Market Analysis of the Smart in Australia - Example

University: Market Analysis of the Smart in Australia Module Code: Date: Name: INTRODUCTION Classy and compact, the Smart car is the ultimate car for the present-day motorist, providing unbeatable functionality and fuel economy, as well as, the elegance that comes with the unmatched Mercedes- Benz brand. The two-seater Smart Car was introduced in the Australian market in the year 2003 under the franchise of Mercedes Benz (Diez, 2008 p12). Its market penetration and popularity over the years has shown a slow albeit steady growth. The rising middle class and the wealthy younger generation has been a tremendous boost in establishing a great potential market for the smart cars. However, amid tough economic times and the large and competitive automobile industry, it is an uphill task to capture and maintain clientele. Interesting to note also is the fact that the Australian market is one of the most competitive car markets in the world. Car sales figures are in the tune of over one million imported cars every year. INDUSTRY OVERVIEW Australians are car enthusiasts.Revenues of $180 billion were collected from the car industry in the year 2012. This was a 2% growth from the previous year. Car sales figures depict 1,126,259 new cars were sold in the year 2011. This was a 2.5% increase from the car sales figures of 2010. However, even with such colossal figures of the total car sales, the Smart brand of the Mercedes Benz sales did not surpass 800 units annually for the last two years. Although a small number, this is a commendable increase from the 300 units sold in the year 2010 (Pride, 2011 p 59). The car industry has created employment for 335,430 Australian citizens. The market players in this industry include the Toyota, with a market share of 19.5%, followed by Holden and Mazda with 10.2 and 9.5 respectively. At number four, we have Hyundai with a market share of 5.2%. The major car importers in the Australian automobile industry is Japan. It has a control of 27% of the market share. It is closely followed by South Korea and Thailand at 16.2% and 6.7% respectively (Pride, 2011 p75). Key among the success factors for the Smart model car brand is the fact that small and upcoming companies have adopted this vehicle for considerably inexpensive marketing purposes. Moreover, the car has generated considerable interest amongst the businesses and they are being absorbed in business enterprises. Sales of cars to private persons indicated an 8% rise while sales to private business fall slightly at 7.3%. Sales of automobiles to the government were at a decline with a 19% drop (West, and Ibrahim 2010 p46). In addition to these, their fuel-efficiency, small size, and ease of parking makes them the ideal cars for an in-city setting. Their safety is also a key factor that has made them admired. This is becauseof crash tests conducted by the Independent insurance Institute for Highway Safety. From these tests, the Smart car attained a five stars rating, the highest attainable level indicative of its high-level safety. This is attributed to its use of side and front airbags as well as its steel frame. The three Australian manufacturers – Toyota, Ford, and Holden record the largest number of car sales annually (Baker, 2007 p 96). The Japanese market is also a strong competitor. Each of these have been fighting with the increased competition and a splitting market that has witnessed a consistent decline in the traditional cars. This has been replaced with a change in customer preferences shifting to the smaller cars. Mercedes Benz has been embracing new techniques and technologies to keep its cars at the top of the competition. However, with the Australian market having a dominance inclining towards the Toyota and other famous brands, the best approach is to satisfy customers and readjust profit margins. SITUATION ANALYSIS 1. Political Factors - The Australian Political climate is very stable. Government policies have been encouraging use of locally manufactured cars to boost domestic manufacturers and this will assist in enhancing market for this car model. Mercedes-Benz adheres to the strict Australian federal and state fair employment legislation. 2. Economic Factors - The results of the global economic recession that occurred barely five years ago was a clear picture of the role played by the free markets. The Smart is a very convenient car in that it consumes very little fuel. Australia boasts of being one of the largest economies globally (Diez, 2008 p129). The presence of many competitors in this economy therefore affects the rate of economic growth of the Smart model compared with other companies. Moreover, tough economic time’s mean that the purchasing power of potential customers diminishes and this means low sales value. 3. Social cultural Factors – Mercedes cars are a luxurious brand. Introduction of low priced brands of these cars creates a high appeal for these cars by the low and middle-income large market for Mercedes. Having that in mind, the Smart model should actually do well (Doole, and Lowe 2008 p 168). Moreover, different age brackets have different perceptions regarding what kind of car to drive with a majority of the younger nation feeling that the Mercedes model is for the older generation. 4. Technological Factors – The Smart Model is a huge leap in technological advancement. Considering latest innovations such as in-car technology based hardware as well as satellite radios, these ideas are a great tool if well exploited. Other technological innovations include the integration of text to speech in car systems, which increase car safety. 5. Legal Factors - Ranked number eleven in the list of the ease of doing business index, Australia’s performance is definitely way above average (Jackson, 2009 p 21) Australia ensures there is honesty in business regulations. Being a chief taxpayer to the Australia government, the Smart complies with the set protocols within the Australian Government of the day. COMPETITOR ANALYSIS In any market, there are forces that determine profitability, competition and the appeal of an industry. An understanding of these forces is vital for any management to surpass its market and hence its competitors: 1. Possibility of substitutes – The Australian market is flooded with other domestic and Japanese car manufacturers dealing with the small cars. These cars have relatively lower cost and their fuel economy is equally attractive. 2. Possibility of new competitors – In the likely event that newcomers enter the market, there is always an anticipated pressure for existing brands to make readjustments. Moreover, with new entrants in place, there is the threat of market fragmentation, change in customer loyalty and prices. 3. Competitive Pricing for customers - Australia is a free market economy. Consumers enjoy a wide range of car brands. The aspect of pricing competitively and matching prices to the quality is important considering that there are more efficient and low cost competitors in the market (Pride, 2011 p124). 4. Competition among existing market players – There is always competition in an economy that enjoys many players. This competitive climate affects directly on the margins, prices and ultimately the profitability of these companies (Mori, 1974 p133) Existence of domestic and Japanese small cars sets the pace for the competition in the Australian market. 5. Penetration to new markets – Even with the high number of car enthusiasts in Australia, it is an overstatement to say that the Australian car market is saturated. Expanding sales to new markets where competition is still low is a great move to boost car sales figures. CUSTOMER TO CLIENT ANALYSIS Customers’ tastes and preferences are dynamic. It is therefore, prudent for clients to treat them with utmost good conduct. Customers have key goals when purchasing any car. Customers seek assurance of seller reliability. The seller, a good reputation, and fairness in dealing reflect this in honesty(West, 2010 p 47). Moreover, Customers are best responsive when they have ease of access to car show-rooms .Therefore, show rooms should be located where they are easily approachable. In addition to these, proper delivery of purchased cars is paramount. For example, if a customer requests for a certain unique feature such as colour, it is of great necessity that such deliveries be made timely. High standard customer relations services is essential for any business intending to attract new clients as well as maintain old ones. Over time, customers have developed new trends. Customers will purchase a car for safety, self-actualization, and acceptance by others or even ego needs such as status and prestige. SWOTANALYSIS Strengths of the Smart car model include the following: 1. They are an inexpensive car whose low price is of particular appeal to the middle class income earners (Maxton, and Wormald, 2004 p 85) 2. The fact that the Smart model is a popular and respectable brand name is a boost for the Smart car model. 3. Fuel-economy and ease of parking are also major strengths of these cars. The weaknesses of this company include: 1. High maintenance cost and high costs of buying spare parts make them a tricky choice for the middle-class 2. The Smart model cars are very small. In addition to that, they are generally not so elegant looking. 3. The car has a capacity of carrying only two people. This may not be so appealing for those wishing to enjoy a higher carrying capacity. Opportunities: The Smart model has opportunities in the following market areas. 1. The Smart car has new opportunities in the younger generation who are after comfort, convenience and the glamour that comes with possession of the Mercedes Benz brand. 2. The ease in availability of spare parts in the market is a great advantage for the customers. 3. These cars appeal to women as well as men. This is a great opportunity to market the car to both sexes. Threats: 1. The major threat in this market is the availability of better efficient and cheap Japanese and domestic models in the Australian market. REFERENCES BAKER, K. J. 2007. Economic tsunami: China's car industry will sweep away western car makers. Dural, N.S.W., Rosenberg Publishing. DENT, M., CLARK, J., & AMOR, P. 2008. Bridging the distance. Canberra, ACT, National Library of Australia. DIEZ, W., & ZÖLLTER, J. 2008. Smart: small car, big deal. Minneapolis, Motorbooks DOOLE, I., & LOWE, R. 2008. International marketing strategy: analysis, development and implementation. London, Cengage Learning. JACKSON, P. 2009. Little book of Smart. Dorchester, Veloce. LEWIN, T. 2004. Smart thinking: the little car that made it big. Osceola, Wis, Motorbooks International. MAXTON, G. P., & WORMALD, J. 2004. Time for a model change: re-engineering the global automotive industry. New York, Cambridge University Press. MORI, T. (1974). The Japanese automobile industry and the Australian market: some notes. Canberra, Australian National University. PRIDE, W. M. 2011. Marketing principles. South Melbourne, Vic, Cengage Learning. WEST, D. C., FORD, J. B., & IBRAHIM, E. (2010). Strategic marketing: creating competitive advantage. Oxford, Oxford University Press. . Read More