The case is based on the industrial development of global auto industries from the perspective of strategic marketing, which impacts on the globalisation process in trade and investment policies for leading automobile companies.
Marketing Strategies and Key Success Factors of Major Suppliers to be Successful in Global Auto Industry
Marketing strategies is the clear understanding about marketing activities to be done and requirements of discipline and flexibility of any firm. It has three parts:
These are the financial side of the automobile industries in marketing strategies, which results of savings $3billion by lower product development costs. There are two strategies:
- Lowering costs
- Creating greater value.
Global scale economies
Auto industries are dominated by few companies with global recognition, tremendously in globalising trends. The improvements of moderate sales of autos about 55% annually are possible for the global economics, which has favourable monetary and fiscal policies. The table is shown the sales of car of different countries.
Steep experience curve: It focuses on the usage of large amount of effort in learning within natural limit, which is also described as learning progressive curve.
In table, USA market of experience curve is higher than the European automobile market.
Low transportation costs
In the global economic recovery gain system, auto industries will get benefited in future by providing low transportation costs to customers. However, the uncertainty of high oil prices will be created high transportation costs in globally.
Difference in country costs
North America has tough competition in making automobiles with other manufacturing countries of automobile with labour and material costs.
Product development costs
The automobile industries have increased their vehicles with the proper development related with the market costs, which is related:
- Attractive design
- Driving fun
- Low emission
- Low consumption
The development definitely increases the sales of the automobiles, shown in following trends:
Technologies of automobiles become more sophisticated, the requirements of customers about operate and safety also increased. The technology transfer of auto parts and other components are also changing very fast, which is given:
In the decision of motor industries in return on capital, employment, global market share, political climates are related with the Government. In international market, Government can make barriers and in environmental issues in future.
Favourable trade policies
The taxation policies on trading cars are one of the most important factors to be considered by automobile industries. In the taxation, Thailand has get most favourable position than others by giving 30% tax on trading automobile and China is in vice-versa situation.
Technical standards -are these compatible
The main challenges in automobile industries are mismatched technical standards. The competitive strengths are the proper innovation process by R&D, design, marketing, after-sales, customer-management and other elements.
Market regulations- how common are these
Countries are differing in market regulations, considering the matters of safety, emission and recycling standards, which can affect the price and performances of automobiles of different countries.
The market drivers are political, economic, socio-cultural and technological (PEST), which affect to market research to impact on customer’s needs.
- Channel: Channels are way to reach customers, so automobile industries also should be more focused on the channels.
- Customer: Customers prefer from any automobiles are the environment, safety and sustainable mobility. Customers have different points of view based on some critical factors:
- Customer needs: Customers prefer automobile with unique design and critical unique technical features. Here an important thing is the restrictions to get loans.
- Marketing practices: In 2004, the low fell to 58.5% of the Detroit 3 (Ford, General Motors and Chrysler). However, the market practice is such that the Japanese cars were experienced a high of 30.6%, where the high was 4.1 % for Korean cars.
- Competitive drivers’ imports: The important competitive drivers are:
- Competitors which one is readily identifiable case: GM is the largest automobile manufacturers in US market; it is the most comprehensive competitor of Ford. It is producing almost 8.5 million automobiles, which is 15% of total global market.
Industry drivers more specific relate to production and market aspects example:
- Relating to the specific production, the performance may be hampering by the country of the company.
Key factors in this market
- Time to market: Competition is the main cause of consolidation, also forces the companies creating alliances. This profit and platform sharing tendency results by a time to market cut.
- Good design: Co-design is a good practice in now-a-days. The success of a company mainly based on the design of car. For this, the researcher work on the data to find which design will attract the customers.
- Product development: The process of product development is the base of getting the attention of customers. Now, it is a systematic way to overcome competition to develop the design of the product.
- Quality: Some customers are basically quality seekers. The quality of a car is depended on:
- Distribution / Dealers: The behaviour and attitudes of the dealers and distributors are important, because they are handling the customer claims, troubleshoot the problems, replace equipments and deliver word of mouth information. Assembly line dealers and the suppliers developed a unique network.
Rationale Behind Ford Motor Company in “2000 Globalisation Plan” and Performance from 1994-2004: In “2000 Globalisation Plan”, Alex Trotman, the first non-American in the top management of Ford Motor Company, established a plan of going first place from second in the market globally in 1994.
- The problem: The problem is remaining after globalisation plan, which can be seen by the loss of $1bn in North America in Ford’s global automobile business. In Europe, it also made loss in 2004 about $626m with Premier Automotive Group. In addition, the market share is decreasing by 24% in 1990 and 18.3% in 2004.
- How reasonable and how justify: The problem is reasonable because of not maintaining the targets of 2000 Globalisation Plan. There are two targets:
- Financial Targets
- Communication and Creativity
In financial targets, settled strict and tough financial controls are minimised with the help of financial authority. The decisions are made by communication with every individual. The creativity has increased by encouraging designers, and people who are working for product development.
- Decision making: Ford industries made decisions about the financial targets to capture the first position in global market. These decisions are implied by the product development, manufacturing, marketing, and sales under single executive in the specific market.
- Cost another problem example production cost look at reducing cost: In the Globalisation Plan, savings are another important factor to consider by Ford industry, by minimising product designing and developing costs. Some actions should be taken to reduce costs:
- Reducing annual operating costs
- Reducing bonuses and incentives for product designers
- Developing cost effectiveness in cost sharing of product development.
- Team work-lack of communication example when designed but not used: In the teamwork, proper communication with every individual is must. But Ford took a couple of week to deliberate view to the employee and designers, which is another problem of communication.
- Which department is responsible: The problems of Ford Motor industries arise from the USA department, because the impact of this department affects all the departments of global Ford industries.
- What the target in 2000 financial: The financial target of 2000 Globalisation plan was on the focus of savings, by reducing product design and development costs.
- Any level of command: The level of command is flowed from the assembly level to suppliers and from suppliers to manufacturers. The design level is commanded by the manufacturing level.
- The cost talks about Alex statement: The Chairman of Ford Company, Alex Trotment stated that, the globalisation plan would be successful in next 20 years by designing and reducing costs of vehicles. The problems of this company can be declined by reducing costs, which is show in 1995, where profits increased from $4.1 billion to $4.4 billion.
Look at this financial:
In financial service table of Ford Motor industry of North America, it can be measured the costs of financial services were increasing year to year. The costs of financial services indicated poor quality of vehicles, which needs more repairing and after sales services.
Calculate the profit analyse and make some comment:
From profit analyses table, the aim of globalization plan is implemented slowly on the profit segment, which was increased every year. The net income of Ford is increasing faster than the sales of vehicles of Ford Industries.
- The eight ways to be close to the customer: When customers are satisfied about the services and quality of vehicles of Ford industry, they can ensure the long-term profitability of the industries in global market. Ford also preferred customers’ want first than other factors. However, to understand them, Ford Automobile industries have to have proper communication with the customers by:
- 2005 sales value not insignificant different: Ford Motor industry in North America had decided to cut jobs about 25% of staffs. The sales volume is decreasing by this decision from $3.5bn in 2004 to $2bn profit in 2005. This is obviously significant for North American Ford Company.
Net income and losses able to make some comments:
From table, in 2001 and 2002, Ford Motor industries faced tremendous losses for cutting of jobs and improper implementation of target of the market. After that, it is improving net income gradually.
- The cost beyond 2000: The 2000 is the increased sales of Ford Company, $170 billion, units sales reached at top by 7 million units. After that, in 2002, the high costs of incentives are blamed for the reduction of sales volume.
2002 selling out:
From table, in 2002, the total selling out of the vehicles in North America is declined because of high priced and medium quality automobiles in the market.
From table, the amount of cash dividend provided to the investors by Ford is decreasing day by day. This can be happened for decline of sales volume and reduce the number of shares and obviously investors.
Toward end 2003-2004 significant:
From table, the global sales of Ford Automobiles are about 57 million units in 2003, but the next year, it increased up to 62%. The significance can also seen in the net income, which has increased about 6 times bigger than 2003.
- What can you find out in financial target in 2001: In financial target, 41% of the profits are slumped for sports utility vehicles to get more customers’ attraction. For this reason, company losses its shares, sales volume and revenues.
- Closing planet down & investing and flexibility: In the closing planets and manufacturing lines, Ford motor industries is contribute to the assembly line and equipment for manufacturing and product technology development. The investment for 20 new models in Ford is developed in R&D for measuring cost cuts.
- Losses countries in 2003 & 2004: In 2003 and 2004, some countries were losing by Ford industry. In Europe, poor perceptions about products are main reason, and in China, the strict government policies are main reason.
- Sector analysis performance: The markets of automobile are not adding 1% output. The sectors should be analysed by taxation, government regulations, communicating with local partners and less trade barriers in every sectors.
A lot’s of move and integration: In the next stage of 2005: Ford planned to meet the following features, like:
From analysing the case, it can be said that Ford Motor Company is in the global market position in sales, technologies and quality services of the products. Although the “2000 Globalisation Plan” could not be implemented properly, after the plan of 2000, the sales and profits are increased.
For making a sound future marketing plan for the company Ford as the world’s fourth biggest manufacturer of automobile, the focus for the given issues should be discussed as below-
Initially with a desire of being the top at the automobile industry, and having a major concern for financial along with ingenuity and communication, Ford aimed to consolidate its European and North American operations. In 2002, into a solo one that is FAO1 for emerging product development, sales action for marketing as well as production for deducting the expensive intend copying, production, and modification of equivalent motors. This objective also endorsed the development of 5 “Vehicle program centers” for the purpose of product development run while a European center could make up the Escort, Fiesta and Mondeo groups with the others in America.
- The company also aimed to offer special incentives on each of its model.
- Mercury Cougar, Escort, Villager Minivan and Lincoln having the possibility to be bought out the year,
- Opportunity for selling non- core properties like oversees parts removal, which had been assumed to up profit by $1.
- Additional pressure for down slopping cost- curve.
The major lacking of such objectives are:
- Inappropriate perception of cost since it has been resulted in corporate loss in quarter four.
- Fierce pressure for cost minimization lacks for achieving the broader return throughout the year.
In 2004, while the world’s top brands including GM, Ford and Chrysler were fallen into 58.5% of losses; Japanese companies had achieved a gain of 30.6%. While at the same time when US Ford Taurus was unable to capture Japanese market, Toyota with a hybrid technology outsell Ford globally in 2003 as well as passing the company regarding sales in USA in 2006.
Several limitations of opportunities are:
- Expansion of global performance hindered by local rules and policies like- China,
- Increasing demand for lowering price restricts growth and profit.
- Reluctance for investing much like other mega- competitors,
- Worldwide antagonism and over capacity in established economy for a profitable entrance.
- Increasing global oil price etc.
The global pressure put the saturated markets of a below performance of below 1% annually for obtaining extra profit as the intense existence of trade barriers along with the tendency of seeking domestic partners for mergers, takeover and non- equity joint venture.
Stabilized oil prices can provide the global economy to make a revival as with a prospective dawn for the company also but the more the oil price than the world economy is, the higher the possibility for economic depression as with a dilution of industrial profit, sales reduction and sliding of income generation along with the company itself.
In china, Ford gained 15% sales growth in 2004 less than 40% recorded for previous periods for-
- Tight credit policy of Chinese government
- Lower price cycle for making original purchase
Along with those issues, the increasing international competition and over capacity has disappointed revenue generation of Ford as the global auto player forcing it to strongly join in the Chinese and Indian emerged markets for which Ford invested extra $1.5 billion in China because of the following reasons :-
- Existing high demand,
- Reducing time- to- market and expense,
- Facing challenges of rising giving out, globalization and safety rules.
The global issues can be termed as:
- Strong sales had been determined in saturated like USA and European market with a combined effort of unit sales at 17 million in 2003.
- Larger local demand,
- Technological investment for on- time autos at cost reduction tendency,
- Stable oil price for prospective future,
- Merger and acquisition for successful global sales of Nissan at 9% in 2004.
- Position as the third global automaker in the world with revenue of $172.5 billion,
- Recognition as the large- scale production and management initiator as Fordism.
- Use of “Crossover SUVs” for coping with high technology,
- “The Way Forward” for adopting market extremes, cutting out unprofitable lines and outsider foreign factories,
- Improved fuel efficiency.
- Smaller market presence in Asia and Middle East.
- Fluctuated market share and profit structure.
- Servicing and repairing offers for generating the highest value.
- Stronger entrance in saturated markets with high demand.
- Emerged competition and pressure of unemployment,
- International trade rules and restrictions,
- Struggle of North America’s operation by Asian producers, upward raw material
- In addition, labor charge and change in customer demand for sport- efficacy and price of oil issue.
Recommendation for a future marketing strategy
After analyzing the overall situation, a prospective recommendation can be given on Ford’s strategic- planning process as below-
The company should also follow the value- delivery process as-
According to this diagram, Ford should follow the options as below:
- Analyze of market opportunities.
- Developing marketing strategies,
- Planning marketing programs,
Managing the marketing effort as:
- Annual planning control
- Profitability control
- Strategic control
- Global expansion control
- Introduction of new and improved model of vehicles,
- Quality development and customer value derived services.
- Efficient cost management endowed as 2004.
- Emerging share and revenue in all operating areas,
- Upward performance at each of the operational criteria.
- Holding domestic market share more than 25% constantly,
- Proper combination of financial and creative communication plan,
- Restructuring dividend and pricing policy.
- Development of assembly plan for obtaining higher value chain for all vehicles,
- Introduction of more than 20 new models by supporting R & D efforts,
- Group effort of Ford, Mazda, and Jaguar- Volvo to be more efficient,
- Introduction of flexible production and utilization of modern technology,
- More investment budget in high demand market like China and India.
- Proper accommodation of cost and adequate suppliers of high- tech batteries for maintaining fuel efficiency,
- 10-year duration for manufacturing 250000 E85 capable autos in USA for generating 1.6 million of sales,
- Concentration on Asian and Middle- East markets.
- autos.msn.com, 2009, Ford Overview: The Ford Story.
- Berkman, H. W., Gilson, C. C., 1986, Consumer Behavior, 7th edition, Dickenson Publishing Company, Inc., U.S.A, ISBN: 9780534031046
- Chernev, A., 2007, Strategic Marketing Analysis, 2nd edition, Brightstar Media, ISBN: 978-0979003912
- David, F., 2008, Strategic Management: Concepts and Cases, 12th edition, Prentice Hall, ISBN: 978-0136015703
- Doyle P. D, 2004, Adding value to marketing: the role of marketing in today’s profit-driven organization, 2nd edition, London: Kogan Page, ISBN: 9780749421755
- Fifield, P., 2007, Marketing Strategy: The Difference between Marketing and Markets, 3rd edition, Elsevier: Amsterdam
- Ford Motor Company, 2007, Progress and Priorities: Ford Motor Company / 2007 Annual Report, Web.
- Griffin, R. W., 2006, Management, 8th Edition, Houghton Mifflin Company, Boston New York, ISBN: 0-618-35459x
- Global Auto Report, (2009), Global Economic Research.
- Hitt, M. A., Ireland, R. D., Hoskisson, R. E., 2001, Strategic Management, 4th Edition, South- Western Thosmson Learning, Singapore
- Hill, C., and Jones, G., 2007, Strategic Management: An Integrated Approach, 8th edition, South-Western College, ISBN: 978-0618894697
- Hurden, J., 2005, Testing: survival tool for the global auto industry.
- Kotler, P., Armstrong, G., 2006, Principles of Marketing, 11th Edition, Prentice-Hall of India Private Limited, New Delhi, ISBN: 81-203-2825-6
- Kotler, P., 2006, Marketing Management, 12th Edition, Prentice- Hall, New Jersey, ISBN- 13-0336297
- OneTouch Systems, 2007, Case Study: Ford Motor Company.
- Stoner, J. A. F., Freeman, R. E., Gilbert, D. R. 2006, Management, 6th Edition, Prentice-Hall of India Private Limited, ISBN: 81-203-0981-2
- Salome, G., Shepard, A., and Peony, J., 2001, Strategic Management, 2nd edition, John Wiley, ISBN: 9780471380719
- Thompson, A. et al, 2007, Strategic Management, 13th edition, Tate McGraw- Hill Publishing Company limited, New Delhi, India.
- UNDO, 2003, The Global Automotive Industry Value Chain: What Prospects for Upgrading by Developing Countries.
- Yahoo!, Inc, 2009, New Ford Cars.
- Future Automotive Operations.