Holden Barina Product Line in China - Case Study Example

Holden Barina Product Line in China Name: Institution: EXECUTIVE SUMMARY The detailed report below provides the viability of considering China as a new market target for Holden Barina product line. It covers comprehensive background information concerning the product line, the company, and the new market. The analysis of the factors that are likely to affect the sales of the Holden Barina product line in China such as political, economical, legal, technological, social and environmental issues also provide crucial information about the viability of the plan. Through market analysis, various estimates of market size, market share and even gap analysis are done in order to evaluate the new market target. It is through this report that the importance of coming up with a proper marketing plan is realised. Considerations to what is expected and the factors are likely to hinder the sales in a new market are realised too. Estimation of market size and gap are also done to determine the viability of the plan. The report concludes after putting considerations into various issues surrounding marketing plan and marketing mix. Through these considerations, it is found that the new market target is favourable for the product line. Table of Contents 1.0 INTRODUCTION 4 1.1Background Information.................................................................................................4 1.2 Report Objective 5 1.3 New Car Market target 4 2.0 HOLDEN BARINA MARKET ANALYSIS 5 2.1 Market target analysis....................................................................................................6 2.2 GM Holden internal and external analysis 9 3.0 MARKETING PLAN..............................................................................................................11 3.1 Estimated market size and gap analysis.......................................................................11 3.2 Estimated market sales and market share....................................................................12 3.3 Market entry mode strategy and analysis.....................................................................12 4.0 MARKETING MIX.................................................................................................................14 4.1 Price.............................................................................................................................14 4.2 Promotion.....................................................................................................................14 4.3 Product strategy and brand...........................................................................................15 4.4 Distribution..................................................................................................................15 4.5 Timeframe....................................................................................................................16 5.0 CONCLUSION........................................................................................................................16 6.0 REFERENCES 18 1.0 INTRODUCTION 1.1 Background Information Holden Barina, a product line of GM Holden is one of the outstanding products in the automobile industries. GM Holden currently operates majorly in Australia. For the company, Holden Barina has remained a significant product line since 1856 when the company first launched the sale of cars of this product line. Though at this time the company operated as Holden, it was acquired by General Motors of US and in 1931 to become GM Holden. Holden Barina has been a successful product line for GM Holden for a long time with various generations of vehicles. Up to this year, the company has had six generations of cars with improvements on the various model series, with the current series model being of Chevrolet series. The company has registered successful sales of this product line though the economic stability of Australia has been of great effect on the sales of this product line. Currently, the company is majorly based in Australia and for success; the company considers having China as its new Market. As mentioned earlier, Holden Barina is a product line of GM Holden. GM Holden is an automobile vehicle industry in Australia, headquartered in Port Melbourne though the manufacturing plant is located in Elizabeth in Victoria. Alongside, Holden Barina, the company also manufactures several product lines such as the Sportwagon, Commodore, Sedans, Caprice, Hatch, and Ute among many others. These clearly show the contribution that this company makes to the host country. The company has brought many benefits to General Motors since it begun its operation as a subsidiary of General Motors. GM Holden has even managed to win contracts with Chinese counterpart to manufacture its models through Chinese brands. This therefore indicates how successful this company has been. However, the economic meltdown in Australia has been an obstacle to the success of this company especially for the sales of new cars. This has therefore affected the operations of the company in Australia and the Asia Pacific. 1.2 Report Objective This report thus aims at providing an analysis of China as an appropriate new market for the sale of Holden Barina product line. This is an important chance of GM Holden and Barina in specific, to find a new market that can enable the progress of the company. This analysis report thus aims at providing a comprehensive analysis of China as the new market target for Holden Barina product line. The report also aims at determining the various factors within the market that are likely to enhance or hinder marketing the product line in China. This analysis report therefore is aimed at helping Holden Barina determine the viability of the new market. 1.3 New car market target The new car market for Holden Barina product line is China. China is currently considered as the auto goldmine where automobile industries are making great progress. China has six major cities that are majorly covered by motor vehicle industries and market (Huang & Techakanjanakit, 2012, p1). This provides Holden Barina, which is a foreign brand in this country with a marketing opportunity that is likely to enhance the sales of this product line. 2.0 HOLDEN BARINA MARKET ANALYSIS In coming up with market analysis, it is crucial to look at the international and domestic marketing environment. This analysis thus provides the analysis on the political, economical, technological, legal, social and environmental aspects of the new market. These aspects are likely to affect suitability of China as the market target for Holden Barina product line. 2.1 Market Target Analysis Political aspects Political analysis is a significant part of new market target analysis. This is especially significant to large investors since political calamities such as riots and violence in general are destructions to investments and security. Therefore, an analysis of the political aspects of the target, China, in this scenario is of great significance. China has a stable political system. This is one of the supporting reasons for the development of various major cities. The structure of the government of China is in such as way that most of the cities are controlled by the centralised administration municipality headed by a major (Amighini, 2012, p330). Currently, China is the most politically stable country in the whole world. This is the reason behind having much development going on in China. This therefore creates a favourable atmosphere for marketing Holden Barina brands in China. Technological aspects Automobile industry is a factor of technological advancement. Various buyers have constantly placed most manufacturing industries on finding ways of revolving the vehicle industry. This is because the industries have been in constant quest to satisfy various buyers’ preferences with considerations on the contributions their inventions have on the environment. Inventions are important aspects for consideration in customer satisfaction. Technologically, China is considered up to bit. This is because China has most of the finest engineers compared to other developed countries (Deng & Ma, 2010, p818). Therefore, technologically the target market embraces technological advancements. GM Holden has also been over the years introduced various advancement especially concerning Holden Barina product line. The fact that the company has gone under six generational branding of Holden Barina is an indication of how the company takes technological advancements seriously. Therefore, the technological aspects in China provide Holden Barina with a good chance to offer its product line. Legal aspects The legal aspects of a country or market target in general are crucial to the success of marketing in that country. The laws imposed by various authorities are crucial in determining the possibility of smooth operation within the chosen market (Huang & Techakanjanakit, 2012, p1). There are also legal procedures that must be followed before attaining the rights to do business in certain countries. It is important to ensure that these laws are favourable. These laws can also play an important role in determining the market entry strategy. In China, there are aspects of the law that currently are likely to affect the success entry of Holden Barina to China (Amighini, 2012, p335). This is because the Chinese government has introduced legislations that are likely to intimidate foreign manufacturers and favour domestic manufacturers. The laws introduced by 2011 are forcing the foreign manufacturers to start manufacturing local brands. This is because the government acknowledges that most of the Chinese prefer foreign brands than local brands. This, in the future, is likely to hinder the success of Holden Barina product line sales in China. Economical aspects The economic growth of a country is always a measure of industrial developments, political stability and developments of infrastructures. The economic stability of a country contributes to the success of the investments in that country (Calkins, 2009, p160). This claim is much evident in the scenario with Australian motor industries, which have been highly affected by the economic meltdown of the country. Due to this economic meltdown, various industries have be registering reduction in sales especially the sales of new cars. It is due to such factors that Holden Barina is considering new markets. China, as a target for Holden Barina, has a stable economic growth. Currently, China is the country with the highest economic growth beating the United States (Wang, et al, 2011, p1). This is due to large number of industries in this country and political stability. Social aspects The social perspective of a given country plays an important role in determining the suitability of that country as a target market for a product especially the automobile products. This is because the social lives of the people defined their preferences. Preference to personal cars of public means of transport is also a factor of social consideration. With the high demand of cars especially the light cars and the high population of China, there is a high likelihood of success of companies that offer foreign brands of vehicles or cars. One characteristic of Chinese people is that they highly consider light cars and variety of brands (Calkins, 2009, p161). They also prefer quality cars and cheap prices. Therefore, these are factors to consider in the analysis of the market. Because Chinese people like using cars as the means of transport, Holden Barina, a product line for light cars, is highly likely to make great sales in China. Therefore, the social factors are favourable for Holden Barina. Environmental factors Various environmental issues must be considered for a company to operate in a given country or for the company to prefer operations in the market. Considerations must be given to the environmental aspects of the targeted country (Schippert, 2012, p410). China for example, have been on serious campaign to reduce vehicular emissions from the vehicles. In 2010, the Chinese government begun a campaign initiative aimed at convincing Chinese people to turn to cycling instead of driving (Calkins, 2009, p159). This initiative is planned to go for five years. Such kinds of initiatives have negative effect on companies planning to have China as their market destination for cars. Therefore, Holden Barina is likely to be challenged by such initiatives. However, according to analysts, the Chinese demand for cars is still high since approximately five out of a thousand Chinese own cars. 2.2 GM Holden Internal and external analysis GM Holden has been majorly operating in Australia. Due to the various challenges that the company has experienced in the past, it is highly convinced that it can handle challenges in the new market. Holden Barina as a product line for GM Holden has also gone through these difficulties and thus, can survive any new market. Since the company has been operating solely in Australia, it understands internal operations and this has managed to help it make a good image. In general, the study of the Strengths, Weaknesses, Opportunities and Threats of this company, give a clear direction on how the company has been operating and is likely to operate. Strengths One of the strengths for Holden Barina is its brand quality. The Brand series released by Holden Barina are known to be of quality. This is evident on how the company has been on constant improvement of generational brands. Due to this and the fact that Chinese citizens prefer foreign brands, the company is likely to make a success in the new market. Holden Barina has a strong market share in the host country. Due to this, GM has managed to strike deals with companies such as the GM Chinese counterpart. This indicates how strong GM Holden is. This is likely to help the company build a strong market. The continuous release for light cars in the new market and even in the local market is also strength for this product line. Opportunities Holden Barina has several opportunities in the new market and even in its future operations that are likely to help it ensure successful sales if it properly utilized. Prospects of coming up with more energy-serving cars. The various brand series of Holden Barina has been undergoing serious transformations into environmentally friendly vehicles. Therefore, continuous utilization of this concept is likely to contribute to the success of the company. Various countries such as China are considering improving vehicle body design. This is thus an opportunity that if properly considered, can contribute to the success of the sales of the product line. Holden Barina product line has an opportunity of using technology such as producing vehicles using rechargeable capacitance as sources of energy. Weaknesses These internal factors negatively affect the operations of the company. There is a decline in the financial performance of Holden Barina due to the decline in the market share. Threats Holden Barina, currently lack experience concerning foreign markets since it has been majorly operating in Australia. This is likely to affect its sales in China Continuous pressure to produce more environmentally friendly cars at cheap prices is also a threat to the success of this company in the future. 3.0 MARKETING PLAN 3.1 Estimated market size and gap analysis Analysis of the estimated market size and available market gap is crucial in coming up with the budget for the period specified. Taking considerations to the Chinese market, there are several estimates that can be made. Statistics indicate that about five in a thousand people in China own a car. It is estimated that car sales in China is likely to grow from 5.5 million cars in 2007 by one million yearly until 2015. It is also expected that the number of families potentially able to afford a car be estimated to move from ten million in 2005 to seventy-five million in 2015. In terms of the company’s operations in China, the market is not currently crowded. As per the records of 2009, China had fifty-two domestic and foreign automobile industries. This made China the top carmaker in the whole world. However, the current market is controlled by the foreign carmakers since the foreign carmakers comprise of 85% of the car market. This therefore indicates the foreign companies dominate the market. This therefore, provides an advantage to Holden Barina since it presents a new brand. It is important to note that the gap narrows down since most of the foreign markets are coming to the market and the Chinese government is struggling to uplift local automobile makers. The supply of cars is therefore still low. This is also accelerated by the fact that the population also is increasing. Used cars are also gaining popularity in this market. This is likely to contribute in increase in sales for the company. Due to the available potential in the market, the gap available still provides ample room for new entries such as Holden Barina. For this specific product line, the gap market size is large since most buyers prefer light cars and cheaper brands, which are what Holden Barina product line majors on. 3.2 Estimated market sales and market share An estimate of the market sales is important in determining the appropriate market. After choosing a new market target, it is important to have an approximate expectation from the market. For Holden Barina product line sale, it estimates a total annul sale of 110,209 cars in the first year 2014 in the market. This estimation is for the sale of new cars only within the six major cities in China. This expected sale represents a 17.4% market share. The company expects to sell various series of the product line. This sale is expected to rise in the coming years since the company shall have developed a strong marketing strategy. The company estimates that the sale of the sixth generational series such as its Chevrolet is likely to contribute greatly to the total sales with an approximation of having 76, 207 units sold. It is though, important to note that this is high market estimation. However, due to the various records set by other foreign companies such as Shanghai GM, the achievements of the sales are possible (Swenson, 2011, p1). 3.3 Market entry mode analysis and strategies Depending on the size of a company, the mode of entry into a new market varies from one company to another company. The choice of the market entry strategy should be that which is likely to enhance the smooth operations of the company’s product without several procedures. However, a company can develop two entry strategies in which one becomes the immediate entry strategy and the next one is used during the second period of entry after establishing a proper ground within the chosen market. For the first entry for 2014-2015, the company plans to use wholly owned foreign investment as its entry into the new market. This is a sensible option for Holden Barina because through this, Holden Barina can get proper income deliveries in time. This is also a viable first entry process, because it help builds a relationship with the local suppliers. The corporation between foreign dealers and the local companies can ensure stability of the company within the new market at the initial stages. This is a preferred choice for the first entry since Holden Barina has a strong market share in Australia. This will be the first tier to dealers and distributors. However, for the second and subsequent tiers, it is important to consider accessing the second or third tier distributors since this has the advantage of little interference by the central government. Another advantage of this is that this sector is driven by free competition, which is only determined by, quality and pricing. These dealers enable the company sell its products in a secure market share. However, for the second entry 2016-2017, the company needs to consider entering into legal agreements with the central government in order to determine its operational considerations (Wang, 2011, p100). The company also needs to stipulate its operational timeframe and this call for an entry strategy that is based on timeframe. Therefore, for the second entry, the company can adopt franchising as the new market entry strategy. This is the market entry strategy where companies enter into signing legal agreements with the local government concerning how long they will be operating within the market. Therefore, the presence of lawyers is emphasized here since agreements are binding and can really affect the operation of the company within the new market if overlooked. On the other hand, the company needs to adopt franchising as the second entry strategy since at this time, the company shall have had a taste of the new market and thus able to plan for stipulated timeframe. 4.0 MARKETING MIX Marketing mix discusses the relevant factors that greatly affect the operation of Holden Barina in the new market. Various factors must be determined in order to ensure successful operation in the Chinese market. These factors include the estimated price of the brands offered, the mode of promotion in order to ensure sensitization and awareness creation, product strategy, distribution and brand. 4.1 Price Most of the Chinese buyers are always sensitive about the price of vehicles. During the Beijing motor show in 2012, it was observed that most buyers spent time looking at light vehicles of new brands and cheap. The company plans to sell the most expensive Holden Barina product line at $23,000. However, the cheapest will go for $12,000. Although this will translate to low gross profits, the revenues by the central government are minimal thus ensuring appropriate profit by the company. These prices are relative and close to those offered by other foreign investors within the same market. 4.2 Promotion Promotion is an important aspect of international marketing mix. This is because this is the most effective way to ensure awareness creation to the market (Shuo & Guo-Shengl, 2011, p1). One of the most effective ways of promotion is to introduce after sale services such as servicing of the cars for a period for no extra cost. This will attract most of the buyers since they would prefer to have these extra free services whenever they buy the cars. The company can also decide to introduce promotions based on the first come strategy. This will ensure that most buyers rush to buy the cars in order to get appropriate discounts that do not result to losses to the company. 4.3 Product strategy and brand Holden Barina product line introduces various series of brands into the Chinese market. This comprises of its various generational car models, which provides buyers with the opportunity of choosing according to their preferences (Schippert, 2012, p400). The product strategy involves availing these products to the customers with little discounts on some products to enhance their sales. 4.4 Distribution Mode of distribution of products is essential since it significantly affect the sales of the product (Liu & Dagsvik, 2009, p10). The company should prefer having dealers in the different six major cities in China. After shipping the products to China, various dealers should be supplied with the products. At the initial stages, the company will shift all brands to each city. However, after determining the market wave concerning these products, some cities can have more of a brand series that is of high demand within it than others. However, distributions will be done before stock clearing to ensure that there is no absence of products at any single time within the dealer distribution points. 4.5 Timeframe The current timeframe of operation within the new market is between 2014 and 2017. This timeframe is ample for the company to make significant sales within the new market. 2014-2015 will mark the first entry of cars into the market and the first sales. After this, 2016-2017 will mark the second entry and second period of sales within the market. After this, the viability of extending the timeframe of operation in this new market can be extended if the product line register significant sales or another market target might be chosen. 5.0 CONCLUSION From the analysis done here, it is viable to conclude that China as the new market target is appropriate for Holden Barina product line. This is because the various market factors are in favour of the operation of the company within China. Buyer behaviour within this market target is a boost to the foreign investors and thus the company should go ahead with selling its products in China. Considerations though should be put on the legislation that is meant to promote local manufacturers in selling cars than the foreign investors. This move, which is forcing foreign investors to produce Chinese brands, can be an obstacle to the product line sales. However, since the GM Holden is also in talks with it the General Motors Chinese counterpart to produce local brands, the product line is likely to get a proper market share and success in sales. Therefore, the new market is viable. REFERENCES: Huang, Meifang, Techakanjanakit, Som, 2012, ‘The strategic transformation of automobile industry in China’, International journal of financial research, vol. 3, 3, Doi: 10.5430/ijfr.v3n3p8 Deng, Haiyan, Ma, Alyson, 2010, ‘Market Structure and Pricing Strategy of China’s automobile industry’, The Journal of Industrial Economics, Vol. 58, 4, pp. 818-845. Doi: 10.1111/j.1467-6451.2010.00434.x Schippert, Lee, 2012, ‘Epilogue- The future of the automobile: CO2 may not be the great decider’, Earth and Environmental Science, vol. 4, 1, pp. 393-415. Doi: 10.1007/978-94-007-2123-4_17 Wang, Qingbin, 2011, ‘Development and trends of China’s automobile market: evidence from urban household ownership of cars, bicycles, motorcycles and motorbikes’, International Journal of Automotive Technology and Management, vol. 11, 2, pp. 99-113. Doi: 10.1505/IJATM.2011.039539 Liu, Gang, Dagsvik, John, 2009, ‘A framework for analyzing rank-ordered data with application to automobile demand’, Transportation research part A: Policy and Practice, Vol. 43, 1, pp. 1-12. Doi: 10.1016/j.tra.2008.06.005 Swenson, Deborah, 2011, ‘The Influence of Chinese Trade Policy on Automobile Assembly and Parts’, Social Science Research Network, CESifo Working Paper series no. 3615. Available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1949070 Amighini, Alessia, 2012, ‘China and India in the international fragmentation of automobile production’, China Economic Review, Vol. 23, 2, pp. 325-341. Doi: 10.1016/j.chieco.2012.01.002 Calkins, Martin, 2009, ‘King Car and the ethics of automobile proponents’ strategies in China’, Journal of Business Ethics, Vol. 85, 1, pp 157-172. Doi: 10.1007/s10551-008-9935-5 Shuo, Wang, Guo-Shengl, Jing, 2011, ‘Comparison of Environmental Impacts from Cars in China’, Journal of Civil Engineering and Management, C.I: U491.9. Doi: CNKI:SUN:WHCJ.0.2011-04-020. Wang, Shiruo, Wang, Ying, Ding, Mengchun, 2011, ‘An Analysis of causes and countermeasures for Reconstruction and Integration of Automobile Industry in China’, Asian Social Science, Vol. 7, 5.ISSN 1911-2025 (Online) Read More