Marketing Assignment: Momenta’s Competitive Advantage In China

Question

Task:
Case Study Summary: “Momenta: Sustained Success in the Artificial Intelligence Boom?”
This case describes how in less than two years a fast-growth venture became the first autonomous driving unicorn startup in China, at a valuation worth USD 1 billion. Specifically, it poses a fundamental question as to how a fast-growth venture continues to stay competitive. Founded in 2016, Momenta is an Artificial Intelligence (AI) and autonomous driving startup based in Beijing, China. Fueled by growth capital investments, Momenta have sped up its technology development in building autonomous driving “brains.” This case presents readers with an opportunity to analyse the critical issues faced by the cofounders of Momenta and provides them with avenues to explore how a fast-growth business could sustain its success in the AI boom.

This case describes how in less than two years a fast-growth venture became the first autonomous driving unicorn startup in China, at a valuation worth USD 1 billion. Specifically, it poses a fundamental question as to how a fast-growth venture continues to stay competitive. Founded in 2016, Momenta is an Artificial Intelligence (AI) and autonomous driving startup based in Beijing, China. Fueled by growth capital investments, Momenta have sped up its technology development in building autonomous driving “brains.” This case presents readers with an opportunity to analyse the critical issues faced by the cofounders of Momenta and provides them with avenues to explore how a fast-growth business could sustain its success in the AI boom.

Answer

Question 1: Using the VRIO framework in the present case of marketing assignment, analyse Momenta’s key resources and capabilities to explain Momenta’s competitive advantage in the Chinese context.

Answer 1
VRIO framework refers to the valuable, rare, imitable, and organized aspects that help the firm in gaining competitive advantage in the industry (Johnson et al, 2017, chap 4).

Valuable–The company provides valuable resources to its customers. It is one of the first companies to manufacture AI-driven cars, intelligent service robots, medical image assistance systems, and others. The company has built resources that will useful in building smart cities in China. The resources capabilities of Momenta are valuable and the company should protect theses assets for gaining long term competitive advantage.

Rare- Rarity is considered to be the scarce resource in the market place (Johnson et al, 2017, chap 4). It can be said that AI-driven services and products are new in China and the government has been supportive in the development of IoT in different sectors. The products manufactured by Momenta are grounded on deep- learning algorithms, for instance, the Auto Ring is manufactured with two cameras, one faces the driver while other keep track of the roads thus, providing safety and fleet supervision. The cars are equipped with low-cost sensors and high definition maps. The AI-driven vehicle and other products are rare resources as they depend on the creativity of the makers.

Imitable- Inimitability refers to the cost of adapting the resource and capability of the firm (Strangmueller, 2018, p.4). In this view, the government is providing monetary and other supports for the development of AI ad IoT in China. Thus, many industries and firms will be to invest and manufacture AI-driven products. However, the collaboration of the Momenta with the government cannot be easily imitated by other firms.

Organized– This aspect refers to structured management systems and processes (Strangmueller, 2018, p.4). Momenta comprise of efficient founders and co-founders like Xudong Cao, Gang Sun, and Yan Xia that are specialized in the Ai technologies which include facial and text recognition and others. It can be said that the leadership and management structure are well organized which helps the firm to achieve its action plan by 2025.

The VRIO analysis predicts that resources and capabilities of Momenta have helped in gaining competitive advantage, thus by 2025, the company will be able to establish a legal framework and AI – Industry worth RMB 400 billion.

Question 2: Discuss what dynamic capabilities have helped Momenta to ‘sense’, to ‘seize’ and to ‘transform’ or/and to ‘reconfigure’ its competences to exploit new opportunities?

Answer 2
Dynamic capabilities are referredto the managerial and organizational abilities that help sense, seize, transform, and reconfigure internal capabilities for addressing the changes in the business environment (Dornyo, 2020, p.13).

Sense – The four founders of Momenta had sensed the requirements and the type of customers, thus committed to building automatic self-driven cars while also providing tech solutions to Tier 1 locomotive suppliers.

Seize-sensing customer requirements required sufficient funds from varied financial partners.In 2016, USD 5 million was funded by Blue Lake Capital while in the next preceding Momenta could secure USD 46 million by NIO Capital and Cathay Capital. Also, the additional funds provided by government investors.

Transform- The company aims at building the company’s future as the brains of the AI-driven vehicles. The company founders worked closely with their strategic partners for developing in the automotive industry, logistics, big data along with the initiatives and support of the Chinese Government. The efficient business model of the company and government support helped the company in transforming its startup. At the end of 2018, the Momenta has become one of the first manufactures of automatic self-driven cars like Auto Ring.

Reconfigure- The company aims to take advantage of the supportive environment, thus between the years 2017, and 2022, it was estimated that Momenta will manufacture OEMS thus providing deeper insights to customers, government agencies, business units, and others.

It can be explained that market gaps of inefficient vehicles were sensed by the company, then appropriate funds were raised for developing the AI-driven cars. In the transformation stage, theMomenta developed vehicles like AutoRing and advancement with support of the government while in reconfiguration stage, the Momenta is committed to manufacturing insights on AI and IoT for different industries and customers

Question 3: What are the entrepreneurial competencies of Xudong Cao, co-founder, and chief executive of Momenta? Is this a resource or capability and how does it impact the competitive advantage of Momenta?

Answer 3
Entrepreneurial capabilities help in introducing unique strategies and disruptive innovation that further fulfills the market gaps. In this view,Xudong Cao was inclined towards the development of Artificial intelligence, also he worked closely with customers to gain knowledge of their needs and requirements. Cao, Sun, Xia, and Ren are the assets of the firm as they possessknowledge andexperience in the technological sector (AI and IoT) that has helped the company in converting the dream of self-driven cars into reality. Xudong Caois a graduate from Engineering Mechanics fromTsinghuaUniversity, China, and gained experience through his research and development job at Microsoft Asia Research and Sense time where he handled more than 100 team members. In the same company, his co-founders worked with AI- technologies. The experience in AI- technology and management of team members helped the co-founders in starting their entrepreneurial journey. They also partnered with Shaoqing Ren who holds a doctoratein Computer Vision philosophy. All the partners had a futuristic vision of their company while they also knew about increasing customer demands in this field.

The founders had realized the boom of AI and understood their potential customer's requirements.

The entrepreneurialcompetencies are referred to as the practices that are undertaken for exploring, integrating, and exploiting the untapped business opportunities of the market. The vehicles of the Momenta are designed to recognize multiple lanes, signs, signals light glare, poor weather, and other aspects that will reduce accidents and hazardous incidents that occur while driving the cars. Hence it can be said that the market gap was understood by the entrepreneurs which helped them in gaining success. It can be said that the capabilities of co-founders are the biggest resources for making the company a global leader of innovation and technology.

Read carefully the following Excerpt from the case that describes Momenta’s plans for future investments to stay competitive in a context of AI boom:

Looking forward, Cao believes that Tier 1 automotive suppliers and OEMs will be partnering with and investing in data aggregators, technology providers, data consumers, and data-driven analytics companies to generate new revenue streams using mobility services and IoT applications in response to market demand for higher value. This will result in connected car data and transaction volume increasing on a large scale, which means that data aggregators will likely shift from a subscription model to a customized revenue-sharing model. They may employ Platform-as-a-Service and Data-as-a-Service models to provide bundled services. Think¬ing about how to connect all these relevant dots, Cao sits back for a moment to ponder his next move—how can Momenta capitalize on its strengths and take advantage of the AI boom?

Based on this next steps vision, answer the following two questions.
Question 4: The 3 F’s framework specifies three ways in which an argument in a business case could be put forth. Based on each of the F’s in the 3 F’s framework, formulate an argument that will influence Cao to invest in the aforementioned technology(ies) and innovation(s) to sustain its success in the AI boom. Therefore, you should have 3 arguments in total. They can be for one investment or multiple investments from the excerpt above.

Answer 4
The 3 Fs framework of Future, Focus, and Fundamental should be mastered by the entrepreneurs for achieving long term growth in the market.

Future- The technical advancements in the past decades have risen. Companies, governments, and individuals have realized the value of IoT and AI in various filed. One of the major advantages is cost-effectiveness by using technology in every aspect of life and business. Hence, Cao should think about AI- boom that can solve several issues in society. Thus, employing Platform-as-a-Service and Data-as-a-Service models will help in converting the business model of Momenta into a revenue-generating unit, profits of which can be used in developing other products and services.

Focus- Since the company has started with developing Self -Driven vehicles thus, the focus should be given in manufacturing other locomotives like racing cars, bicycles, and others. In recent times not, many companies have invented AI-driven cycles and other locomotives. The company shall invest in data-driven analytics companies to gainin-depth knowledge about the application of IoT in different vehicles.

Fundamentals- Business Fundamentals are essential while investing in technical fields. Cao should gain industry analysis and gain knowledge about the industry influencers and potential competitors. Thus, determining the strengths, weaknesses, threats, and opportunities will help Cao in refining its service and market positioning.

Question 5: Using the IT Portfolio theory, explain what type of investment asset class (infrastructural, transactional, informational, strategic) these belong to and if it might change in future? Support your argument with examples from the case.

Answer 5
The IT Portfolio helps in examining different types of investment assets that are

Transactional– Thistype of investment is used to down the cost through repetitive transactions. It is estimated this aspect involves 26% of investments that provide solid returns and are less risky (Fletcher and Crawford, 2013, p. 332). The transactionalinvestments of Momenta will be AI- insights and low-cost inputs that have been used in autonomous vehicles.

Informational- This type of investment provides information that further assists in decision making and management. Informational investments provide enhanced control with improvement in quality (Talmor and Vasvari, 2011, chap. 15). These investments provide moderate returns while they are also average risky. Since the company is AI-driven, informational costs are reduced as the integration and quality can be improved through further research and expansion in its products and services.

Strategic –The strategic investments are utilized for gaining competitive advantage by developing new products or entering new markets (Castelnovo and Ferrari, 2013, p.258). These investments are highly risky while providing enhanced ROI. The strategic investments involve 11 % of the assets while it will enhance the product, process, and service delivery of the firm. The government support in booming AI will help the Momenta in developing new product lines for forming a competitive advantage.

Infrastructure- The infrastructure investments help in determining the future business cost but providing a flexible base (Griffiths, 2011, p. 22). These investments enhance business integration and reduce IT costs but deliver moderate risks and returns. In this view, Momenta will require 46% of total investments for reducing the costs of operations and the final product.

It can be estimated that the company should streamline its investments in strategic and infrastructure so that competitive edge can be maintained even after the AI- boom in China.

References: References and citations showing the source of all the information in the exam need to be provided (Harvard referencing style). The references used must demonstrate thorough research using quality references such as journal articles, book sections, conference papers, and industry reports with good evidence to support your arguments in the sections above. Details on referencing can be found at: http://www.deakin.edu.au/current-students/study-support/study-skills/handouts/ideas.php

1. Castelnovo, W, & Ferrari, E 2013, ECEG2013- 13th European Conference on eGovernment: ECEG 2013, Academic Conferences Limited, South Oxfordshire.
2. Dornyo, W Y, 2020, Principles of Management in Strategic Management: Featuring a Masters ISP Approached Project Work for Managers, GRIN Verlag, Munich.
3. Fletcher, R & Crawford, H 2013. International Marketing: An Asia-Pacific Perspective, Pearson Higher Education AU, New Jersey.
4. Griffiths, P 2011, Strategy-technology Alignment: Deriving Business Value from ICT, marketing assignment Academic Conferences Limited, South Oxfordshire.
5. Johnson, G, Scholes, K, Whittington, R, Regn, P &Angwin, D 2017, Fundamentals of Strategy, Pearson UK.
6. Strangmueller, M 2018, Economic Strategies. Potential Improvements of Burberry, GRIN Verlag, Munich.
7. Talmor, E &Vasvari, F 2011, International Private Equity, John Wiley & Sons, North America.