Informal situational analysis – kia motors corporation Essay
Informal situational analysis – kia motors corporation
An informal situational analysis is being conducted on KIA Motors Corporation to analyse critically the internal and external environment as it concerns KIA so as to determine its capabilities, customers, positioning and competitors within its business environment. It would also involve the marketing and business strategy of the organization, how they align to achieve profitability and/or market orientation, we would be able to discover after this analysis if KIA’s focus is on profitability or market orientation. Are they a market-oriented organisation? This exercise can be achieved by exploiting the SWOT analysis, PESTEL or the 3Cs analysis and this analysis would concurrently use 2 of them.
KIA Motors Corporation was founded in 1944 to engage in the manufacturing and sales of automobiles starting from bicycles to passenger vehicles, commercial vehicles, military vehicles and recreational vehicles while also investing in new technologies in the development and manufacture of eco-friendly cars. Kia Motors remains a driving force in Korea’s automotive industry with an expanding product line sold through a network of 4000 dealers, 20 sales subsidiaries, 141 distributors scattered across about 170 countries around the world. Its major brands are the Cerato, Soul, Rio, Picanto, Sorento etc. Kia’s management vision coined as – Innovation for Humanity tells a lot about its commitment to market orientation. 1. To grow the Kia brand to a world class level and become a leader in the global automobile industry.
2. To pursue “Customer Happiness” by providing the best technology and the highest levels of quality and service. 3. To work hard at growing out of conventional modes of thinking by being creative and spontaneous innovating 4. To achieve its long term vision by striving to satisfy the customer through technological innovation that respects people and nature. KIA Motors’ goal and mission statement is “to become a tier-one automotive brand by 2016 with a mission to become one of the most desirable brands in the automotive industry by providing a different type of driving experience that will enhance people’s lives and enrich them every day.”
According to several researchers of marketing strategy, an organization that is highly market oriented and aiming at achieving above normal market performance and providing superior value to customers to achieve a competitive advantage is bound to make profit, however, profit ought not be the major focus above market orientation. Kia is able to inculcate the culture of market orientation which according to Kohli and Jarwoski (1990) “is the organization wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments and organisationwide responsiveness to it” into the organization.
Kia gathers intelligence on its present and future customers through using data as regards their family life, work, holidays, interests etc from reputable marketing surveys, it also gathers information on current and future weaknesses and strengths of its competitors and ensure all these information are properly disseminated to all departments of the organization inorder to each to position itself appropriately to achieve customer satisfaction and maintain competitive edge. There is a strong coordination between key departments ranging from marketing, branding& communications, finance to design departments. Therefore, there is a positive relationship between market orientation and profitability. The organization also as a matter of policy allocates up to 5% of its profits to Research & Development so as to continue to deliver sustainable superior value to its present and future customers even in the long run. SWOT Analysiss
1. Its marketing strategy that is focused on customer needs and desires. 2. Pricing 3. Style and Vibrant designs that provide appeal to the younger generation. 4. Increasing network of distributors and dealers worldwide. 5. Lower cost of production 6. Manufacture of hybrid electric vehicles (eco-friendly) and highly fuel efficient products that can match other international brands. WEAKNESSES
1. They need to improve on operational efficiency to meet both quantitative and qualitative standards
2. Inability to appeal to a broader audience
4. Low global awareness level
1. A shift in consumer preference for eco-friendly vehicles due to skyrocketing oil prices and increased pollution resulting in the depletion of the ozone layer. 2. Partnership with Hyundai in a single production line and plant will result in economies of scale for the KIA brand and allow it to continually focus on designs and marketing for new products. THREATS
1. Competition is becoming stiffer
2. Direct exposure to sharp changes in the price of raw materials or OEMs not manufactured by KIA could have a positive or negative impact on bottom lines and prices that hitherto used to be a selling point. 3. Vulnerability to natural disasters similar to that which affected Toyota in Japan.
3 Cs Analysis
The marketing strategy of KIA as already mentioned above is directed towards meeting the needs and desires of its target customers. Marketing mix Product – Kia introduces a new model after about 18months of the last model launch which usually comes with an improvement with respect to interior and exterior specification which is meant to compete with other brands entering the market. The stages of the product life cycle being introduction stage, growth stage, maturity stage and decline stage. Therefore at introduction stage, sales are just beginning to gain momentum, awareness and education of customers on the product is just being done and the customer is beginning to take purchasing decisions.
At this stage, Kia engages in aggressive and catchy adverts and mono fairs across countries to persuade potential customers to buy. And it can be said that Kia brand has an average life cycle of 3 years after which the customer is ready for a change of car. At the growth stage when Kia car owners have clocked 3 years on their former purchase, a lot of them are willing to buy the new model that has newer options and sales continue to climb at this stage, but at maturity, sales peak, and begin to decline which is when sales and profits are likely to decrease.
Therefore, the organization upon studying the pattern of sales on the large variety of brands they have, adopt a production mix that emphasizes manufacture of higher selling products than products that have lower sales. Pricing – The company adopts different pricing for their products at different stages of their product life cycle by placing higher value on vehicles at introduction stage and depending on market response adjust the prices accordingly, however in order to penetrate the market as quickly as possible and deeply before competitors, it adopts the penetration pricing strategy.
Also for each brand of car model, prices differ to allow consumers to decide at best suits their lifestyle and needs, for example, the Rio has 3 variants and with different prices from which a customer can choose from. However, the price of Kia vehicles ranges from $8,000 to $36,800 with the Picanto being the lowest of the range and the Sorento tops the range of products.
Place – Kia is headquartered in Korea but has networks and is well represented across the world through 4000 dealers, 20 subsidiaries and 141 distributors with further expansion still ongoing. Dealers could make or mar the brand, and therefore, Kia ensures there is uniformity in the outlook of dealerships across the world, while ensuring standards are strictly adhered to. In trying to ensure customer service are not compromised, it is necessary for them to generate feedback from customers across the world concerning their Kia experience at all dealerships and also recognize those known to uphold the Kia standards.
Promotion and Branding – Kia, in the last 10 years has spared no costs creating awareness of their products to the consuming public. Using not only the traditional approach of promotion and advertisement but also the use of social media and electronic digital marketing. The use of social media allows it to constantly connect with younger generations and enable it to receive and give feedback as efficiently as possible. At the introduction stage of a product is when large amounts of funds are invested in promoting to make consumers aware of the new product and its benefits. The company’s websites are also well developed to promote and advertise their products.
They also get involved in endorsements and sponsorships of major events, sport teams, athletes, charity events etc. that they believe would sell the KIA brand. Kia has introduced a number of novel ideas into the automotive world market and have allowed the brand to be built since it was launched to the United States market in 1992 and to the rest of the world riding on the slogan “Power to surprise”. Its major emphasis on Design has also allowed it to carve a niche for itself in the market and the evolution of the brand. Therefore, they safely assume brand recognition has been achieved while not resting on its oars to gain market share by continuing to establish the best customer relationships. The branding strategy being deployed by Kia so far can be termed to be successful allowing it notch the 87th position on the 2012 Interbrand’s Best Global Brands survey far behind its benchmark competitors, Toyota at No 10 and Honda at No 21.
KIA’s marketing strategy is formulated in such a way as to address to 2 significant issues which the organization revolves round. Which customers do we want to serve? How do we intend to create value for the customers we want to serve? To answer the 1st question, KIA embarked on a process of market segmentation through market intelligence across 4 variables namely – geographic, demographic, psychographic and behavioural. Diagram 1 – Market Segmentation
The 2nd question in formulating its marketing strategy is market differentiation and positioning which is being done through its major focus on its core strength which is cutting edge design and style. In 2006, Peter Schreyer, an award winning designer came on-board as Kia’s Chief Design Officer thereby completely turning around the entire product design line since 2009 to date and making KIA a world renowned automotive brand.
Kia Motors UK is differentiating the product within the market by selling with a 7 year warranty that can be passed on to whoever the vehicle is transferred to, this is a novel and one of its kind in Europe. In Nigeria, Kia workshop is open Mondays through Sunday to cater to working class people that are unable to bring in their cars for service during workdays. Therefore, the KIA’s customer is the average middle and upper middle class with an average age of 40, upwardly mobile, male and female looking for the best value for money and located in all parts of the world. Competitors
Kia’s major competitors are Hyundai, Toyota, Ford, Chevrolet, Vauxhall. Toyota continues to lead the pack due to its high resale value that cannot yet be matched by Kia and also its reputation for safety. The selling point being adopted by this company to achieve competitive advantage is a better price offering, i.e better price for better styled product. However, the Kia brand is not yet known in major global cities and it is a known fact that they are lacking in global awareness for which the organization is already positioning itself to address.
Inspite of being presently owned by Hyundai, Kia is still being seen as competition. Since the recession, Kia has stealthily grown its market share coupled with the Tokyo disaster which stalled Toyota production for a period, this allowed for a high growth rate for the brand in the last 5 years, but with the recent pick up of Toyota, Kia is likely to have a tough time in maintaining this growth rate which stood at 27% in 2010 against industry averages of 12%. Therefore, they continue to invest in capital expenditure, building of new plants, re-inforcement of the design centers to be able to churn out designs that would continue to project a dynamic and youthful brand, aggressively market and expand its presence across the world.
The business and marketing strategies of Kia are well aligned as analyzed above which is responsible for the success they have continued to achieve over the years as reflected in the gradual brand acceptance globally. Kia is customer and market oriented, it does not pay lip service to its goals and mission of ensuring it delivers excellent customer service and also getting to the top 3 automotive organization even though it may seem as an unachievable task, it still continues to position itself to bridge the gap.
It is recommended amongst others that Kia improves on quality of its products, availability of OEM parts and spare parts, access to after sales service and all other factors that make the brand more attractive and also increase on its resale value which is presently nothing to write home about presently. It should also from time to time gather information on which cars are receiving more acceptance and ensure they are produced in quantities that would meet customer needs. As we speak, the Sportage is doing very well but supply remains low to meet up with demand. Kia also adopts the use of market share as a measure of brand equity measure which according to Aaker(1996) to be deceptive especially since Kia prices are lower relative to market prices, therefore it is also advisable to measure the relative market price at which the brand is being sold compared to industry market price.
1. Aaker, D. A., (1996) ‘Measuring Brand Equity Across Products and Markets’, California Management Review, 38 (3) pp.102-120
2. Interbrand, (2013) Best Global Brands 2012: The Top 100 Brands, Available at: http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-2012-Brand- View.aspx, (accessed: 14/10/13)
3. Kia Motors Corporation- Company Profile, Information, Business Description, History, Background Information on Kia Motors Corporation [online] Available at: http://www.referenceforbusiness.com/history2/74/Kia-Motors-Corporation.html [Accessed 14 October 2013]
4. Kohli, A. J. & B. J. Jaworski, (1990) ‘Market Orientation: The Construct, Research Propositions, and Managerial Implications’, Journal of Marketing, 54 (2) pp.1-18 5. Yu R.(2011), “Focused, feisty Kia bears down on its competitors” (online) Available at http://usatoday30.usatoday.com/MONEY/usaedition/2011-06-28-Kia_CV_U.html, (accessed 16 October 2013)
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