Marketing Strategies for Car Market Chery China - Coursework Example

Marketing Mix for U.S.A car market – Chery Cars China Executive Summary This report has studied the marketing mix strategies that can be adopted by Chery Automobiles as it plans to enter into the U.S.A. market. In doing so, the automobile market of U.S., the cultural difference between U.S. and China and other relevant factors have been analyzed. It has been found that due to the difference in culture and expectations of the customers, product adaptation strategy will be a more ideal choice compared to product standardization. Based on these findings, it can be said that development of hybrid vehicles will be the best strategy that can be adopted, along with competitive pricing. Internet based promotional techniques are suggested for promotion. Contents 1. Executive Summary 2 2. Introduction 5 2.1 Chery company background 5 2.2 The special culture of U.S.A market 5 2.3 What is Mix Marketing? 5 3. Main Finding 5 3.1.1 Product 5 3.1.2 Price 6 3.1.3 Promotion 6 3.1.4 Place 6 3.1.5 People 7 3.1.6 Process 7 3.1.7 Physical environment 7 3.2 Chery into the other countries 7 3.2.1 Product 7 3.2.2 Price 7 3.2.3 Promotion 9 3.2.4 Place 9 3.2.5 People 9 3.2.6 Process 9 3.2.7 Physical environment 10 3.3 Toyota into U.S.A market 10 3.3.1 Product 10 3.3.2 Price 10 3.3.3 Promotion 10 3.3.4 Place 10 3.3.5 People 11 3.3.6 Process 11 3.3.7 Physical environment 11 4. Conclusion 11 5. Recommendation 11 5.1.1 Product 11 5.1.2 Price 12 5.1.3 Promotion 12 5.1.4 Place 12 5.1.5 People 12 5.1.6 Process 12 5.1.7 Physical environment 12 Reference List 13 2. Introduction 2.1 Chery company background Chery Automobile Co., Ltd is one of the most successful automobile companies in China, which has come a long way ever since its inception in 1997. The company had begun production of cars in 1999 and started exporting them from 2001. Presently, headquartered at Wuhu, Anhui, China, the company manufactures and distributes passenger cars and vehicles, minivans and commercial vehicles. Chery Automobile serves its customers through a wide chain of distribution network in 11 countries around the world (Tao, n.d.). 2.2 The special culture of U.S.A market The US automobile industry is one of the largest automobile markets in the world and houses 13 automobile manufacturers. The domestic production of passenger cars from 2007 to 2011 was 8.1 million and in 2011, the country had exported 2.5 million passenger cars (Brock, 2013). Liberal investment policies, higher expenditure on luxury items by consumers, robust infrastructure, skilled workforce and encouraging government policies are lucrative for car manufacturers around the world (Select USA, 2014). 2.3 What is Mix Marketing? Marketing mix can be defined as variables that are controlled and put together by the company to satisfy target markets and achieve long-term objectives of the firm (Campbell and Netzer, 2009). Traditionally, marketing mix contained 4Ps, which have undergone modification over time and particularly in case of service, marketing mix is considered to comprise 7Ps (Terpstra and Sarathy, 2001). 3. Main Finding 3.1.1 Product Chery Automobile is an efficient producer of low-cost fuel efficient cars. Under these circumstances, product adaptation will be ideal for the company in order to be successful. It will be appropriate for the company to focus on small car manufacturing (especially, popular QQ range) for the middle class segment with slight adjustment in the product style like, engine and outward appearance, suitable for U.S. market. Regional product and regional brand image strategy analysis is required, before designing the product to meet customer needs. One more important factor for product development in U.S.A. is the high level of pollution emission standards that is needed to be met in U.S. market. This may involve sufficient alteration of existing models (Aut Guanzhu, 2014). 3.1.2 Price Chery automobiles have been quite successful in producing small, good quality and affordable cars. It has also adopted a number of discount strategies, personal selling and other strategies to boost sales in U.S.A. These kinds of strategies are particularly applied during a new launch for attracting more customers. In order to gain a competitive advantage over the rivals, Chery must adopt competitive pricing; this will ensure cost leadership in the segment where it operates (Li and Vinten, 2007). 3.1.3 Promotion Promotional strategies in the US, as those in other automobile markets, rely on the timing factor. It has been observed that in US, most of the car manufacturers heavily spent on customer advertising to grab attention of customers before they purchase the product. As Chery cars mainly produce cost effective cars, youth market segment can be of particular importance for the company in U.S.A. Majority of the U.S. population are internet users. So, Chery must use both traditional and social media for promotion. 3.1.4 Place U.S. automobile market is dominated by a large number of manufacturers, which compels Chery Automobile to enhance its market presence in order to battle the high competition (Wasserman, 2003). The dealers of Chery cars should make sure that cars produced for the US market should be available at most strategic locations of the country. To fulfil this objective, joint venture with an established U.S. car manufacturer can be helpful; this will allow Chery access to a wide distribution channel. Auto trader market is also a good place for enhancing visibility of cars as this offers a good relationship with retailers. 3.1.5 People There exists considerable cultural difference between Chinese and US customers regarding purchase of automobiles (Gallagher, 2006). This indicates a considerable difference in taste and preferences of customers concerning type of automobiles to be purchased. As educated young customers will be an ideal target market for the company, difference in taste and preferences of this group must be studied in details. 3.1.6 Process Process in the automobile industry mainly refers to the process whereby customers can purchase the cars (Peng, 2010). In order to satisfy customers, Chery cars can include test drive of the vehicles. Personal sales staff must have adequate knowledge about the product to answer customer queries. 3.1.7 Physical environment Physical environment refers to outward appearance of the showroom where the products are sold (Nelson, 2009). Through joint venture with a leading U.S. automobile manufacturer, Chery cars will be able to depend on the already established physical resources of its partner without excessive investment in this segment. 3.2 Chery into the other countries 3.2.1 Product In Russian market, Chery cars had a joint venture with local partner, Tagaz, where both of them had developed appropriate products for the local markets. This allowed Chery Automobile to gain a considerable market share in this market (Campbell and Netzer, 2009). In Indonesia, however, the company has mainly operated on standard models by exporting its products. This shows that the company uses both standard and diversified products, depending upon the country in which it operates. 3.2.2 Price There is one common factor in the prices that is offered by Chery cars through its competitive pricing strategy. The standards of living are different across countries, so the company has mainly adopted pricing followed by the competitors in order to compete effectively with rivals. In case of developing countries like, Russia and Indonesia, expenditure on luxury items are lesser than that in developed economies like, U.S.A., which calls for slight adaptation in the pricing strategy (Li and Vinten, 2007). Yet, the competition factor has to be taken into consideration; if the company charges higher price than its competitors, then customers will not be interested in buying the products (McEachern, 2012). The following chart shows comparison of the prices of different models of Chery cars and other leading car companies (Drauz, 2013). Figure 1: Comparison of prices (Source: Shaker, 2010) The above figures clearly indicate that Chery Automobile has a cost leadership advantage among other brands because Chery cars cost lower than other models in the similar market segments. 3.2.3 Promotion As the company operates in different geographies around the world with differences in culture and habits, promotional strategies followed by Chery Automobile have also been streamlined to yield the best results (Moran, Graham and Blomström, 2005). In each of the country wherein it operates, the company has differentiated target markets that it wants to serve and subsequently promoted brand specific advertisements to attract specific customer segments. This implies that promotional strategies are mainly targeted at needs and preferences of customer segments, where the brand is operating. The company has also been promoting internet based advertising to reach a wider audience and price and feature of the products are available on the internet for customer’s convenience (Mahajan, 2008). 3.2.4 Place It has been observed that most car manufacturing giants use the 4S (Sales, Service, Spare parts and Surveys) as a part of their placement programs. Chery has also been using this strategy owing to its importance in establishing good relationships with buyers. In Russia, the company has used the network of Tagaz; and in Indonesia and other countries, it has employed retail outlets and showrooms (Junjie and Xiajing, 2013). 3.2.5 People Cultural difference is an integral part between the countries and Chery cars has considered these differences in ways in which the product is developed and advertised for gaining competitive advantage. Analysis of the cultural difference has been necessary for Chery marketers so as to create specific product perceptions in minds of individuals (Apco, 2010). 3.2.6 Process Process adopted by Chery cars in most of its markets is uniform and involves test drive of the car and demonstration by sales personnel, before final purchase is made. This also helps in establishment of good relationship with customers (Triantis, 2009). 3.2.7 Physical environment Apart from models that are displayed for the purpose of sale, showrooms and their infrastructure is also an important factor that draws attention of customers, before they make their purchasing decisions. 3.3 Toyota into U.S.A market 3.3.1 Product Toyota is one particular company that has been very popular in the U.S. market and offers a wide range of products for passenger cars, trucks and commercial vehicles (Nelson, 2009). The hybrid products of the company have been very popular in US markets. Toyota’s Highlander has garnered immense popularity in U.S. markets. Toyota has also used product adaptation strategy to gain popularity in U.S (Toyota Group, 2009). 3.3.2 Price Toyota has followed a competitive pricing strategy along with demographic and financial segmentation of customers in order to target potential customers. This strategy also reflects flexibility of the company in pricing (Toyota Motors, 2011). 3.3.3 Promotion The company employs most of the common promotional strategies used by car companies like, advertisements through newspapers, television, radio and billboards. This is also coupled with internet and social media based advertising for increasing visibility of products. The web portal of the company is a very effective measure of communication with customers (Toyota, 2014). 3.3.4 Place Toyota has adopted strategic alliances and joint ventures in order to create an elaborate distribution channel, which has ensured a robust sales growth. The company has established good relationship with the US dealers. 3.3.5 People Wide geographical presence of the company along with diverse range of products have made it necessary for the company to adopt cultural differences, especially in the western countries like, U.S. 3.3.6 Process Similar to most of its rivals in business, Toyota has also devised a customer-centric process for delivering their cars. This includes easy legal formalities of purchase and valuable after sales service. 3.3.7 Physical environment Toyota has one of the most attractive showroom outlets in business, which adds to brand value of the company. The customer’s perception of the brand image has been enhanced by working upon physical environment of the company. 4. Conclusion This report has analyzed the marketing mix strategy that can be adopted by Chery Automobile when it ventures into the American market. In this regard, marketing mix that is followed by the company in other countries, like, Russia and Indonesia, has also been discussed. From policies followed by the company, it has been realized that product adaptation strategy is suitable for specific needs of the population and the market where the company operates. Chery Automobile has also used low cost competitive strategy to gain competitive advantage. The promotional technique pursued by the company is based on above the line and below the line advertising. 5. Recommendation 5.1.1 Product This report recommends that hybrid vehicles must be produced by Chery cars, which is appropriate for environmental standards and differences in customer tastes. 5.1.2 Price Competitive based pricing is the recommended strategy for this venture as very high pricing will alienate customers and very low pricing will create negative image in mind of customers (Brux, 2007). 5.1.3 Promotion This report suggests that youth market will be ideal for the company to target in U.S.A., considering capacity of the vehicle. This segment requires aggressive internet advertising. 5.1.4 Place Strategic joint venture will allow the company to utilize distribution channels of the partners, thereby increasing visibility (Vaidya, 2008). 5.1.5 People This report proposes that for ensuring a successful launch, acknowledging the cultural gap between the countries will be crucial. 5.1.6 Process Easy legal formalities in the purchasing process and welcoming behaviour of selling agents are essential for transactions. 5.1.7 Physical environment Attractiveness of the place of service delivery is also important as external attributes of the product usually influence customers’ purchase decisions (Voss, Tsikriktsis and Frohlich, 2008). Reference List Apco, 2010. Market Analysis Report: China’s Automobile industry. [pdf] Apco. Available at: < http://www.export.gov.il/uploadfiles/03_2012/chinasautomotiveindustry.pdf> [Accessed 9 April 2014]. Aut Guanzhu, 2014. Automobile exhibition. 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