Marketing Mix for Cherry Automobile Company Ltd - Case Study Example

Marketing Mix for Cherry Automobile Company Ltd Executive Summary This marketing mix report analyzes how Cherry can enter in the market of United States. Cherry has a presence in 80 countries, and it is analyzing the opportunities and strategies to enter in the USA market. The car industry of USA has significant opportunities and potential, however it is crucial to formulate the right strategies to be successful. After having detailed research, it has been identified that Cherry has to improve its quality to be successful in the USA car market industry. Moreover, to be successful Cherry must follow adaptive strategy and the company has to come up with cars that are eco-friendly and fuel efficient. Introduction Cherry automobile company is a distributor and producer of passenger and commercial vehicle, minivans, transmission and engines (Cherry, 2013a). Company is a significant exporter of its passenger vehicles. Company was founded in 1997 and before 2004, was recognized as SAIC Cherry automobile (Bloomberg Business week, 2014). Cherry’s strategic goal is to capitalize on the opportunities available in the international market because of globalized (Cherry, 2013b). It is the first global exporter of engines, CBU, CKD, and vehicle-manufacturing technologies in China. The company is focusing on innovation and it has started to focus on improving the quality (Cherry, 2013c). The company has exported its manufacturing to more than 80 countries (Cherry, 2013a). The company is analyzing the potential of entering in the market of United States of America. In United States of America, culture of owning cars is decreasing, due to high gas and oil prices, and for maintaining the environmental sustainability youngsters are drifting away from the car and preferring to travel on public vehicles. Even household income is more than $70,000 but still people are concerned about the environment, and therefore, prefer to travel on public transit (Schmitt, 2014). Americans usually have short families therefore; trend of small cars is high even in families with high status. New concept of marketing has moved from 4P’s to 7P’s (Kotler, 2003). Therefore, it is necessary for marketers to understand these changing environments (Kotler Armstrong, Wong, and Saunders, 2008). Marketing mix is a combination of tools and blends of tactics used to create the repose the company wants in its target market (Kotler, and Keller, 2009; Fill, 2009). Before taking entry into USA market there is a need to understand the concepts of standardize marketing mix and adaptive marketing. Standardized Marketing Mix: Standardized marketing mix model refers to international marketing strategy in which same product, distribution, promotional, and other marketing mix elements are used for all countries. Adaptive Marketing Mix: Adaptive marketing mix is an international strategy in which all marketing mix elements are adjusted to target the each international market. It is a costly strategy but starts with the hope for large returns and market share. Three models that are being discussed and each acquires standardization, adaption, or both in their DNA and that are as follow: Polycentric Marketing Model: Polycentric marketing model acquires adaption strategy for every market. By following this, approach companies establish subsidiaries in overseas market and work independently from their home countries according to the needs of the country. Geocentric Model: Geocentric model is a fusion of polycentric and ethnocentric model. This approach is considered more balanced and makes balance between two extremes. This marketing model is considered the most successful as compare to the other two. Ethnocentric Model: Ethnocentric model uses standardization strategy in which the product is made based on domestic country norms. This is the easiest model to use and less costly but can cause to have fewer sales due to the failure of recognizing the needs of international customers. Changes Required In Cherry For USA Market United States of America is a tough market for car manufacturers and has strict safety conditions. Cherry and USA have immense cultural differences. Therefore, Cherry has to follow the adaptation strategy and has to be specific with USA needs (Meyer and Bernier, 2010). Product: Product is a solution for customers’ desires (Smith, and Zook, 2011). Cherry has a wide range of brands, but Cherry QQ3 is the most selling brand and has rich colors. This brand has fashionable configuration and appealing look. Cherry QQ3 has electronic transmission. Other valuable and attractive features include oil saving, cheap maintenance and power saving. This brand is up to the emission standards of national “3.” This car also has multifunctional digital instruments that enable the driver to have all digital information, and enjoy safe, easy, and fashionable experience (Cherry, 2010). However, company has to follow the geocentric approach in order to fulfill the requirements of USA car market. This car can be successful in the US market with slight modifications such as less fuel consumption or fuel-efficient engine. To enter in United States, the car has to be fuel-efficient and has to concentrate more on eco-friendly manufacturing. Price: Price is defined as the amount paid by the consumer for the product or service (Kurtz, & Boone, 2010). Cherry is the cheapest model in China, but with the enhancement of features regarding safety and fuel efficiency; the price of the car will increase. The car industry of United States of America is competitive as there are a number of brands competing with each other. Cherry is a new name in the market. Therefore, it must follow the price penetration strategy. Therefore, price of this new brand should be around $33,000 if purchased on cash. This pricing strategy is based on polycentric approach. Promotion: Promotion is communicating the product to the audience (Shaw, & Ivens, 2002), which includes advertising through social media, personal selling, sale promotion, and public relations (Newlands, 2011). Company can follow push and pull promotion strategies to promote the product. Company will advertise its product through social media and by making contracts with local car dealers. In America, car promotions are based on car price, procedures, and product specifications. Therefore, Cherry has to do follow the polycentric approach and should do detailed promotions of its product features (Drouart and Alarie, 2013) and this promotion can be done through user trial. Place: Distribution channels are essential for generating sufficient sales (Haberberg, and Rieple, 2008). Cherry needs to use multichannel placing or distribution. Cherry can follow the geocentric approach for distribution and can sell its cars by forming different agreements and alliances with USA based dealers, agents and can placed its cars at different showrooms. Selective distribution is also used to sell Cherry cars in United States of America; most automobile brands are sold through this medium. People: People are the target audience of the company to which the company wants to sell its product. It is important to understand the people and their culture (Hollensen, 2007). Cherry’s target people for USA should be from the age of 25-60 years that belongs to all classes. USA is a market that acquires multicultural people therefore; company will follow the geocentric approach for targeting the audience. Process: Process is an explanation of products that how the product is best suited for the customers and process includes detailed features. For example, car is medium sized and fuel-efficient. It can be driven on electric mode and can provide visual help for efficient driving. Informative screen will enhance the informative capacity of the car. It has EcoBoost in-line-four-cylinder engines that involve the combination of three diverse technologies for the enhancement of efficiency and performance. These three technologies are Ti-VCT (Ford, 2010), turbo-charging and direct injection. Auto start and stop will reduce the car emission. Car has SYNC, blind spot information system, adaptive cruise control function, and Active Park assists. The process will be defined by following the polycentric approach because Americans are concerned about the processes. Physical Environment: The physical environment of America is highly competitive for Cherry because consumers demand high security and fuel-efficient cars due to their economic conditions and for environmental sustainability. Young generation is drifting-away from cars, and the use of cars in USA is turning down and due to individualism culture, the sale of mid-size car is more than big cars. Therefore, Cherry needs to focus on mid-size cars to be successful in the market of United States by following the polycentric approach. Cherry Presence In Other Countries: Cherry has sold approximately 200,000 cars in 80 countries by the year of 2012, and the company is willing to increase its global sales (Perkowski, 2013). The most exported brand of Cherry is Tiggo and Cherry QQ3. Product: Cherry uses polycentric approach because exports of Cherry products defer with country demand, but the most exported brands are Tiggo and Cherry QQ3. Amulet is another brand that is preferred in Russia. Cherry makes changes in its products according the demands of the country. Therefore, it can be said that it follows the adaptive product strategy. Therefore, each product has different specifications in different countries. Cherry needs to improve its models in term of quality if the management wants to be successful in different markets. Price: Price is an important factor in the decision of purchasing the car and for pricing Cherry uses polycentric approach at international level. Price of different brands of Cherry is different in each country with differentiated features. For example, In Malaysia, Cherry Tiggo price is $26,000 and Cherry QQ3 price is $14,562. In Pakistan Cherry, QQ3 price is $7,960. In Russia, most sold brand is Tiggo and its price is 520,000 rubles. Promotion: Each country has different cultural preferences, and promotional activities need to be performed accordingly (Keegan, & Green, 2011). Cherry has a marketing and branding department, which is responsible for the promotions of brand at international level. This department adopts polycentric, geocentric, and ethnocentric approaches according to the country’s requirements. Cherry brand department shapes the monthly fee system to enhance the image of the company at a global level. Brand department also provides assistance to sale department through which promotions can be performed according to the requirement of the countries. Place: Dealership of Cherry exists in different countries. For instance, in Ukraine, Cherry sells its cars through UkrAVTO Corporation. Similarly, different retailers or distributors are used to sell the cars. Cherry uses geocentric approach for distribution. People: Target market of Cherry automobile is different in each country. For targeting the market, Cherry focuses on the specific needs of the country. Therefore, it can be said that the company follows adaptation strategy and modifies its strategy according to the market (Kotabe, & Helsen, 2008). The aim of Cherry is to provide economic price cars. Process: For the exportation of different models, Cherry has focused on providing the best localized after and before sale service. In order to be a leading exporter, Cherry focuses on a variety in its assembling line technologies of production and product technologies. For processes company uses geocentric strategy to meet the need of specific country. Physical Environment: Cherry was used to sale finished products in different countries, but due to different issues such as China cars’ boycott in foreign market, high tariff, long delivery period and high transportation cost, Cherry has started to localize its operations by making joint ventures (Liping, 2012). That is a polycentric approach. Leading Company Of USA: Ford motor, Nissan, Honda, General Motors, Chrysler, Toyota, and Hyundai Motor Company are some of the leading cars manufacturers in America. The following graph shows the leading car manufacturers and their market share in USA market: (Cain, 2014) Ford Motors is the leading company with a market share of 15.8%. The most sold the car of Ford is a mid-size Fusion (Cain, 2014). Product: Ford motor has a wide range of products, but the most sold brand is Fusion. Fusion SE, Fusion hybrid SE, and Fusion energy SE are the different categories of Ford Fusion. Midsize hybrid cars of Fusion have four diverse cylinder engines, and these are fuel-efficient cars. It has continuous transmission, electric motor, car has standard before-crash alert system, and these cars have inflatable back seat belts, which are an additional and unique feature of safety (Al-Haas, 2014). Ford Fusion has a stylish design, and comfortable seats. Fusion hybrid SE has regenerating braking system, Fusion Hybrid Titanium has, dual LCD with eco-guide, hand free calling system, and has an automatic transmission along paddle shifter. Fusion range has many other features, which are commendable. Company uses polycentric approach for its products (Paul and Kapoor, 2008). Price: For pricing Ford, motor uses polycentric approach. Car has many features and as compared to features car has a lower price. The prices of Fusion models are presented in the table below Car Models Prices in USD Fusion midsize S 21970 SE 23935 S Hybrid 26270 Hybrid SE 27280 Titanium 30600 Hybrid Titanium 32600 Fusion Energi SE 34700 Fusion Energi Titanium 36500. (Ford, 2014) Promotion: Ford uses traditional advertising for the promotion of its brands. Company promotes its products through advertising brand details and specification of products, cooperate and dealer-level advertising. Ford Motors has standardized (Ethnocentric) promotion strategy for its products. Place: Ford vehicles are available at all Ford’s dealership from corner to corner in USA. Cars are available in all colors and customized options. Ford uses geocentric approach for the distribution of its cars in USA. People: For audience Company uses polycentric approach according to the culture of the country. Target audience of Ford Fusion is people from the age of 25-60 years who want luxury drive and love the comfort drive. Ford Fusion line targets business world, proud Ford, upper class, eco-minded, and middle class. Process: Ford Fusion line has a variety of products with different features. Each product process is different and company uses polycentric approach in its processes. Physical Environment: Ford Fusion cars are manufactured according to the physical environment of the United States of America. Cars are fuel efficient, environmentally stable and had high safety features. Ford follows the polycentric approach for meeting the physical environment’s needs. Conclusion and Recommendations Cherry automobile marketing mix and its presence in other countries is discussed in this marketing mix report. Ford Fusion line is the leading selling line in the United States of America that has been discussed along with one of the most selling brands of Cherry Automobile, Cherry QQ3. Cherry QQ3 needs to introduce in USA by considering the trend, culture and the specific characteristics of the market of USA. Therefore, some recommendations have been presented that could be helpful in making Cherry QQ3 successful in USA market. Product quality, safety, and emission conditions of the cars in USA are extraordinarily high. Cherry has to overcome with these restrictions by adding safety, enhancing the quality and making the environment friendly. Cars must be fuel-efficient and has to be of satisfactory quality so they can pass the safety tests. Company has to follow the polycentric approach in order to better meet the requirements of USA car market. Company should follow the adaption strategy in USA market because additional features in product according to the USA needs will lead Cherry towards high price. Company should use low pricing strategy as compare to its competitors, but the price difference should not be too high. Otherwise, people will consider the brand less worthy. The process of car should be according to the demands of USA market and in this regard, Cherry should follow the polycentric approach to meet the USA cars’ standards. There is a significant difference between USA and China culture. Therefore, Cherry cannot apply the same promotional strategies in USA car market that have been successful in China. Cherry has to follow the adaptive promotional strategy. Cherry should make joint venture or should make agreements with local dealers in order to sell its products in USA. Cherry should use geocentric approach for distribution of its product. Cherry target market should not be specific, and the company should target all those people who seek for luxury, comfort, and fashion. Cherry should target people from the age of 25-60 years and all classes from lower middle to upper-upper class. Company should use ethnocentric strategy that will help the company in the enhancement of profit. Americans are more concerned about environmental sustainability and require more fuel efficient and safe cars. USA is a competitive market and safety regulations are high. Therefore, Cherry must offer eco-friendly and fuel-efficient cars to sustain and be successful in USA market. Company must follow the polycentric approach. References Al-Haas. (2014). Ford Fusion blends brains, beauty. Philly.com. Available from http://articles.philly.com/2014-04-06/news/48912121_1_Ford-Fusion-hybrid-gas-engine-car-enthusiasts [Accessed April 13, 2014] Bloomberg Business week. (2014). Company Overview of Chery Automobile Co., Ltd. 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