Renault Sports Market in Australia - Case Study Example

NAME : XXXXXX TUTOR : XXXXXX COURSE : XXXXXX TITLE : RENAULT SPORT MARKET IN AUSTRALIA INSTITUTION : XXXXXX @2009 Table of Contents Page Table of Contents ii 1.0 Executive Summary 1 2.0 Background Information 1 2.1 Mission Statement 3 2.2 Marketing Objectives 3 3.0 SWOT Analysis (Hill & Westbrook 1998). 4 3.1 Company strength in relation to the new Renault car models: Clio Renault Sport and Megane Renault 4 3.2 Company weaknesses in relation to the new products. 4 3.3 Opportunities within the industry 5 3.4 Potential threats within the industry 5 3.5 Competitive Situation Analysis (Jastak 2002) 6 4.0 Proposed Marketing Solutions 8 4.1 Positioning 8 4.2 Channel Strategy (Distribution) 8 4.3 Pricing Strategy 9 4.4 Promotional Strategy 10 4.5 Product/Service strategy 11 5.0 Critical Analysis 12 6.0 Recommendations 13 7.0 Conclusion 14 8.0 References 15 Appendix 1 18 Appendix 2 Summary Points 18 1.0 Executive Summary Australia is one of the most robust countries in car manufacturing industry both for domestic and international use. Its car industry is largely characterized by manufacturing of large sized cabin vehicles that are uniquely tied to its industry. In the recent past owing to the recent global recession that plagued the entire globe in 2008, the industry was negatively impacted so much that there was a remarkable downturn in automotive sales (Guise 2001). This recession led to a number of cut downs worst of which was the official closure of Mitsubishi Motors Australia Plant that is in Adelaide in February 2008. The car industry market share in Australia is dominated by Toyota which by March 2009, had sold 16 608 vehicles which represented 22 percent of the market share. Other manufacturers that are active in the industry in Australia include Holden, Ford and Renault. For this paper, the attention is given to Renault Sport which is narrowed down to two of its car models: Clio Renault Sport and Megane Renault. These two models are magnificent creations of French Automaker Renault which have taken the car industry by storm in their complexity, class and efficiency as automobiles. This industry is analyzed and studied more keenly to assess its strength in the market and establish its comparative advantage in relation to other companies in the car industry in Australia (Nahum 2004). 2.0 Background Information This assignment is based on Renault Australia which is a firm that specializes in the production of cars, vans, tractors, buses and trucks. Its association and alliance with Nissan, has made Renault currently the fourth largest automaker in the world. The company is large and owns a number of corporations in the world and in Australia. A number of such corporations are the Korean Renault Samsung Motors and the Romanian Automobile Dacia. Renault boasts of superb revolutionary designs, motor racing and security technologies and its most recent car model in the market now is the Renault Clio. As a strategy of its expansion to permeate the whole world (major economies), Renault came to Australia under the name Renault Australia and established its base as an assembling and importing company for automotives. This Renault arm was set up in Heidelberg in Melbourne. This plant was mainly for assembling models like R8, R10, R12, R16, R15 and R17. The company further diversified its products to include Peugeots and also assembled Ford Cortina station wagons which was done under a contract with Ford. Renault continued forming partnership with big companies around the world to consolidate its market share and ensure product differentiation and amass enviable competitive advantage over most of its competitors. In 1979, it partnered with AMC and eventually bought it when AMC went bankrupt with the fall of its 4x4 truck and XJ Cherokee models which were not doing well in the market at the time. Renault bailed out AMC from this threat of bankruptcy at the price of owning over 47.5 percent of AMC’s interest. This acquisition was quickly followed by Renault replacing most of AMC’s executives with its (Renault’s) own personnel thereby pontificating itself as the major shareholder in AMC (Kotler, Brown, Adam & Armstrong 2007). 2.1 Mission Statement To be an effective producer and assembler of automobiles of top quality and artistic elegance to our consumers that are both authentic and cost-effective. 2.2 Marketing Objectives 1. The target market for our products are all the households, industries, firm owners who use small automobiles for their individual, business or recreational purposes. 2. Objectives for the four marketing strategies (Malamed 2007). i. Our new product will be designed such that its effectiveness, safety in working with and durability are authentically guaranteed in line with consumer expectations and satisfaction. ii. The distribution channels through which the product will reach the target market is to be effective and protective of the consumer by safeguarding him from extortion and exploitation by middle men in which case direct contact with the consumer as much as possible is the favoured channel of distribution. iii. The pricing of the product is to be conscious of the prevailing economic challenges and in should be tandem with market forces so much so as to be the most affordable in the niche market while still realizing company’s worth in investment in the product for profitability. iv. Extensive promotion to popularize the new product and assert its elegance and effectiveness in the small appliances industry is to be conducted through electronic and print media while also instituting promotional activities consistent with the firm’s Corporate Social Responsibility. 3.0 SWOT Analysis (Hill & Westbrook 1998). 3.1 Company strength in relation to the new Renault car models: Clio Renault Sport and Megane Renault i. Renault Australia has very experienced engineers capable of coming up with innovations that are unique, elegant and cost-effective. ii. The company’s debt-to-equity ratio is low enough to warrant capital investment of this nature. iii. The company enjoys unyielding popularity in the market and given that the new models. After concept and prototype testing, it has been shown that the new products are very appealing to potential buyers. iv. Renault Australia has strong partnership polices that tie it to most successful automotive industries around the world and this helps boost its business and brand name. 3.2 Company weaknesses in relation to the new products. i. Its high credit rating may be detrimental in its marketing of the new product. ii. The involvement of many suppliers to get raw materials rather than trusted supplier posts a weakness suscepting it to strict bargaining. iii. Its specialty only in one product (automobiles) does not safeguard it should the product’s sale decline in its niche market. iv. The sophistication with which the company designs and makes its new models unavoidably forces retail prices of its products to increase appreciably to a level that is at times considered exorbitant thereby negatively impacting its business (Kotler, Brown, Adam & Armstrong 2007). 3.3 Opportunities within the industry i. There is increased innovation within the industry to meet consumer needs. ii. The ready market available for automotive products offers opportunities for expansion. iii. The market is highly differentiated to accommodate a myriad of models for individual and corporate use therefore providing great opportunities for the new product. iv. There has been a general increase in the general income for Australian mid and high income earners which means that more people are willing to spare a little more money for elegance and recreational car models and automobile appliances (Hawkins 2001). 3.4 Potential threats within the industry i. There is a threat of substitute products in the industry since there are increased innovations with technological advancements which are bound to bring a lot of such innovations in the market as regards vehicle security and elegance. ii. Given the robustness of the automobile market, there is the likelihood of having more new entrants as competitors who pose a threat in the industry. These competitors have a wide variety of consumer needs that they may predicate their entrance on and still make a kill. Such consumer preferences as complexity, cost-effective and style of the vehicles desired are valid consumer desires that any aspiring companies can base on for their entry (Frank & Howard 2006). iii. The absence of regulative measures that guide the level of innovation and direction poses a threat in the industry as it makes it prone to irregularities. iv. The industry of automotives in Australia has suffered a number of economical hardships in the last decade that are not necessarily related to the global recession. The stability of the industry in Australia is not as promising as it is in other economies and this possess a threat in dissuading investor confidence in investing in the industry. 3.5 Competitive Situation Analysis (Jastak 2002) 3.5.1 Renault Australia competitive environment analysis This analysis is done in accordance with Porter’s Five Forces model of competitive forces (Douglas & Janis 2007). i. There is a significant threat of substitute products in the market since the automotive industry is characterized by very high levels of development and innovations especially given the high technological advancement of the day. This is the area that Renault Australia receives stiffest competition from such companies as Toyota which sold 16 608 vehicles in the last fiscal year, a representation of 22 percent of the market share; Holden which sold 9 188 vehicles in the same period, a representation of 12.1 percent of the market share; Ford which sold 7 570 vehicles which was a 10 percent of the market share (see appendix 1 for more top brands and Models in Australia motor industry). ii. Given the robust and extensive industry that is the industry of automobiles; many more competitors are bound to spring up at any time with automobiles that are specific to consumer needs as regards elegance, class and complexity. However, given the assertion and general establishment Renault Australia already has made in its niche market, the threat of entry of new competitors does not overtly threaten the company as does existing competitors. iii. Given that Renault Australia is well established and highly regarded in the automobiles market, (especially with the introduction of its two newest models, Clio Renault Sport and Megane Renault) the intensity of competitive rivalry does not directly cause a threat to its business as it does for new entrants. This aspect of the competitive environment of the company’s niche market therefore does not single-handedly worry the company (Boyd & Kirkwood 2006). iv. Since the target market for the company incorporates individuals as well as corporations and companies, the bargaining power of consumers is a big factor that determines its competitive environment as does any other competitive factor since it determines its pricing strategy and the profit realizable from the sales (Kotler, Brown, Adam & Armstrong 2007). v. The bargaining influence of providers does not openly influence the company’s business since the company currently enjoys excellent relationship with its suppliers. Since it has to increase its raw materials for the new products in its assembling industry by taking on more suppliers, it is expected that their bargaining power will have a bearing to the business (Georgia State University 1993). 4.0 Proposed Marketing Solutions 4.1 Positioning In addressing the prevalence of Renault Australia in the automotive industry in Australia, its positioning has to be such that it is strategic as regards product differentiation and identification of its company brand. The new models that Renault Australia is trading in are of great elegance and novel design and therefore they are what the company needs to remain afloat in its niche market (Kotler, Brown, Adam & Armstrong 2007). They are vehicles whose power, security and consumption are superb. It is therefore left upon the company to get a marketing strategy that marches this elegance in placing the products at a higher position in the market. Positioning deals with product rating in the market by consumers. Promotional and developmental strategies are all to be geared towards popularizing the new models in the market so that their capacity in power and elegance is known by consumers. This is in turn is going to lead to improvement of the product’s position in the market. Having the target consumers at all times being helped to envision the new product by whatever devices and means that may be employed is the strategy required to address the issue of positioning of the product (Gertner 1997). 4.2 Channel Strategy (Distribution) The device of distribution channels that are mindful of the company’s shareholders is the strategy that is most likeable. This strategy should be one that makes the retail price by which the new models are sold to the consumers affordable and as low as possible but still ones that will realize profitability for the business. The cost the models eventually have is dependent on the distribution channels that the company devices. To minimize costs, the distribution channel that Renault Australia should device is one that minimizes the effect of middlemen since they are the ones who extort prices by their intervention (Goldman & Richard 2005). Partnership with warehouses for mutual business benefit and using its own convenience stores and warehouses as part of its distribution channels and retail outlets are examples of the strategies that the company could use to minimize on the middlemen costs (South Carolina 2002). 4.3 Pricing Strategy There are a myriad of elements that affect the price that Renault Australia can sell its model cars. Some of these factors concern currency used in Australia which makes it expensive. Another factor is that Renault is only supposed to sell Sports models predominantly to its consumers; and it can only import models which are fully optioned to build Renault Sports’ position. These limitations bring challenges on the pricing strategy to be used to ensure profitability of the company (Kotler, Brown, Adam & Armstrong 2007). The company therefore should consider these restrictions especially those that require that it sells models of one make only (sports cars) so that it readjusts its mechanisms of response should the model have market competition or should it not receive market acceptance or consistency in its acceptance. The best pricing strategy is one that is all inclusive in its consideration incorporating such factors as corporate social responsibility, shareholder interest, company profitability, market forces, competitor pricing and prevailing economic trends (Ronald, Burke & Cary 2008). When these factors are well balanced such that there is no one factor that is overlooked or undermined, then the pricing strategy employed will have achieved its ultimate objective of helping the company arrive at car model prices that are all considerate to the consumer and realize profit for the stakeholders and the company (Kotler, Brown, Adam & Armstrong 2007). 4.4 Promotional Strategy There is a huge level of success of the marketing plan that can be used by Renault Australia that is entirely tied to the promotional strategy the company devices. These preceding strategies of distribution channels, pricing and marketing are all dependent on how well the products being traded in are well communicated to the consumers and how well the consumers receive them (Kotler, Brown, Adam & Armstrong 2007). The promotional strategy that is therefore needed is one that addresses all the consumer needs and articulately sticks to the company objectives. The approaches that can be used to realize this market share and prevalence have to be rigorous media and press releases that communicate the capacity of the new models that Renault is putting on the market. Their safety, security and power capacities have to be well articulated through say television adverts. In line with this, the company has to stress its objectives of manufacturing cars that are of high quality and special elegance. Its commitment to manufacturing products that are consumer specific and ones that are skewed towards realizing consumer satisfaction should also be well communicated through the adverts and press release statements. Another strategy that is at times overlooked in promotional endeavours is the commitment to corporate social responsibility. Brand names and company image is greatly improved when the society can see that the corporation they buy their products is giving back to them in kind. It is therefore imperative that Renault Australia focuses on societal development with almost the same zest as its profitability. Such social responsibility concerns can be involving itself say youth initiatives and organizations that are involved in social courses like women empowerment and addressing the needs of the minority or the marginalized groups in the society. 4.5 Product/Service strategy 1. Strategies for each element of the marketing mix Product i. The function of the new product will be such that it meets consumer needs and satisfies them with its convenience and effectiveness. iii. To further consolidate the product’s likeability in the market, product services in warranty will be provided. Price i. While keeping in mind profit margins and the probable pricing response of competitors, pricing strategy will skew towards use of discounts to realize this. ii. Financing for subsequent re-investment in the new product will be among the determining factors that direct pricing decisions for the new product. iii. To further diversify the scope of the new product’s likeability in the market with relation to its pricing element, leasing options will be availed for bulk acquisition of the new product and as an encouragement for consumer loyalty. Promotion i. Advertising to popularize the new product in addition to highlighting educating consumers on the advantages of using the product within the market will be done. ii. There will be deliberate efforts done in public relations to foster acceptance and usage of the new product within the market. iii. Given the high costs of promotion, break-even analysis to determine the value of consumer in order to determine whether additional customers are worth the cost of acquiring them will be done before engaging in these promotional activities. 5.0 Critical Analysis There are a number of challenges that are associated with each of the marketing mix discussed herein. For positioning, the advantage of the strategy proposed is that it helps to popularize the product in the market and thereby increase its position in the market. With this increase in acceptance of the product in the market, it is likely that the volume of sales will increase. Its main disadvantage is that it is costly to popularize new products given the promotional activities that are necessary (Suresh & Anil 2002). The channels strategy has the advantage of minimizing prices at the retail level and its main disadvantage is that it is not easy (or even possible) to entirely do without middlemen at times since they help in the distribution channel by bringing new ideas and strategies for marketing. The advantage of the promotional strategy employed by this plan is that it makes the consumers aware of the product in the market while at the same time furthering company goals and objectives (Bamforth 2000). The one disadvantage that sticks out is the economic implications that are connected with the media releases and advertisements. Product/service strategy helps to detail the capacity the product and services offered by the company has on the market thereby making it easier to know how well the new product will fair in the market. Its disadvantage is also tied to the financial implication that come with the strategy implementation (Berkman 2004). 6.0 Recommendations Looking at three years to come, there are a number of recommendations that Renault Australia should consider in its marketing in the view of remaining economically viable in the market: 1. It should diversify its products from predominantly majoring on Sports cars 2. It should consider differentiating its products so that it is in a better competitive position with regards to its competitors who have large market shares (Richard 2006,). 3. By the time it is three years in the market, Renault Australia should major on the making a brand name that is recognizable and respected due to its elegance, effectiveness and comfort. 7.0 Conclusion For Renault Sport Market in Australia, the choice trade goods of the Clio Renault Sport and Megane Renault are promising. Despite the challenge of market dominance by other firms, the opportunities presented in the market are characterized by potential expansion and ready consumers who are willing to spend more on vehicle and tertiary goods. In this regard, the firm has to do some adjustments in diversification of its goods to incorporate a wider variety of cars in its market. It is a potential risk banking heavily on one type of product (Sports car) since it is an industry that is greatly affected by consumer preferences. The economic implications that may arise should consumer preferences shift to other tastes in the automobile industry are too dear to encourage the company to specialize in one variety of cars (Kotler, Brown, Adam, & Armstrong 2007). 8.0 References Bamforth, L 2000, World of trust in business, Management. Berkman, R 2004, Find It Fast: Uncover Expert Information, Harper Perennial, New York. Boyd, C & Kirkwood, J 2006, Porter's 5-Forces Model, Thomson Gale, New York. Douglas, H and Janis, KZ 2007, Contemporary Investments: Security and Portfolio Analysis, W. W. Norton Publishers, London. Frank, WH & Howard, F 2006, New York Supplement. University of Californian: West Publishing Company. Gertner, R 1997, Federal Rules Decisions. New Jersey: West Publishing Company Georgia State University 1993, Inventory of overseas Manufacturers in the United States Georgia: Georgia State University Press. Goldman, R and Richard, PG 2005, Innovation Happens Elsewhere as Business Strategy, Morgan Kaufmann, New York. Guise, R 2001, Sustainable Settlements a Guide for business Planners, Swiss publisher, Bristol. Hill, T & Westbrook, R 1998, SWOT Analysis: It is Time for a Product Recall, Long Range Planning,vol.30, no.1, pp. 46-52. Hawkins, J 2001, Trade: The performance management, Journal of business management. Jastak, JT 2002, Sustainability in business performance, WB Saunders Co, Toronto. Jobson, K 1992, Australian Companies, University of Michigan: Riddell Information Services. Kotler, P, Brown, L, Adam, S and Armstrong, G 2007, Marketing, 7th ed., Pearson Education Australia. Malamed, SF 2000, Handbook in business, Mosby, Toronto. Nahum, N 2004, Good Strategies in business, Schocken, New York. Richard, L 2006, Corporate Strategy, Prentice Hall, USA. Ronald, J, Burke, P and Cary, L 2008, The Peak Performing Organization, Routledge, U.K. South Carolina 2002, Reports and Resolutions of the General Assembly of the State of South Carolina. University of Michigan, State Printer. Suresh, S and Anil, D 2002, Research Methodology, Ess, New Delhi. Appendix 1 Top Australian Brands March 2009 Brand - Sales Top Australian Vehicles March 2009 Vehicle - Sales Toyota - 16,608 Holden - 9188 Ford - 7570 Mazda - 6116 Hyundai - 4907 Mitsubishi - 4694 Nissan - 4396 Subaru - 3415 Honda - 3349 Volkswagen - 2522 Holden Commodore - 3544 Toyota HiLux - 3306 Toyota Corolla - 3007 Mazda 3 - 2801 Ford Falcon - 1990 Toyota Yaris - 1741 Hyundai Getz - 1597 Nissan Navara - 1562 Toyota Camry - 1515 Hyundai i30 - 1503 Appendix 2 Summary Points Executive summary Renault Sports Market in Australia is robust and promising given the thriving motor industry The industry however was negatively impacted by the recent global recession leading to the closure of Mitsubishi Motors Australia Plant The trade products that Renault Australia wants to specialize on in the market are Clio Renault Sport and Megane Renault Background information Renault Australia is an affiliate of French Renault which is a large corporation that owns a number of other automobile firms in the world like Korean Renault Samsung Motors and the Romanian Automobile Dacia The company stabilizes its global market prevalence and share by acquiring shares and owning automobile corporations like AMC Mission Statement To be an effective producer and assembler of automobiles of top quality and artistic elegance to our consumers that are both authentic and cost-effective. Marketing Objectives Product are designed for elegance and style Pricing is done to be consumer considerate while at the same time so as to realize profitability for shareholders and business Distribution channel is to minimize middlemen influence who bloat retail prices Promotional activities are to be extensive to ensure new models are well received in the market SWOT Analysis Strengths for the firm Renault Australia has experienced engineers capable of great up with innovations of elegant Its debt-to-equity ratio is low enough to warrant capital investment of this nature. The company is popular in its market Renault Australia partners with other like minded companies to strengthen its market strength Weaknesses Its high credit rating may be detrimental in its marketing of the new product. Firm involves many suppliers for its raw materials hence suscepted to supplier bargaining Specializing in one product is risky in the event of product decline in the market. Product sophistication makes the models expensive Opportunities Ready market for automobile products Consumer needs in the market are many and varied giving room for investment and expansion general income for Australians’ annual income makes them ready to set aside extra money for recreation and elegance in cars Threats Substitute products in the industry from competitors New entrants Lack of particulate regulation in the industry Economic instability Proposed Marketing Solution Positioning The new models have to be widely publicized for its positional rating among consumers increases Channel Distribution Minimizes involvement of middlemen who bloat retail prices Partnership with retailers and warehouses to instead replace agents Pricing Strategy Puts into consideration all stakeholders’ interests from the business, consumers, society, environment and management Should realize profit for the company Promotional Strategy Publicize company brands and objectives to the consumers Sensitize the society of the firm’s corporate social responsibility Improve the company’s image and brand Product/Service Strategy To realize product and services which are elegant, safe and cost-effective Give services that are professional and up to the standard Recommendations Diversification of its products from predominantly majoring on Sports cars Differentiation of its products so that it is in a better competitive position with regards to its competitors who have large market shares By the time it is three years in the market, Renault Australia should major on the making a brand name that is recognizable and respected due to its elegance, effectiveness and comfort. Conclusion Renault Sport Market in Australia is robust and promising There is stiff competition for Renault and it has to device good marketing strategies to have the upper hand Read More