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					Zack Kent                                                                              BUS 444


                                THEORY IN PRACTICE


INTORDUCTION

        Ballard Power Systems was incorporated in Canada on May 30, 1989, replacing Ballard
research, which incorporated in 1979. It went public on June 10th, 1993. Ballard Power System's
primary business since 1989 has been the development and manufacture of proton exchange
membrane (PEM) fuel cells and PEM fuel cell system (the system used to supply fuel to the
PEM). They are fabricated for use in transportation, stationary, and portable applications. These
PEM products are all scheduled begin commercialization within the next four years. Already
portable fuel cell devices were test marketed in 2002, followed by bus engines in 2002 or 2003.
So far there has been little demand for their portable unit, while the bus engines have proved to
be desirable in coming years and demand should steadily increase.
        The company has emerged as a leader in fuel-cell technology, which may become a
prominent energy source in the future. They are currently recognized as the world leader in the
development, manufacturing, and marketing of fuel cells and related technology. Like Harley,
Coca Cola, and Phillip Morris, Ballard seems to have the first mover advantage for PEM fuel
cells. This position is mainly due to strong financial support form DiamlerChrysler and Ford.
DiamlerChrysler and Ford own 18.1% and 13.6% of outstanding common stock. Still, it is too
early to know how well fuel cells will catch on, how long it will take, or if they will ever be cost
competitive with other electricity generation methods. The rate of technological advancement
and macroenvironmental factors will determine the answers to these uncertainties. There are
many types of fuel cells. Small companies are developing different types of cells while large
competitors are in the process of developing fuel cells similar to Ballard’s. All the big energy
and automobile companies realize the possibility of fuel cells, and it seems that no one wants to
be left behind. Therefore, we see Ballard faced with tough competition from many worthy
competitors, similar to the market structure Dell is currently in. It is still difficult to predict
which companies will emerge as leaders in this industry. The biggest company doesn’t always
come out with the best product, which can be applied to Ballard’s position in the industry. We
saw this happen with Honda in its early years, they were a smaller sized company, but they came
out with a superior product. Ballard is in a very dynamic and exciting industry.


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Zack Kent                                                                           BUS 444



THE STRATEGIC MANAGEMENT PROCESS 1

       For Ballard Power Systems to one day become profitable in their industry, they must
insure that their short term strategies are in line with their long term strategy, and more
importantly, make sure that their long term strategy emphasizes competitive advantage over its
competitors. Similar to what Wal-Mart emphasizes. Recent events indicate to me that the
competitive advantage that Ballard once had is now diminishing. There has been a significant
amount of activity on the management level of Ballard’s operations. Ballard had recently made
many changes to its board and management department, mostly on the general management
level. Past managers may not have had a strong commitment to the company’s’ mission
statement.


Ballard's Mission
Ballard will be the leading supplier of high quality, low cost fuel cell systems, electric drive and
power electronics products, creating superior value for customers, shareholders, and employees.


       In my opinion, their mission statement sounds a little generic. It also is missing two of the
major components of a good mission statement. Although, the vision is found separate of the
mission statement.


Ballard's Vision
Ballard's vision expresses the company's aspiration to transform everyday life: Power to Change
the World®.


       The mission statement is missing the values or guiding standards that drive and shape the
actions and behavior of employees. A list of Ballard’s values and a description of their culture is
found on their employment web page.


       Ballard seems to be strongly focused on major goals and objectives, and they have been
for many years. This is good because it the results are precise and can be measured. This helps
the company to grow at the proper speed because time periods are specified. Ballard has been



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Zack Kent                                                                           BUS 444


good at setting goals that are challenging but realistic. Yet, Ballard seems to have overlooked a
crucial issue, competition. Ballard may be too focused on their own goals and objectives, and not
focused enough on what the competition is doing and how they are doing it. The fuel cell
industry is very dynamic. Constantly improving technology and any breakthrough can drastically
change the dynamics of the industry. Fuel cells may do to gasoline engines, what CDs did to
tapes or VHS did to BETA. A company must keep changing the goals and objectives to stay
competitive in this type of industry, if you don’t you way end up like Harley-Davidson once did.
Ballard’s goals and objectives seem to be somewhat stagnant. Ballard has had good focus on the
national environment, marcoenvironment, internal functions, but has had poor focus on the
industry environment. Their intended strategies are well formulated, so well formulated they
seemed to be attached to them. This could hinder to possibility of adopting an emergent strategy
that could benefit the company. Similar to Honda’s initial strategy when the expanded to the U.S.
market.




EXTERNAL ANALYSIS 2


       The fuel cell industry well leave the embryonic stage in the next few years and will start
to enter the beginning of its growth phase. This growth phase will be a very long one. The
acceptance of its technology will be a long and drawn out process. They speculate that fuel cells
and hydrogen power will one day take the place of internal combustion engines and petroleum
fuel. This isn’t good news for engine manufactures and oil companies. The oil companies have
so much power there is the possibility that they will stunt the progress of fuel cells in order to
maintain their own profits. Similar to the power Wal-Mart now has over many of its suppliers.
Actually, I think they’ve been doing that for the last 50 years. Now, fuel cells have become well
known and are on their way to making history. That is why the oil companies are some of the
biggest investors into fuel cell technology. They know they most also make the transmission
from being oil companies to hydrogen companies.


       Ballard is in an industry that has the potential to be extremely profitable. They are having
some trouble maintaining their leading position in the industry. If they are not able to stay the



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Zack Kent                                                                            BUS 444


leader of the industry, they could potentially miss out on billions of dollars in possible revenue.
Competition is becoming fiercer and it is hard to tell what company will come out on top. I have
my doubts about Ballard coming out on top based on their recent performance. This industry is
full of opportunities and threats. Porter’s Five Forces are also very strong within the industry.
The sixth force, complementors, is also a very important factor in this industry. Ballard is both
focused and diverse. Since the industry is still in its infancy the strategic groups are not well
defined or established. Ballard has focused on primarily PEM fuel cells, but has also made many
acquisitions which has diversified their portfolio to include the support systems (complementors)
needed for a functional fuel cell system. Over the last ten years, Ballard had acquired and sold
numerous companies in all types of hydrogen technologies. Like Coors they will soon control
many of its own supplies.


    5 forces


        Threat of entry: The risk of entry by potential competitors is relatively high. This
industry is very young and the technology is still being developed, intellectual property is crucial
to this industry. I see the possibility for some of the big oil companies come in and try to
compete in the fuel cell industry. They have the resources and they don’t have to worry about
brand loyalty yet. Economies of scale are very high in research and development, making entry
difficult without substantial financial baking. There is not much control of the distribution
channels, except for the automobile manufacturing partnerships. Like Honda found out,
distribution channels will become very important in the future success of fuel cell companies. It
is still to be decided who will be the major investors in building the hydrogen infrastructure to
support the fuel cell industry. Threat of entry by big companies is moderate to high, more so as
fuel cells start to become popular and accepted.
        Intensity of rivalry: The intensity of rivalry is also high. There are a number of
competitors out there, most are small but are still a threat if they make advancements in the
technology, and there are the few well funded companies which include Ballard. These
companies are being financed by automobile makers, oil companies, and energy giants. There is
a lot of pressure coming from these investors, which only adds to the intensity. Right now the
industry growth rate is low and the fixed costs are tremendous. For the big companies, including



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Zack Kent                                                                            BUS 444


Ballard, the exit barriers are so high and the sunk costs are so large that exiting will never be
considered. This factor can widely vary and is also difficult to predict. The technology of fuel
cells and hydrogen technologies is still relatively immature. Fuel cells are still very expensive to
manufacture and there is no infrastructure to support it. There is no commercial demand for their
products, mainly due to high costs, inconvenience, and unfamiliarity/acceptance. The company
who is able to advance their technology of fuel cells the fastest and most efficient will become
the dominant player in its industry. In an industry that has the potential to be very large, we will
see a few main players, probably tied to the main automobile manufactures and energy providers
of today.
       Power of buyers:        Buyers for fuel cells right now are few and large. Huge companies
who have pressure from government and society to pollute less are investing in fuel cell
technology to appease the pressuring parties. Commercial power generation and transportation
industry are the two main buyers of fuel cells. And in most cases, they are only buying a few at a
time for use with prototypes, since fuel cells are still too expensive to be marketed to the public.
This force should significantly weaken over time.
       Power of Suppliers: Power of suppliers is moderate and varies according to what is
being supplied. There are so many inputs that go into the production of a PEM fuel cell that one
can’t even start to break down a list of all the things put into a fuel cell. I know that many of the
supplies are expensive and state of the art materials and components which may only be supplied
by one or a few suppliers. For other inputs there are numerous suppliers. Therefore the power of
suppliers is low to high.


       Substitutes: As far as substitutes are concerned, fuel cells are still seen as the substitute
to traditional methods of power production. Traditional methods, all though they cause more
pollution, are cheaper and widely accepted, even in the face of increased criticism and
environmental concern. Price performance ratio for these traditional methods has stabilized.
These methods will not become more popular, they have reached their decline phase. In contrast,
the rate of improvement in price-performance of fuel cells is constantly increasing. Soon fuel
cells should be able to compete with traditional methods when in comes to cost.
       Complementors: These are extremely important to the success of Ballard and the fuel
cell industry. Fuel cells are only one part of the bigger system which incorporates so many other



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Zack Kent                                                                           BUS 444


essential parts. The goal is to produce electricity with hydrogen and this is essentially what a fuel
cell does. Yet, there are many steps to complete this process. The hydrogen must be obtained by
some means: electrolysis, fuel refinement, or by-product. Then the hydrogen fuel must be stored
in a safe manner. Only after these steps can the fuel cell do its job.




        Competition

               These companies show promise that they can be potentially fierce competitors to
       Ballard. Its competitors include: FuelCell Energy, Plug Power, and Energy Conversion
       Devices; these are companies that like Ballard have massive amounts of financial
       backing. There are also a many other smaller companies that are developing fuel cells,
       yet these companies are not worth mentioning at this time because they are still in their
       infancy and do not pose a competitive threat to any of the major players until they
       develop competitive technology. As with Ballard, its competitors have formed alliances
       with large companies involved in the industries of energy and transportation; companies
       that will benefit from the development of fuel cell technology.
               Some of the companies who have invested into the development of fuel cells
       include: Microsoft, Honda, General Motors, Caterpillar, Cummings, General Electric,
       Sony to name just a few. Any company that sells, produces, manufactures, and develops
       products which use any form of energy (especially electric) will benefit from the
       development of fuel cells. This is because the fuel cell will be used in a vast range of
       applications; including: powering a watch, a computer or lab top, your car, your home, a
       power plant, a manufacturing plant, and anything that uses electric. The fuel cell could
       also replace the internal combustion engine.
               FuelCell Energy Inc. has made many promising developments in fuel cell
       technology, and has started to generate revenue from the sale of this technology. Plug
       Power and GE Distributed Power have formed a joint venture, GE Fuel Cell Systems,
       LLC to distribute; install, and service Plug Power designed and manufactured fuel cells
       systems as the HomeGen. The HomeGen is one of the first commercial fuel cell systems.
       These companies are Ballard’s main competition, which it will have to compete with for
       business in the future.


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Zack Kent                                                                           BUS 444



    Macroenvironment
       The macroenvironment has a very strong affect on the fuel cell industry, much more so
than the five forces. The macroenvironment must change in order for fuel cells to become
successful in the commercial economy. Economically the world is still an oil dependent
consumer. Everything we do is focused around using oil (petrol chemicals) to power our lives
and industries. We have long been this type of consumer, and changing how we operate will
prove to be very difficult and timely. Essentially, fuel cells are the engine that will power the
hydrogen industry. Here lies one of the main problems for fuel cells success in the market.
Without a developed hydrogen infrastructure fuel cells will be in small demand. All of the
complementors must be as technologically advanced as the fuel cells. And still fuel cells
themselves must become more advanced. Demographically I do not see fuel cells being accepted
for years to come. In my opinion, I don’t see people who are currently over 40, in general, will
ever accept fuel cells as main source of electricity. It is hard to make people change their ways;
this ties into the social acceptance of this technology. This can only be achieved over long
periods of time. Also, political and legal factors will affect the pace at which fuel cells develop
and their technology accepted. Government and special interest groups will be the ones pushing
this technology. Opposite of what we see with the cigarette industry. It will be a long and
difficult road, implementing this technology is going to take years and along that way it will
meet many road blocks and also lots resistance. Developed countries will implement this
technology much sooner than third world countries.




INTERNAL ANALYSIS 3


       Ballard Power Systems remains on target with last year's stated goals. The company
currently has its first fuel cell, a one-kilowatt (kW) portable device, in limited production.
Ballard also has sold fuel cells for fuel-cell operated buses and stationary generators in 2002 and
2003. Ballard's bus engines and 250 kW generators have already been tested in numerous field
studies with exceptional results. Finally, it has targeted commercial production of fuel-cell car
engines between 2006 and 2008 (www.Ballard.com). Now that target is mover back to between



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Zack Kent                                                                           BUS 444


2008 and 2011. I do not anticipate strong revenues from these products for several years past
2008, however, because it will likely take time to gain market acceptance and become cost
competitive. Ballard will likely receive assistance from the government through changes in
emissions standards and customer tax breaks for purchasing fuel-cell operated vehicles. This
type of encouragement and government support is needed in order to keep the fuel cell industry
stimulated until demand starts to increase and commercial units are sold.
       Ballard can be seen to have a competitive advantage, though it is not based on its
performance in the market. This is mainly due to the fact that is not currently much market for
fuel cells. Ballard may have higher revenue than its competitors, but only because it has the most
strategic alliances and investors like Ford, who buy a large percent of Ballard’s products.
Distinctive competencies are not much of a factor in this industry right now. No one company
seems to have much strength over others when it comes to product differentiation or even cost
advantage. It is too early to speculate who will achieve the greatest distinctive competencies. I
would still give the advantage to Ballard because of their enormous amount of resources. They
have the most capital, financial, human and technological resources of any fuel cell company
currently in business. It will be many years before companies like Ballard develop specific
strengths which will allow those companies to gain competitive advantages in different strategic
groups within this industry. Neither the proper resources nor capabilities currently exists in this
industry, it is still too young with a long learning curve still ahead. Like the computer industry in
the 70’s.
       Because this industry is so young, fuel cells are not perceived as valuable in the eyes to
the consumers, especially in a financial sense. Currently, the cost to produce fuel cells is most
likely more than the customers’ perceived value for those products. This is way there is not much
demand for these products in the current market. Consumers place very little value on fuel cells;
and because of this companies in this industry will not be profitable for many years. This is
apparent because Ballard and companies like them are currently spending most of their money
on research and development which is the first part of Ballard’s value chain. The other primary
activities such as production, marketing and sales, and customer service are of little importance
until the research and development department can design a fuel cell which will be cost
competitive with current technologies or creates enough value to make it desired among




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Zack Kent                                                                             BUS 444


consumers. It must also be sold at a price that is higher than the costs, and have value which is
equal to or higher than the price.
       Currently research and development at Ballard is focused on building a fuel cell that is
superior in quality, efficiency, and innovation. These building blocks are the bases for
competitive advantage; the companies that have fuel cells that are superior in these three areas
when the market becomes profitable will be the company or companies that will become the
dominant players in this industry. Ballard is trying to position itself to be one of those
companies; they hope to become the benchmark company for that industry. In order for Ballard
to achieve this the must stay focused on the building blocks of competitive advantage, show
continuous improvement, overcome possible inertia, and have a considerable amount of luck.




BUSINESS LEVEL STRATEGIES 5


       Their competition seems to be possibly catching up with them, even surpassing them in
certain areas. This is evident in the performance of Ballard and its competitions stock price and
performance. Ballard’s stock price has consistently been close to double that of its competition.
Now, the prices are relatively close, and the competitions stock continues to out perform
Ballard’s. The reasons for this could be very artificial, which is common in the stock market. I
have analyzed the financial reports of Ballard and its closest competition. Ballard is bigger in
size; they are making more and showing a larger negative in income. Its competitors are smaller
in size, and seem to be comparatively spending less money than Ballard, which is making them
look more profitable. This may be a good strategy short term to appease shareholders. But in the
long run, this will only hurt their chances of being competitive in their industry.
       In this young industry, cost leadership is the most important goal for any company within
it. This technology is in its infancy, which means there is not much of an experience curve
established for manufacturing affordable and efficient fuel cells. Ballard realizes that sources of
cost advantage rely heavily on large amounts of capital. Economies of scale are important in
research and development, Ballard possesses this more so than its competition. Large amounts
of money are being pumped into Ballard to stimulate huge amounts of R&D focused on
developing their main product, the proton exchange membrane fuel cell. In the end, the company



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Zack Kent                                                                            BUS 444


with the most affordable fuel cell will win the biggest slice of the pie. Timex did this with
watches, Honda did it with motorcycles, and Wal-Mart did it with all types of products. It is
important to note that in a young industry like fuel cells, the cost leader must also be the
innovator. Like Honda and Timex. Cost leadership will only be achieved through innovations in
production methods which will make fuel cells cheaper to produce. These innovations must
decrease cost and increase efficiency of the product and the production methods. I do not see any
company in this industry heavily focused on the differentiation strategy until this industry
becomes more established and experienced. Cost leadership will continue to be the dominant
strategy for Ballard and most of its competitors. Like Southwest Airlines and Bic. Though I do
see that many of the smaller companies in this industry are stuck in the middle, Ballard was once
this type of company before it raised huge amounts of capital which it needed to better position
itself as a potential cost leader in this dynamic industry.




COMPETITIVE STRATEGY AND INDUSTRY ENVIRONMENT 6


       The most interesting aspect of this industry was the change in the structure and dynamics
of the industry over the last four years. At first, I saw the industry consolidating. Like the
cigarette industry. In the late 90’s, I saw Ballard acquire many companies, which would allow
them to integrate both vertically and horizontally. Their competitors were doing the same thing.
Now I see this changing and the industry seems to be on a path to becoming more fragmented
and there is also been the development of strategic groups. Like the beer industry, especially in
California with all the microbrews. I believe the reason for this fragmentation was the need for
more specialization within the different areas of the industry. The industry got a little ahead of
itself. It was too optimistic with the time frame in which they speculated fuel cells to be
commercialized and thus possibly profitable. Ballard had projected dates for commercialization
of their PEM fuel cells by 2005. Now that date has been moved back to about 2008, and most
likely not till 2010. The fuel cells need to become more advanced, if they are to be profitable,
and only time will allow this to happen. Because of this correction in the time projections for this
industries development, the industry will become more fragmented. Consolidation doesn’t make
sense in an industry which won’t be profitable for some time. Ballard has become more focused



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Zack Kent                                                                            BUS 444


in the last couple years because of this, focusing mainly on the PEM fuel cell, and selling off
some of its other divisions.
       The fuel cell industry has had an extremely long embryonic stage and a even longer
growth stage, longer than many had speculated, which I already mentioned. There will be slow
growth in demand for fuel cells because of many reasons. First, current fuel cells have limited
performance and relatively poor quality compared to traditional power generation methods.
Second, customers are very unfamiliar with this new technology, and may even threaten some.
Also, there is no infrastructure (complementary goods) to support fuel cells, especially in
automotive applications. And last, the production costs for fuel cells are still very high. Mass
markets for fuel cells will evolve as these things are overcome. In the next 5 to 8 years I believe
that fuel cells will start to be appeal to the early adopters in many applications. This is an
exciting technology, one that has gained much interest from the public. Fuel cell powered
equipment and automobiles will appeal to these early adopters, since they are technologically
sophisticated and are not sensitive to price.
       Ballard realizes that there can not be a profit made off this group since they are so few in
number. They must keep improving their technology in order to cross the chasm and become
desirable among the early majority, which will lead to profitability for Ballard. Only the creation
of superior fuel cells can increase the rate at which this industry will develop. The industry is
waiting for the company who can achieve this goal of producing a superior and affordable fuel
cell. Like Timex did with watches. This in turn will help stimulate the development of the
complex infrastructure needed to support fuel cells in the mass market. Ballard currently seems
to be in the best position to achieve this. Once this is achieved Ballard will have a product that
has relative advantage, which will make it compatible with customer needs. The complements
will follow as they are seen as becoming profitable.




STRATEGY IN HIGH TECHNOLOGY INDUSTRIES 7


       Ballard is definitely in a high-tech industry. Proprietary knowledge concerning fuel cells
and methods for producing them are Ballard’s main asset. This technology is seen to have the
potential to change how we live. It is possible that fuel cells will change are daily life more so



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Zack Kent                                                                           BUS 444


than computers have. The development of the fuel cell industry is comparable to the
development of the computer industry. Like fuel cells now, computers were once big and
inefficient. They took up lots of room and didn’t do that much. Technical standards were still in
development and no one had gained any advantage in the format war. This is exactly what we
see currently in the fuel cell industry. We are yet to see if Ballard’s PEM fuel cell will become a
standard in this industry. If they can achieve this they will be able to profit on a level comparable
to what Microsoft accomplished. Becoming a standard in a industry will lead to further
profitability because it will guarantee compatibility, reduce confusion, reduce production costs,
and help reduce risk associated with supplying complementary goods. The main complementary
good would be the infrastructure to support fuel cell use, especially in automotive applications.
This is important consideration for Ballard, even with a standard set, will there be the necessary
network of hydrogen supplied. This is a direct determinant of demand for Ballard’s product.
Demand would still be limited for fuel cells even if the marginal costs were low for Ballard.
       Ballard has been around for a long time, starting out as a battery company in the 70’s.
They made a switch like Timex. Over this time they have compiled a large amount of intellectual
property rights. They have hundreds if not thousands of patents connected to fuel cells and
related technology. Ballard has a first mover advantage in this area. Hopefully for them, this will
also lead to a first mover advantage in the production of an affordable commercial fuel cell. They
would be the first to satisfy consumers’ expectations of fuel cell as a competitive alternative to
gasoline. They would then be able to capture significant revenues and profits. Yet, this is all
speculation. There is a negative side to Ballard’s position, which could also lead to their demise.
First, Ballard has already bared significant pioneering costs. Also, there is the possibility that
they are investing in the wrong technology. PEM fuel cells are only one of many types of fuel
cells that are currently under development. If one of these other types of fuel cells emerge as
being the standard of choice because of superior performance and quality, then Ballard may be
out of business. Ballard may not want to put all of their eggs in one basket; the consequences
could be devastating.
       Another important aspect which ties into complementors to Ballard’s fuel cell is their
strategic alliances. In order to exploit there first mover advantage, they must have strong
strategic alliances which will be able to create the necessary infrastructure and demand necessary
for Ballard to be profitable. Currently, Ballard has many powerful strategic alliances who have



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Zack Kent                                                                          BUS 444


invested large amounts of money into Ballard. In a way Ballard is not really Ballard, it’s an
extension of other big firms such as Ford and Chrysler. This type of support will also help the
exploit their first mover advantage of a disruptive technology.
        The potential for fuel cell technology is huge. One day everything could be powered by
fuel cells: your house, your car, your computer and your cell phone. Gasoline engines would
become obsolete if fuel cells could offer similar performance. Remember, a fuel cell’s main
advantage is that it produces electricity without producing much pollution. This is extremely
important to the future condition of our planet. We know that pollution from burning oil has
devastating affects on the environment. We also know that oil could one day run out. These are
the two driving factors in the development of fuel cells. If gasoline engines didn’t pollute we
wouldn’t need to develop fuel cells.
        In the future companies like Ballard will revolutionize the power generation and
automobile industries. This will cause a decline in the demand for gasoline and gasoline powered
products. What is interesting and somewhat predictable is the fact that fuel cell development is
mostly funded by the power generation and automobile companies. This proves that there is
great potential for this technology, and they know they must invest in this technology if they
want survive in the long run. We will see a technological paradigm shift due to this technology.
There will be many implications to the shift, but it is a necessary step to the long term survival of
life on our planet.


CORPORATE STRATEGY- DIVERSIFICATION 10


        A few years ago Ballard was making small acquisitions and extending its partnership in
preparation for commercialization. It acquired the Carbon Products division for Textron Systems
for $12.8 million. The unit, which had %11.8 million in revenues in 2000, manufactures a gas
diffusion layer, which is a critical component of the fuel cell. Meanwhile, Ballard entered into a
new alliance with Graftech. It will invest $5 million in that company, and has extended its supply
contract for Graftech's graphite-based materials and components used in fuel cells. Ballard also
made a similar arrangement with MicroCoating Technologies. It invested $7 million in MCT,
which develops a combusting chemical vapor deposition process. This was seen as a necessary
step towards to eventual commercialization of fuel cells. From the little I know, fuel cells are



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Zack Kent                                                                             BUS 444


very complex and require many inputs. These decisions were made at a time when predicted
commercialization of fuel cells would occur in 2006. As I have already mentioned
commercialization currently is not predicted to occur until 2010. Ballard is now less focused on
diversification, and more focused on its main product, PEM fuel cell.
        They would have stretched themselves out to thin by trying to diversify to other related
and complementary products. Fuel cells where once internal new venture at Ballard. Today it is
still somewhat managed like a new venture. “The company is still focused on research at
advancing basic fuel cell science and its technology. Development research is aimed at finding
and refining commercial applications for the technology” (Meilich). Ballard is making
acquisitions which relate the vertical integration of supplies that are used for its fuel cell. This is
the best strategy for controlling the supply chain of your primary product. This strategy will also
help them keep their intellectual knowledge secrete since it will be its own supplier for most
materials, this could be very important in the future. This is the economic benefit Ballard must
see in pursuing this strategy. Ballard has also been involved in some joint ventures. I see this as
a smart move on their part. Since fuel cells are so complex and require so many inputs it would
be even more expensive to try to do everything on your own. In certain situations Ballard entered
in joint ventures with companies who had the skills needed to help Ballard achieve its own goals
quicker, by taking advantage of those companies’ distinctive competencies and experience in
their area of expertise. Ballard seems to use a well balanced corporate strategy in the area of
diversification, acquisitions, and ventures.




CORPORATE STRATEGY- INTERGRATION 9


        There is some level of horizontal integration occurring in the fuel cell industry. More so
with Ballard than with other companies, mostly due to the fact that Ballard has the money to by
some of its smaller competitors. Ballard’s main reason for acquiring other companies is to gain
there intellectual property which will further strengthen their own position within the industry
(market power). In the past, Ballard has made some mistakes acquiring companies that it later
sold because they didn’t add value to their company as the industry changed. In the future I
assume that Ballard will have to continue to have horizontal integration as part of its corporate



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Zack Kent                                                                             BUS 444


strategy. It will be necessary to stay competitive. Like Microsoft, some of Ballard’s best
innovations will come from the acquisition of other companies innovations. I also believe that
Ballard will continue to vertically integrate in areas related to its main product, PEM fuel cells.
This will be essential in the protection of its intellectual property. Full integration on the
immediate supply end may be the best strategy for Ballard since the intellectual property they
possess is so valuable. Therefore technological change for PEM fuel cells will most likely move
at the speed at which Ballard moves since they will tightly control their property, making it
difficult for others to compete in that certain area.


INTERNATIONAL LEVEL STRATEGIES 8


       Naturally, Ballard is a global company. They have offices in the United States, Canada,
and Germany. They are supported by other global companies. A large portion of their sales are
from countries in Europe and Asia. Mainly in countries that have smog regulations which are
more strict than California’s. In Japan, they replace the entire engine after 60,000 miles.
Therefore, in these countries fuel cells have more value because of the relative higher costs
associated with gasoline engines. Ballard’s fuel cells will mainly be used in automotive
applications, thus making them the perfect alternative to gas engines in these strict countries. We
will see the demand for fuel cells start in these countries before we see it happen in the United
States. Ballard has the resources to enter any market in the world, time will only tell exactly
which global markets will show the most interest in Ballard’s fuel cell, but they will most likely
be the ones a mentioned.




STRATEGIC CONTROL SYSTEMS 12


       Ballard is a very large company. I assume their organizational structure is very complex
do to the nature of their product. Currently, its organizational structure is focused mainly on
research and development. Their primary goal is create an efficient fuel cell, made of high
quality, through the use of innovative manufacturing processes and methods, to bring a product
to the market that customers will respond to. This goal highly depends on the employees at



15
Zack Kent                                                                           BUS 444


Ballard since they are the ones responsible the advance of fuels cell and related technology.
Therefore, it is essential for the employees to have high levels of motivation. The employees
motivation will come in to forms; intrinsic and extrinsic. Their intrinsic motivation comes from
within. I assume that employees have high levels of intrinsic motivation at Ballard. “Power to
Change the World”. Here is the companies’ vision statement. This statement relates directly to
their intrinsic motivation. Working for a company who is creating something that could change
the way we live in a good way, is a good feeling and knowing that your part of that is motivation
within itself. Employees get satisfaction from knowing they are making a difference in the world.
Ballard’s organizational culture must also be focused on these beliefs and feelings. This culture
can further increase the employees’ intrinsic motivation by creating a work environment that
make employees feel like they are really making a difference.
       I was unable to find much information concerning Ballard’s internal control system. I do
not know what types of incentives or rewards they use to extrinsically motivate their employees.
I know that in general they are a well structure company. Therefore I assume that they have a
well formulated control system set up the further motivate their employees. I had contacted a few
people within the HR department but they would not give out the information I requested
concerning their control systems. What I did find out is that strategic reward systems widely vary
among the different departments. Research and development has mainly teams and groups; that
department is more of a flat structure compared to the other departments. It seems that Ballard
overall has well formulated control strategies for its internal.




Interesting Findings


       I have long had an interest in fuel cell technology, I find it to be very exciting, and feel
lucky to live in a time in which I may possibly witness the transformation of the electricity
generation and automotive industries from petroleum based to hydrogen based. I have been done
some light research into the fuel cell industry, Ballard and its competitors over the last four
years. I also owned stock in Ballard for while, about a year. Luckily I knew enough about the
industry to get in and out at the right times. I bought stock in Ballard when it was at its low,




16
Zack Kent                                                                             BUS 444


$7.10, and sold it a little over a year later when it peaked at $15.60, I sold at about $15.00. Since
then it’s had stagnated around $10.50.
       After doing this theory in practice I have a better understanding of Ballard and their
strategic situation currently and in the future. It has made me realize many of the drawbacks of
being in their situation. In the past I had always looked at fuel cells and the implementation of
that technology in a very optimistic way. Not realizing the great challenge it will actually be to
make fuel cells and a hydrogen infrastructure a reality. Don’t take this the wrong way, I still feel
optimistic about fuel cells and the positive affect it will have on our futures, but know I see the
realties needed to be overcome in order for fuel cells to become an accepted and standard
technology.
       Also, I know realize what a difficult and complex strategic situation Ballard is in. There
are in an extremely dynamic industry where the next huge innovation could make Ballard the
great leader in the industry or if the innovation comes from their competitors, Ballard’s
technology could become obsolete. The dynamics of this industry are extremely complex, since
fuel cells can be seen a disruptive technology. This is interesting because this technology
challenges the way we currently do things. It could revolutionize the way we live and doing it in
a way that will benefit everyone by decreasing pollution levels. It is also interesting to see how
Ballard is so strongly tied to other major and potentially competing industries. They also strong
ties and support by governments and their environmental regulations. Politics could play a big
role in the future of the fuel cell industry. Ballard’s fate is highly in the hands of these players
and influences. It will be interesting to see what happens with this industry in the coming years.
It was difficult to relate (IRMe’s) all of the case studies we went over in class since the company
and industry which I choose it so different from those case studies. It would have been easier if
the fuel cell industry was more mature.




17
Zack Kent                                                                    BUS 444



                                         References


Meilich, Ofer. BUS/GBM 444. Class Notes. Spring 2004. Montezuma Publishing.


*Most information was obtained through my general knowledge of Ballard and the fuel cell
industry.




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