Marketing Strategies of BP and GM - Lessons Learnt and Shared - Case Study Example

Executive Summary This paper is a brief review about the marketing strategies of two companies that are at different life-cycle stages in extremely dynamic markets. Having gone through the initial building stages very early on in the last century, these companies are extremely big in size, have operations all over the globe, employ thousands of people and have huge financial and capital resources. Consequently, their marketing strategies need to be well thought out and long term in nature. One company is British Petroleum. It has been one of the oldest oil marketing companies in the world. It has seen many ups and downs over the years including issues of environment, government dealing, exploration sites, oil prices and such, but has remained strong, with a great market presence and brand equity. The second is General Motors. One of the heavyweights in the 20th Century automotive scene, GM saw bankruptcy in 2009 after many of its products and policies failed. With government holding and new management in place, GM is on the way to recovery. This paper analysis the strategies of these two companies, along with some suggestions that they could utilize in the near future. Table of Contents Introduction 3 Scope and Limitations 4 Strategic Focus 4 Current Macro-Environment 6 Customer and Market Analysis 6 Marketing Strategy 7 Objectives 7 Product Development 8 Budgets and Pricing 10 Brand Management 10 Advertising 11 Public Relations 12 Promotion 12 Lessons Learnt 13 Recommendations 13 Conclusion 14 Marketing Strategies of BP and GM: Lessons Learnt and Shared Introduction This paper will study the current marketing strategies of British Petroleum and General Motor. These companies are amongst the biggest players in their respective industries. However, the recent macro-economic environment has had an impact on the policies adapted by both. This paper will examine the specific marketing strategies and will give my own insight into them. General Motors Company is one of the largest automakers in the world, headquartered at Detroit, USA. GM employs around 235,000 people globally and has presence in 140 countries in various regions around the world (gm.com, 2009), with a complete brand portfolio of Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Opel, Vauxhall and Wuling. According to company website, GM main business territory and market is the United States, then China, Brazil, the United Kingdom, Canada, Russia and Germany. GM has been through many peaks and troughs over the years but the recent taste of bankruptcy was a devastating low for the company. Having changed from General Motor Corporation to General Motor Company, GM has fortunately turned out fairly well from being in the decline phase. Whether this turnaround is successful for the company remains to be seen. There is still a need for GM to establish a culture with a more distinct and reachable vision and get the entire organization on board. The company still has excess staff and high costs which need to be dealt with. In GM, the issues faced by the past CEOs have been mostly related to ‘corporate debt and legacy costs, work rules, and franchise laws’ (Taylor, 2009); these issues have been distracting the top management from focusing on the core business of car manufacturing. Now in the throes of bankruptcy, GM is getting its act together and refocusing product lines. British Petroleum Plc is an oil and energy company that has operations all over the world and employs over 100,000 people. These worldwide operations include exploration and production of natural gas and crude oil, refining of crude oil, petroleum products manufacture, marketing of refined products with construction and mining and transportation of crude oil as supplementary operations (M2PressWIRE, 2009). BP headquarters are in London, United Kingdom. It has been known to be the first major multi-national corporation that acknowledged its contribution to the global climate change and was proactive in trying to do something about it. BP can be safely placed as a mature company in a mature market. However, it’s positioning in the energy sector allows it to reinvent itself with time to stay profitable and productive. Whether BP is successful in deploying these resources to have a strong position in the market will be seen in this report. BP’s main competitors include are Chevron, Shell Oil and Exxon Mobil. 2. Scope and Limitations This report is meant to be an analysis of the current marketing strategy of GM and BP as can be observed from the various marketing tools used by the companies and observations of industry experts through secondary research. The conclusions of the report are subject to the limited time and resources available for research and researcher’s own understanding, experiences and bias. This report must be taken in that light and should prove to be a useful basis for further research on related topics. 3. Strategic Focus In 1997, CEO of BP made a commitment to reduce greenhouse emissions from its operations, and solar energy was made one of the main business functions of the company along with exploration, oil, and chemicals (Lowe & Harris, 1998). To this effect, Browne – then CEO – was quite successful as he was able to lead BP into reducing its own carbon emissions and developing a specific positioning for itself apart from its competitors in the minds of its consumers. The General Motors Company today is far different from what it was before bankruptcy. There is a general change in attitude, making it far humbler and cautious than before. Companies that start feeling and displaying haughtiness are on the brink of downfall because that attitude starts to show to the customer and turns him off and the ‘customer is always right’. After the June 10 bankruptcy, GM is ‘smaller, nimbler, more focused, and less financially stretched’ (Taylor III, 2009b), meaning GM has lost most of its baggage that was impairing it from reaching and aiming higher. Higher costs and overheads, legal and management issues, trite way of thinking and decades-old, impenetrable culture – all of these contribute to the lagging of a company in terms of creativity and productivity. After getting rid of this baggage, Taylor writes, GM will come down to 34 assembly, powertrain, and stamping plants in 2010 from 47 in 2008; furthermore, people cost will come down too as hourly and salaried people will now total 68,500, instead of 91,650 in 2008. Most importantly, GM has cleaned up its portfolio, from eight brands which were pretty much all over the place with no focus, to four brands (Taylor III, 2009b). All of these will result in lower overheads, labor and material costs. On the marketing front, this will provide more focus in terms of resources used for the product development to the final delivery of the car. For GM, the company’s main challenge, Taylor writes, is to ‘change GM’s thinking’ (2009). It needs to be more customer-focused at all levels, not limited to advertising. This kind of culture translates into the product offerings and after-sale services. GM has decided to get its act together finally and has decided to spend most of management time addressing customer concerns and needs by developing newer, better product lines of their brands. With most of the restructuring out of the way, this should not prove to be a big problem. Says CEO Henderson, ‘The new board wants us to complete restructuring actions as much as possible by the end of 2009 and is pushing us to spend much more of our time winning in the marketplace” (USA Today, 2009). It is exciting to know that GM has its customer focus in place and see what new innovations they can come up with. 4. The Current Macro-environment The current economic scenario has had more obvious impact on GM, rather than BP. In the wake of the economic downturn and decreasing demand for new cars, GM’s strategy for the next coming years is to refocus attention and resources on the car business again (Taylor, 2009a). BP, having a more inelastic product offering is lesser impacted in the sense that it does not require redoing the product and brand management plans. International competition remains a worry for both companies. Furthermore, the world has become more ‘green’ than yesteryears. Now people are making a conscious decision to buy green over non-green items and are overtly disagreeable with any product associated with environmental degradation. This factor should determine everything from product development to promotion plans of companies. Both GM and BP are in industries that have been inherently labeled as harming the environment. The implication is that these companies have to be especially careful when operating in today’s markets and dealing with today’s savvy customers. 5. Customer and Market Analysis The economy of today is very different from what it was a few years ago. It might not be exactly correct today that people are poorer, but their buying power has definitely shrunk. Where before households all over the world could easily afford two or three cars per household with full tanks, now they have difficulty running the sole car available. This should have a direct impact on the pricing policies and offerings of companies like GM and BP more than ever before: customers have to spend more effort and time into making the decision of buying a particular car and now they are more conscious of the amount of gas a car consumes and the mileage it gives because sadly, every penny’s now counted. Also, both companies’ major market presence is in the Western regions of North America and Europe which are developed markets. 6. Marketing Strategy a. Objectives So that the GM company is steered towards the right direction, the chairman has identified following objectives for his team (Welch, 2009):   Market Share: In the U.S. alone, increase the market share over 20% in 2010 Product Development: Get cars ‘to market’ much faster than before Culture Change: Must stop ‘slow decision-making’ and drive our own culture These objectives may be a bit farfetched and optimistic as most experts believe that the market share for GM is likely to go down from 19.4% to 15% (Welch) in the coming years. Furthermore, the concept of creating cars ‘faster’ cannot happen without the installation or perhaps invention of newer technology as every player in the highly competitive industry is already working on the average. BP continues with exploration of oil and gas but the focus is on more feasible alternative sources of fuel in the next few years. b. Product Development As has been decided before, the customer of today wants value over extravagance, affordable over high-priced and comfort over luxury. It is good to know that GM has cut down its focus to four major brands of Chevrolet, Cadillac, Buick, and GMC. Now all the marketing budget and muscle will flow into creating product lines and extensions from these brands that will address the customer needs better. For example, next year GM plans to launch not an unaffordable Chevy Volt but rather a smaller car called the Chevy Cruze (Taylor III, 2009). GM has not competed in the small car market effectively since the 1960s, writes Taylor III (2009), but with the Cruze GM will have the opportunity to compete in a completely different market segment. All the financial and marketing resources of GM must be used to back it up and make this new product a success. It should be marketed with the open acknowledgement of the changing times and changing needs of customers. That said, it should uphold the associated values of style and classic design to the brand of Chevrolet. If this new car is not adapted to the brand promise of Chevy, it will likely not succeed – for example, the car has sloppy design. The strategy that BP has been following is one of careful portfolio management and streamlining. It has pruned quite a chunk from its chemicals portfolio over the last few years and has been concentrating on its major products by acquiring facilities and capacity expansions, namely in the seven core product lines of ethylene, hdPE, polypropylene, paraxylene, PTA, acetyls and acrylonitrile (Harries & Baker, 2004). The purpose of this process was maximum and most efficient capital utilization to core products. Furthermore, the CEO aims to free cash flow from petrochemicals in proportion to capital employed. The business unit, he added, has not made a contribution at this level before (Harries & Baker). This strategy obviously would allow the company to effectively use its resources, reduce wastage and achieve cost efficiencies. BP has identified that among its core product offerings, three have the most potential for growth and higher returns. These are the aromatics (PX and PTA) and acetyls products. These will, consequently, receive the bulk of the budget allotments. This is a learning point for GM – to identify which products pose the greatest profit/return potential and allocate marketing resources accordingly. At GM, many ideas which were put away during CEO Wagoner’s time due to cost constraints have been revisited by Henderson. He plans to launch a variety of well-designed cars including Chevrolet Equinox crossover and Buick LaCrosse (Taylor III, 2009b); however, this will be at a slower rate compared to competitors. An analysis by Merrill Lynch quoted by Taylor claims: “GM will be replacing an average of only 11% of its product line between 2010 and 2013, compared with 17% for Toyota and 25% for Ford. Murphy believes GMs 18% to 19% market share target is optimistic, and a more realistic range is 15% to 16%”. GM CEO acknowledges that they are in a market where there is no room for mistakes. If they take out two cars, both have to be successful with zero rate of error. (Taylor III, 2009b) One of the major objectives set by management at GM was the initiative to cut down the development time of cars. Typically cars, from conceptualization stage to market, go through a 36 months program. The new GM management wants this to be cut by one-third and must not take more than 24 months. This requires the product teams to push the process and work harder than ever, including through the complicated processes of engineering design (Welch, 2009). The company, at the moment is struggling with these demands. It would be best if they allow the product experts to determine the most efficient time in which the completion can be managed. For this, meetings with departments must be held that allow the minimizing and streamlining of all processes so that the most efficient procedure is adopted to bring the car to the market. c. Marketing Budgets/Pricing General Motors Co. is expected to increase the budget for marketing starting now and continuing on for next year (Lareau, 2009) The marketing head at GM BOB Lutz has said that there is need to build the brand health and this ad spending, he justifies, is more likely to succeed rather than not because it will focus on four brands – namely Buick, Cadillac, Chevrolet and GMC – as opposed to the eight brands GM was looking after before going bankrupt (Lareau). BP is already the biggest ad spender among competition and this strategy seems to have paid off well too because of the brand image strengthening it fostered. d. Brand Management BP made a smart decision to acquire Amoco in 1998 and Castrol and Arco in 2000 as these were contributors to their dealing with global climate change strategy. The aim was to create an image that unified and separately identified the diverse companies but maintained the brand name of BP per se, away from the rest of the Big Oil (A.L., 2005). The momentous occasion for this strategy was when in 2000 the company went through an overall identity makeover and the British Petroleum shield was gone, being replaced by the green and yellow Helios. The colors, the campaign and the tag line all delivered the overall green message of the company. One read, "We believe in alternative energy, like solar power and cappuccino." And BPs slogan became ‘Beyond Petroleum’. (A.L.). This is in sharp contrast to the GM strategy of individual brands taking the forefront, rather than the umbrella brand. BP’s brand image has also improved vastly over the years in comparison to its competitors like Shell and Exxon which have been neck-deep in controversies and environmental catastrophes. BP’s rebranding, making and broadcasting it as more environmentally friendly have really paid off. The company has generated a lot of goodwill because of its rebranding. An expert who calls this tantamount to ‘precrisis management’ says, "Once you have consumer trust, you have the wind at your back in case something bad does happen." (A.L., 2005) Now the company is taken to be an ‘oil giant… friend of the earth’ (A.L.) There is another lesson here for GM: being more proactive in their social and brand image building. e. Advertising The current ad campaigns of GM are more the formula-following ads rather than break-through innovation. That interprets into the product itself. Referring to the recent campaigns, Lutz found the print ads quite lackluster and unattractive with inefficient photography (Lareau, 2009b). He was told by the team that GM has mostly been using the existing portfolio of pictures, and that too in a hurried way, therefore, the pictures do not deliver the impact that they should. Lutz now wants to be closely involved with the ad agencies throughout the process. Uptil now, it is quite uncommon to see a marketing chief so thoroughly involved with the ad work. But Lutz hopes to change that by giving clear direction to the ad agencies. Ad agencies will likely balk at the idea, but with the kind of budgets GM is deciding to pour into marketing, Lutz’s intimate involvement should not be a shock. f. Public Relations In contrast to GM, the product offering of BP is inelastic. GM also understand that it has to deal with the problem of ‘negative perception’; to deal with this, the current strategic marketing objectives of GM are (Lareau, 2009b): Be more actively involved with agencies throughout the creative process; have more product-oriented advertising; allow vehicle designers more involvement in advertising; adopt viral ad campaigns especially for the Internet. BP has adopted an inherent philosophy which showcases the company as being very environment friendly. This is further enhanced by the corporate branding efforts of the company. g. Promotion GM has launched a fantastic 60-day money back guarantee that is attracting scores of shoppers. The biggest winner of this plan appeared to be the Chevrolet Malibu. Since its inception, there have been rumors of only one claim so far. (USA Today) On the marketing front, this is something that BP can adopt for its products: give the buyer/dealer more incentive. Today’s times are when conscious customers will go after and take up promotions. This can prove to be the edge over competition. GM is also looking at deploying Integrated Marketing communications where they make use, effectively, of all available media. Traditionally, GM has been very conservative and risk averse when it came to marketing. But now they need to buckle up and resort to more creative methods available to reach the customer (Halliday & Lareau, 2009) . Lutz intends to make great use of the very popular social networks for the new advertisements. Any tech-savvy corporate professional understands that today is the era of pop culture, social networking and ‘twitter’. For the GM products to some with a ‘bam’ and wow factor, they must be present where the audience is actively present and making choices. Having YouTube channels is also a good and extremely cost effective way of reaching the audience and showcasing the muscle of the auto product without going public through the expensive medium of TV. My suggestion is that to back up the TVCs, more descriptive videos of the products (rather than creative) should be put up on product website, as well being placed on YouTube to have a greater audience. Lessons Learnt There are many lessons that the two can learn from each other as the auto and the energy businesses are very closely linked. To summarize the points covered: GM should adapt the strategy of streamlining process flows into focused product lines for more effective product development cycles, just like BP is doing by defining seven, then narrowing down to three core focus products. Also GM should be more proactive to build corporate brand image which emphasizes what GM as a whole stands for; this can be done through BTL activities. On the other hand, GM has been able to effectively reach varied customer segments though its great multicultural marketing program. It has been able to establish a good customer base in the African-American markets and now in the Hispanics as well, the U.S. fastest-growing minority at currently over 45 million (Martínez, 2008). By defining sharper customer segments and trends, combined with geographic expansion, BP can increase its market share. Recommendations For GM, rather than pouring millions of dollars all into advertising campaigns, I would recommend dedicating a big chunk to the direct marketing and sales front of the company. At times like these where the customer is not trusting of the GM brand name, it is very important to deal with them on a below the line, one on one basis rather than appealing to them on the mass media. There are many reports and studies which indicate that customers generally do not believe the corporate social responsibility ad campaigns of companies that are preached on TV. This worked for BP but the initiative was well rounded and employed other media as well. If anything, these further the doubts of customers that the company must be hiding something from them and out of guilty conscience is preaching the message of social responsibility on TV. Also, new products in the brands such as Chevy’s smart car must be developed to become stand alone cars so that they do not borrow too heavily from the Chevy name and end up hurting it. Both companies’ distribution strategies need working upon as they both are heavily restricted to particular geographies, with GM being highly saturated in North America and BP biased towards Europe and the US. As said earlier, there are many emerging markets that have high demands and relative price inelasticity that will soak up their product offerings. This means, establishing joint ventures, acquiring companies and hiring individuals from these diverse cultures. GM must also adopt geographic expansion policies as countries in the Middle East, Asia esp. China, Eastern Europe and Africa, all represent emerging markets which have higher demand for bigger cars and increasing purchasing power as well. Conclusion Both companies, British Petroleum and General Motors, are extremely big, and old. Both have seen more economic booms and troughs than can count and have emerged strongly. However, the past decade has proved that the world has changed very much and very fast. The customers are more educated and demanding, the markets are more inter-linked and competition is strong from every direction. For such old companies that are in mature markets and are starting down the road of decline, ‘survival today’ represents a bigger challenge than anything they have faced before. That said, the strategies of both companies indicate they are trying their level best to cope with and address customer concerns. In conclusion, I would just like to say that the only factor that will ensure these two companies survive through these tough times and the coming easier ones is customer centricity. As long as they understand what their customer wants, they will be able to beat all odds and remain productive. References A. L. (2005). BP. Fortune, 152(9) “About GM” (2009). General Motors. [online] Available at http://www.gm.com/corporate/about/ “British Petroleum Plc - An In-Depth Business, Strategic and Financial Analysis of British Petroleum Plc” (2009). M2PressWIRE. Available at Newspaper Source http://web.ebscohost.com. [Accessed 14 Oct 2009] “GM shifts focus to products” (2009) USA Today, [Online] p.03b. Available at Academic Search Elite http://web.ebscohost.com. [Accessed 14 Oct 2009] Halliday, Jean & Lareau, Jamie (2009). IS THIS THE RIGHT GUY TO RUN GMS MARKETING? Advertising Age, 80(25) Harries, Karen & Baker, John (2004). BP: at the core. [Online] European Chemical News, 80(2095). Available at Business Source Premier http://web.ebscohost.com. [Accessed 14 Oct 2009] LaReau, Jamie (2009) More ad bucks for GM. Automotive News, 83 Lowe, Ernest A. and Harris, Robert J. (1998). Taking Climate Change Seriously: British Petroleum’s Business Strategy. Corporate Environmental Strategy, Available at http://www.indigodev.com/BPclim.html Martínez, Laura (2008). Lessons learned, GM extends multicultural-marketing reach. Advertising Age, 79 (34) Mullman, Jeremy. GM sends shivers down Mad Ave. Advertising Age, 79(31) Taylor III, Alex (2009a). Can GM Survive? Fortune, 160(7) Taylor III, Alex (2009b). ITS CLUTCH TIME FOR FRITZ HENDERSON AND GM. Fortune, 160(7) Welch, David (2009). GM: His Way Or the Highway. BusinessWeek, [Online] 4149. Available at Academic Search Elite http://web.ebscohost.com. [Accessed 14 Oct 2009] Read More