Developing a New Plug-in Hybrid Vehicle - Case Study Example

1.Executive summary 3 2.Introduction 4 3.Company and Its Mission 5 4.Situation analysis 7 4.1.PESTLE Analysis 7 4.2.SWOT Analysis 10 5.Segment- Targeting and Positioning 12 6.Marketing Intentions 13 6.1.Objectives 13 7.Marketing strategy 13 8.Marketing programmes 17 9.Financial Planning 19 9.1.Projected costs, revenue & sales forecasts 19 9.2.Anticipated profits 20 10.Metrics & Implementation controls 20 10.1.Controlling & adjusting 20 11.Conclusion 22 12.Reference 23 1. Executive summary Ford is one of the most popular automobile companies in the global automobile industry. However, in case of plug-in hybrid vehicle market, Ford has not been able to perform better in comparison to its key competitors. In UK, Ford has developed a strong market and hence, it must try to develop its plug-in hybrid car through better marketing plan. The situation analysis has been conducted using PESTLE and SWOT analysis. PESTLE analysis disclosed that the macro-economic factors are favourable for Ford’s hybrid car market development. However, after the financial crisis, the purchasing power of the UK consumer has reduced and hence the demand of high cost hybrid cars will remain low for few years. High brand image and large portion of market share are the two major strengths of Ford in UK, and increasing competition and high production cost are the major threat for the company. Major target market consists of high income group people who are tech savvy and environmentally conscious. The marketing strategy has been planned after considering the marketing, financial and societal objectives. As per the features of four P’s, Ford is expected to follow differentiation strategy by bringing product developments. Promotional activities are important for spreading consumers’ awareness for hybrid cars offered by Ford and hence, it will follow integrated marketing communication (IMC) approach for better performance. The financial planning is done based on projected sales revenue, and the anticipated profit for the years will be minimum. However, with increasing demand in the following years, the profitability is expected to increase. For controlling, evaluation and adjustments of strategies, balanced scorecard (BSC) approach is very effective as it includes major business perspectives. Ford will also use financial techniques for evaluating the effectiveness of the marketing strategy. 2. Introduction Globalization has brought several improvements in the society. In the case of economic developments, globalization has helped to encourage the trade and business among the world countries. Besides, with time, there has been a significant development in the field of technology that further expands the scope of trade and business in the global market. This has encouraged free trade policies and oligopoly market structure. As a result, competitiveness among the players in a given industry has been intensified to a higher extent. This competitiveness has urged the companies to gain a competitive advantage for avoiding unnecessary competition and achieving an upper hand position in the market (Reid, 2002). In this process, in the post-modern business organisations, developments and execution of effective strategic marketing plans has become inevitable tasks for them. Marketing activities are used for a number of reasons, for example, for increasing sales revenues, for brand developments, for promoting corporate image, for gaining trust of local market, for cost efficiency and for sustainability (Burrow, 2008, p.260). An extensive marketing plan includes a number of tasks and activities like developments of mission & objectives, environmental analysis, formulation, execution and evaluation of marketing strategies & tactics. In this process, marketers have to consider multiple elements of marketing. The primary element of marketing is known as four P’s i.e. product, price, promotion and place. Business organisations frame specific and defined strategy for each element for enhancing consumers’ value. Moreover, there are also certain factors that should be taken into consideration like organisational objectives, culture, multiple external forces etc. In case of developing a product in a particular market, these considerations cannot be excluded. This paper will attempt to present a comprehensive strategic marketing plan for developing plug-in hybrid cars in the competitive market. The marketing plan will be developed focusing on Ford’s business unit in the UK automobile industry. Plug-in hybrids cars are the latest concept in automobile industries which are developed using advanced technology and its primary unique selling proposition is that it is an eco-friendly car for a safe and healthier future. However, in order to develop this product commercially in the market, Ford needs to follow an effective set of strategies which are discussed and given in this paper by taking necessary considerations of marketing plan into account. 3. Company and Its Mission The primary objective of this paper is to develop an effective marketing plan for Ford Motor Company in UK. Basically, this giant global automobile company is US-based and it has entered in most of world markets like in European countries, China, Africa, India, Australia etc. Ford has also entered the UK market and currently, it is one of the biggest automobile companies in this country as it is present in seven locations with 550 strong dealerships. It has also owned several manufacturing plants in UK where the company manufactures cars, engines and other motor parts components (Ford UK-a, 2011). In order to set proper strategic business directions, it has developed its specific mission and vision statements. The company considers itself a global company and hence, it has established its mission and vision statements accordingly. Its mission and vision statements are “we are a globally diverse family, with a proud heritage, that’s passionately committed to providing outstanding products and services” and “to become the world's leading company for automotive products and services” respectively (Ford UK-b, 2011). Therefore, the company wants to be an outstanding automobile leader in the global market by offering constant consumer value through high quality product and services. Ford strives to create value through its strategic planning for people, society and for environment. Ford had entered the UK market in1965 and for the last 30 years, the company has been able to serve the UK market by countering its key rivals. UK automobile market is crowded with a number of European and other multination automobile companies but Ford is able to generate sufficient sales revenue by selling 440,000 vehicles including cars and commercial per year (Ford UK-a, 2011). Ford is popular for commercializing its innovative ideas in the market by offering a range of highly quality cars and it also uses its technologies for inventing eco-friendly technologies. The company has launched several hybrid cars in the market but the hybrid cars offered by its key competitors have outperformed Ford in the hybrid car market segment. Leading companies like Daimler Chrysler’s and Toyota have launched their successful hybrid cars i.e. Prius and Sprinter van respectively. Ford should also focus on developing hybrid cars as future trend of automobile market is shifting towards eco-friendly and fuel-efficient cars. 4. Situation analysis 4.1. PESTLE Analysis PESTLE analysis is a marketing analytical tool for scanning the influence of the macro-economic factors on a business. PESTLE includes six macro-economic factors i.e. political, economic, social, technology, legal and environment. Using the PESTLE framework, it becomes easier to identify the impact of these factors, and business organisations develop the most suitable strategies based of these analyses (Kay, 2009, p.25). The PESTLE analysis has been conducted for Ford UK to develop its successful marketing plan for plug-in hybrid car. Political: One of the primary reasons of Ford’s entry in UK during 1965 was the stable political condition of UK. The UK government has been constantly aiming to bring economic and social developments by encouraging trade and business within the country. Political parties in UK are very influential as these parties play a very crucial role in controlling multiple affairs. UK government is based on the “constitutional monarchy and Commonwealth realm” and the chief of the state and head of the government are Queen Elizabeth II and Prime Minister respectively (CIA, 2011). The Prime Minister is responsible for appointing various cabinets of ministers for different areas like trade, technology, agriculture, defence, foreign affairs etc. Labour government is a leading political power in UK since 1997, and this political party strives to bring major development in UK (U.S. Department of State, 2010). Department for Business and Innovative Skill (BIS) is a major regulatory body that “is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed” (BIS, 2011). Economic: UK is one of the most powerful economies not only Europe but also in the world. Due to the strong economic condition, its economy belongs in the category of first world country. Most of developed countries’ major strength is the industrial growth and development. However, in case of UK, its economy primarily depends on its services sectors. Major services sectors include business, financial, transport, distribution, communication, hotel and tourism etc. However, UK economy also has some of the major industries like metal manufacturing, heavy engineering, iron & steel, textiles, motor vehicles, electronics, chemicals etc. The contribution from services and industries to the UK’s GDP is nearly 75% and 23.8%, and rest is contributed by agriculture. However, better economic condition of the country has led to strengthening the purchasing power of the UK people. GDP as per the purchasing power is nearly $2.189 trillion which is the ninth highest in word, and per capita GDP of UK is $35,100. During the financial crisis of 2007-2008, this economy was drastically affected and in 2009, real growth rate was nearly -5%. However, currently, UK is in a recovery stage and it is expected that in the future, people’s standard of living will improve Social: The demographic feature of UK is also an important factor that influences trade and business. During the Industrial Revolution of 18th century, people of Britain played very crucial role as they became aware about the importance of trade and business. At present, due to certain factors like economic enhancement, education, technological improvements, the lifestyles of UK people has been changing with time. Besides, increasing number of population indicate higher consumer availability. The country’s population is nearly 62,698,362 and it is growing at 0.557% per year. UK government’s expenditure for education is nearly 5.6% of GDP and nearly 99% of population (CIA, 2011). Technology: Automobile industry is highly dependent on technology and infrastructure. UK government always strives to bring technological improvements and hence, it has developed better transportation and communicational infrastructure. UK has 505 airports that facilitate business visits in UK. Besides, better roadway, waterways and railways are very helpful in executing business relation activities (CIA, 2011). UK automobile industry is now developing and introducing better technologies for meeting consumers’ demand. UK is trying to increase its technological capabilities by encouraging R&D (Ricardo, 2010). Legal: UK’s legal framework for trade and business strives to bring acceptable standards by governing the economy and business environment. Major legal structures cover the labour market, taxation etc. UK follows a sophisticated commercial law “upholding of contractual agreements; and protection of its investors” which is considered to be “business friendly” (HM Treasury, 2011). Environment: UK government is increasing its concern regarding the environmental safety. Automobile industry is one of main contributors of global warming and pollution. Besides, there is also a certain number of independent regulatory that helps this industry to follow environmental protections guidelines. UK’s Ministry of Defence have imposed environmental specific law known as “Safety and Environmental Protection (S&EP) Legislation” (Ministry of Defence, 2011). 4.2. SWOT Analysis SWOT analysis in another vital marketing tool that helps to indentify internal strength and weaknesses, and external opportunities and threats. SWOT plays very crucial role in formulating strategies based on strengths, weaknesses, opportunities and threats. SWOT analysis for Ford UK has been given below. Strengths and Weaknesses: Primary strength of the Ford Motor Company is its high brand image in the market. Many global consumers have developed specific brand preference for the company that helps it in international market expansion. Secondly, the company is present in most of major markets and from each market it earns a major portion of market share. The following table shows its sales revenues from different market. Table 1 (Source: Ford Motor Company, 2009) As per the above table, U.S. and Europe are the major markets for Ford. Moreover, Ford also has better technical and automobile engineering capability that has helped it to gain a competitive advantage in the market. Its distribution strategies are effective for catering to different regional market as it has developed 550 strong groups of dealers. The financial crisis of 2008, had hit the company in a major way and as per table 1, sales of the company has decreased significantly. Moreover, Ford has to try hard for maintaining its higher market share. On the other hand, the company is neglecting the future trend of automobile industry as it has not taken any major steps for developing better hybrid cars that can compete with the product offered by rivals. Opportunities and Threats: A major opportunity for Ford UK for developing plug-in hybrid cars is that the demand and popularity for such cars are increasing as environmental protection plays very a crucial role in consumer buying behaviour. This has encouraged other automobile manufacturers like Honda, Toyota, and Lexus etc to introduce their hybrid cars. Besides, automobile industry of UK is matured as a large numbers of skilled employees and leading companies are present. Government is also trying to develop R&D process in UK for better technological developments in the automobile sector. UK’s economy has just experienced a massive hit due to financial crisis and still the economy has not been able to overcome completely. As a result, automobile demand in UK is still in distress. UK may take longer period to overcome from the depression. On the other hand, the hybrid car segment is already dominated by key competitors and Ford is facing very steep competition in this market. Another major challenge is that hybrid cars production is quiet expensive that lead to the increase in the cost of the product. Moreover, initially, the company will not be able to achieve economies scale that will further pull up the overall costs. 5. Segment- Targeting and Positioning Based on the above analysis and finding, Ford is able to identify and specify its market segment for developing plug-in hybrid cars in UK. There are certain factors that must be taken into consideration for market segmentation. The automobile consumers of UK are primarily categorized into different segment based on their needs and consumer awareness. Moreover, Ford should also focus on its high-end brand loyal customers for its new hybrid cars. The targeting should specifically identify the core features, age, income, geography and genders of target consumers. These areas of target markets are given below. Consumers will be tech-savvy and environmentally conscious. Target age group will be 30yrs to 45yrs old. Customer will belong to high income group of people. Male as well as female group will be targeted from the major cities like England, Manchester, and Liverpool etc. Ford must determine a positioning statement to develop a higher brand image in the market. The primary theme of the hybrid car is green environment. Ford should try to develop trust among its target market regarding product quality and environmental benefits. Therefore, Ford should aim to be the most respectable and value added brand in hybrid car market segment. 6. Marketing Intentions 6.1. Objectives Financial: Ford will aim to be the leader in the hybrid car market of UK, and it will try to produce cost effectively so that it can offer low cost hybrid cars. Therefore, primary financial aim is to achieve cost-efficiency in hybrid car production. Secondly, Ford should try to earn 25% of its UK sales revenues by selling hybrid cars. Marketing: Primary objective of marketing plan is to make the target consumers aware about Ford’s hybrid cars. Secondly, Ford should create a brand identity for its hybrid cars in UK market. Societal: Ford’s hybrid cars will help to offer less polluted environment and Ford will try to develop the consciousness regarding environmental protection among UK people. 7. Marketing strategy To meet the primary aim of this market plan and to meet the above stated objectives, a set of plausible marketing strategies are inevitable. The first priority in the marketing strategy is the four component of marketing i.e. product, price, promotion and place. These four P’s are basics for framing marketing strategies. Perreault has identified that these four P’s must be blended by focusing on the target market. Moreover, some other factors should be taken into consideration in this process and the following figure depicts marketing strategy planning process. Figure 1: Marketing Strategy Planning Process (Source: Perreault and McCarthy, 2007, p.582) As per the above diagram, specific four P’s strategies for Ford UK’s plug-in hybrid cars are given below. Product: Product is the core essence of a marketing plan and offered product must be able to satisfy and create value for the target consumers. Ford’s Plug-in hybrid cars are meant to meet the environmental responsibilities. Moreover, it also offers a long term benefit to customers as it helps to reduce maintenance and fuel cost. These cars are able to run on electric as well as on fuel. The performances of these cars are also quite better e.g. “a mid size plug-in can accelerate from 0 to 60 miles per hour at less than 9 seconds, sustain a top speed of 97 mph and maintain 120 mph for about two minutes even with a low battery” (IAGS, 2006). Hybrid cars offered by Ford will be able to satisfy all the needs of consumers by enhancing their values. Price: As these cars require greater technology and expensive material, costs of this product remains higher in comparison to ordinary vehicles. Ford’s plug-in hybrid cars will cost around £19,500 to £21,500, depending on the extra-added features. Ford will aim to offer reasonable cost product in the hybrid car segment in comparison to the key competitors. Promotion: Promotional activities for these cars are very essential as it is very necessary to make the target consumers aware about Ford’s hybrid cars. Moreover, many of consumers do not have proper information regarding the advantages of hybrid cars. Therefore, awareness will be spread and product will be promoted using effective promotional mix. Place: For catering to the different target market, fluent distribution channels are very crucial. Moreover, distributers also play a significant role in promoting product in specific local market. However, Ford has already developed 550 strong dealers in all over UK which is a great advantage for Ford in its distribution activities. On the other hand, Ford also needs to identify its core generic strategy for achieving specific competitive advantage. In this respect, Ford can use Porter’s generic strategy matrix and the model in given below. Figure 2: Porter’s Generic Strategy (Source: Eldring, 2009, p.7) As per the four P’s for marketing, Ford must follow differentiation strategy for developing the plug-in hybrid cars. The primary aim of Ford’s marketing plan is to offer hybrid cars at reasonable prices so that more number of people can avail such cars for future benefits. Reasonable price will help to expand the competitive scope and hence, differentiation strategy is most viable for Ford. Moreover, Ford must compare the market with respect to the product for strategic directions. In this process, Ansoff Matrix is very useful model and it is given below. Figure 3: Ansoff Matrix (Source: Cheverton et al, 2005, p.131) Considering the above matrix, the automobile market for plug-in hybrid cars already exists but the offered product by Ford is new for market. Therefore, Ford should concentrate on its product development activities. The process of product development will require significant amont of investment for R&D to gain technical expertise and for idea generation. 8. Marketing programmes The previous section has distinctly identified the core marketing strategy and strategic direction. In order to meet the primary goal and objectives of marketing plan, the marketing strategies should be followed by execution of marketing programs. Marketing programs are specific and it is helpful in achieving the short term goals (Webster, 1995, p.345). Marketing programs for Ford’s hybrid cars will focus on its promotion, sales, distribution, product developments etc. Some of the specific marketing programs are below. The foremost task is to conduct a primary research to understand specific preference of the target consumers so that Ford can develop its product accordingly. Besides, research should also be conducted to develop the product for idea generation and for concept testing etc. The company should aim to achieve higher economies of scale by boosting sales revenues. For promotional activities, Ford must follow integrated marketing communication (IMC) approach. IMC approach is the most effective promotional mix strategy which is helpful for brand development and for consumer relationship management. The IMC activities must aim to enhance the consumers’ awareness regarding the offered hybrid cars. Ford must partner with dealers and retailers for better consumer awareness and product promotion. Ford should also provide product knowledge training to sales personnel. For advertising activities, Ford must use social networking sites, online promotion, and automobile magazines etc. It can also promote its product by sponsoring program or events where most of the target customers will be available. Ford should partner with multiple financial services institution for availing credit to its consumers. However, Ford already owns a subsidiary company called Ford Credit and this subsidiary financial company can play a crucial role in this respect. 9. Financial Planning 9.1. Projected costs, revenue & sales forecasts Based on the market demand and availability of target consumers, the sales demand for Ford’s hybrid cars can be projected. The financial planning will be estimated by focusing on the financial objectives i.e. to achieve 25% of the sales revenue from hybrid car segment and to achieve cost efficiency for offering reasonable price. Currently, Ford is selling nearly 440,000 cars each year and it should sell more than 110,000 units hybrid cars to achieve the aim. However, for the first financial year, the sale forecast has remained lower i.e. 80000 units in per. The company will aim to achieve higher sales targets in the following years and average sales price for each unit of cars is around £20500. Production cost of hybrids cars is quite high in comparison to other conventional cars and hence, estimated production cost is 80% of the sales i.e. £16400 per unit. The following table depicts the projected sales, costs and revenue for the first year. Table 2 9.2. Anticipated profits In order to execute the production and other marketing activities, Ford also has to inject further capital for capital expenditures, R&D programs, marketing expenses, employee training program etc. However, the primary financial aim of Ford is to achieve cost efficiency and hence, it will try to control these expenses. The following table represented a projection of anticipated profit from Ford’s hybrid car sales. Table 3: Anticipated Profit (in UK£) The above table represents the projection of anticipated profit from Ford’s hybrid car sales in UK. Initially, the profitability will be low i.e. 2% of total sales due to lower economies of scale. However, with increasing sales, the profit will raise significantly. 10. Metrics & Implementation controls 10.1. Controlling & adjusting Development of extensive marketing plan is a critical task as it includes a number of activities relating to decision making process. In order to make a marketing plan effective and relevant, a marketer has to consider a number of areas. However, the implementation and control of the entire marketing activities is an inevitable task for the management. On the other hand, while controlling and implementing, the decision marketers need to take the pre-defined objectives into consideration. Therefore, controlling activities are very important and in this process, Ford can use management and controlling tools. Balanced Scorecard (BSC) is a celebrated management tool for controlling multiple business activities including marketing. BSC is a model that includes multiple perspectives of a business and by using it, each of these perspective can be controlled, evaluated and adjusted according to the prevailing internal and external needs. Kaplan and Norton were the first to develop the concept of BSC. The following model represents the BSC model showing four business perspectives. Figure 4: Balanced Score Card (Source: Olve and Sjostrand, 2006, p.6) Ford can easily control its four major business perspectives using the above model. These business perspectives are finance, customer, development and process relating to efficiency maintenance. Moreover, for measurement of the financial viability, Ford should use financial evaluation method like return on investment. In case, if necessary, Ford must bring adjustment in their implemented strategies. 11. Conclusion This paper has demonstrated a comprehensive marketing plan for developing plug-in hybrid vehicle. The entire chapter has dealt with Ford UK for developing its new hybrid car in market. A marketing plan consists of multiple tasks and this paper has included all the necessary areas. Ford is a global automobile company and it has captured a significant amount of market share in UK. However, the market for hybrid cars is already dominated by its key competitors like Toyota and Daimler Chrysler's. Moreover, hybrid car is becoming the latest market trend and in future, there will be higher growth. Hence, Ford must identify and cater this opportunities by a set marketing plan. Ford has already introduced its hybrid cars but its products are not as successful as competitors’ offered product. This paper has presented situation analysis for identifying key target customers. Based on target customers and four P’s, Ford should follow differentiating strategy by bringing product development in the market. Financial aspect of marketing is also very important to meet the financial objectives and it should also implement BCS approach for implementing, controlling, evaluating and for adjusting. 12. Reference BIS. 2011. About BIS. [Online]. Available at: http://www.bis.gov.uk/about. [Accessed on March 15, 2011]. Burrow, J. L. 2008. Marketing. 3rd ed. Cengage Learning. Cheverton, P., Foss, B., Hughes, T. and Stone, M. 2005. Key account management in financial services: tools and techniques for building strong relationships with major clients. Kogan Page Publishers. CIA. March 8, 2011. The World Factbook: United Kingdom. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html. [Accessed on March 15, 2011]. Eldring, J. 2009. Porter ́s (1980) Generic Strategies, Performance and Risk: An Empirical Investigation with German Data. Diplomica Verlag. Ford Motor Company. 2009. Annual Report. [Pdf]. Available at: https://mail.google.com/a/sigmaresearch.in/#search/FORD/12bf97823ff9ed1c. [Accessed on March 15, 2011]. Ford UK-a. 2011. Ford in Britain. [Online]. Available at: http://www.ford.co.uk/AboutFord/CompanyInformation/FordinBritain. [Accessed on March 15, 2011]. Ford UK-b. 2011. The Standard We Set Ourselves. [Online]. Available at: http://www.ford.co.uk/AboutFord/CompanyInformation. [Accessed on March 15, 2011]. HM Treasury. March 01, 2011. The UK’s strategy for enhancing its attractiveness as a venue for international business. [Online]. Available at: http://www.hm-treasury.gov.uk/speech_fst_apa_010311.htm. [Accessed on March 15, 2011]. IAGS. 2006. Plug-in Hybrid Vehicles. [Online]. Available at: http://www.iags.org/pih.htm. [Accessed on March 16, 2011]. Kay, R. 2009. An APMP Primer. Robin Kay. Ministry of Defence. March 2011. Safety and Environmental Protection. [Online]. Available at: http://www.aof.mod.uk/aofcontent/tactical/safety/content/legislationintro.htm. [Accessed on March 15, 2011]. Olve, N. G. and Sjostrand, A. 2006. Balanced Scorecard. Wiley-India. Perreault, W. D. and McCarthy, E. J. 2007. Basic Marketing. 15th ed. Tata McGraw-Hill. Reid, G. C. May 27, 2002. Free Trade, Business Strategy and Globalization. [Pdf]. Available at: http://www.st-andrews.ac.uk/crieff/papers/dp0009.pdf. [Accessed on March 15, 2011]. Ricardo. June 15, 2010. Introducing a new research report Automotive technologies: The UK’s current capability. [Pdf]. Available at: http://www.innovateuk.org/_assets/pdf/corporate-publications/automotive%20tech%20summary.pdf. [Accessed on March 15, 2011]. U.S. Department of State. December 14, 2010. Background Note: United Kingdom. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/3846.htm#political. [Accessed on March 15, 2011]. Webster, F. E. 1995. Industrial Marketing Strategy. 3rd ed. John Wiley and Sons. Read More