel business model. In the following an analysis of this business model will be presented based on the CANVAS model which will be followed by a discussion about other examples where a similar model could work. Local Motor’s business model vs. “typical” models

Before going into detailed analysis of LM’s business model it must be pointed out in what key aspects does this model differ from those of traditional US carmakers. One of the most important concepts of LM’s model is an active community of car enthusiasts, designers and customers who take part in the design of future LM cars. The community allows LM to gather valuable, firsthand information about customer preferences and shape its offering accordingly. Traditional car makers usually do not have such a clear picture about what their customers want. Another key concept in the model is customers’ contribution to the assembly process of their cars which provides them a unique experience and for LM free labour force. Compared to big car manufacturers LM has a different concept about what to offer to the market. It does not want to make traditional cars but it wants to think out of the box and make novel and innovative cars instead. LM does not have the size and the sufficient resources to serve the mass market. It focuses on a much narrower segment of customers and tries to adapt to local preferences taking into consideration differences in market characteristics between different US cities. The CANVAS model

In the following the business model of LM will be presented in detail using the framework of the CANVAS model. First the different building blocks of the model will be described and then based on these building blocks the strengths and the weaknesses of LM’s model will be discussed along with suggestions for possible changes. Customer Segments

LM focuses on a market niche and targets those consumers who are searching for new technologies when purchasing cars and are attracted by limited edition models. It wants to reach those car lovers who would be pleased to take part in the assembly process of their own car. Early purchasers of hybrid cars and buyers of kit cars for instance form part of LM’s target group. Value propositions

The value proposition of LM consists of a combination of a product and different services. The product is a fuel-efficient car with a special design made by one of the members of LM’s online community. The car is not made in mass production which delivers the value of rarity to the customer. Buyers also get the assembly experience as they take part in the process of car making. This can be an important value for those customers who are obsessed with cars and consider this as a unique opportunity. They can also share this activity with friends and family members which many of them might...

References: Dencker, D., 2010. NIKE id – the first example of mass customization driving revenue? [online] Available at: http://www.crossroadinnovation.com/nike-id [Accessed 7 March 2014]
Castells, M., 2000. The Rise of the Network Society - The Information Age: Economy, Society and Culture Vol. I. Cambridge, MA; Oxford, UK: Blackwell.
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