Introduction to Automobile Industry Essay
Introduction to Automobile Industry
The automotive industry designs, develops, manufactures, markets, and sells motor vehicles, towed vehicles, motorcycles and mopeds as defined in ISO 3833, and is one of the world’s most important economic sectors by revenue. Automobiles changed the world during the 20thcentury, particularly in the United States and other industrialized nations. From the growth of suburb to the development of elaborate road and highway systems, the so called horseless carriage has forever altered the modern landscape. Themanufacture, sale, and servicing of automobiles have become key elements of industrial economies.
But along with greater mobility and job creation, theautomobile has brought noise and air pollution and automobile accidents rank among the leading causes of death and injury throughout the world. But for better or worse, the 1900s can be called the Age of the Automobile and cars will no doubt continue to shape our culture and economy well into the 21st century INTRODUCTION TO PHUKET INDUSTRY Phuket Automobile is an Asian Car manufacturing company established in Malaysia with it headquarter in Phuket. Phuket wants to enter in Swiss market as a test market.
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It was established in 1995 in Malaysia by a joint venture between Matusiti and Government of Malaysia, where in Govt. Of Malaysia has 75% stake in it and Matusiti has 25% stake in it. Phuket is entering into a new market in Switzerland where Swiss market is famous for manufacturing the parts of the car. The company is expanding its geographical reach and is now planning to enter into the European market for selling its car. In Europe the company has selected Switzerland as a test market for selling its car. The company will be selling two models in Switzerland by the name of Phuket Saloon and Phuket Persona.
For this purpose company is planning to open a wholly owned subsidiary company in Switzerland to import the cars. The company has done a market research about the Switzerland automobile market and the leading brands and company has also done a segment analysis to find out its target market in Switzerland. There are few advantages which Phuket automobile poses which are its competitive advantage over other car manufacturing companies. SWISS AUTOMOBILE INDUSTRY Switzerland has the highest rate of car ownership in Europe.
In the seventies and eighties the market was volatile, with Japanese producers challenging their European and American competitors with lower prices and more standard features. Today it is the ambitious South Koreans, like Hyundai, who are driving competition in the market. VISION To become world leading automobile company MISSION To be the premier provider of automobile products and related services in European and other selected markets. SEGMENT ANALYSIS In Switzerland the automobile industry is segmented into three categories – 1) High End segment – BMW, Porches, Audi, Mercedes
2) Mid Segment – Volkswagen, Skoda, Toyota 3) Low Segment – Ford, Renault, Opel CRITICAL SUCCESS FACTORS OF INDUSTRY First and foremost, the auto industry must engage and adopt sustainable practices, whether it is the wages and benefits it pays its labour force or maintaining a dealer network that is optimized to meet the size of organic demand. Makers must abandon the mistaken belief that “any sale” is a “good sale”. For automobile industry there are certain critical success factors which should be taken care by all companies in that sector. Quality and Compelling product:
Automakers must also ensure the quality and compliance of the vehicles they are selling in various federal and local regulations. Including their emissions standards, fuel efficiency and safety industry. Few examples can be more clear than Ford’s homespun renaissance it undertook in 2006. It’s no longer in the business of promising customers great products to come; the products are in showrooms and driveways today, and Ford’s certainly not resting on their laurels. Ford has overcome the perception it built during the previous 30 years that buying American meant buying inferior.
Positive Image Makers have to win public perception. Positive image about the product is one of the key result areas in automotive industry and this one critical factor that often defines an automotive company is its public image. Because buyers entrust their safety, along with a sizable portion of their income, to a car company, the perception of the company figures greatly in the buying decision. Factors influencing an automotive company’s image include advertising, word of mouth and expert reviews and opinions. Technological Advancement.
People in Switzerland prefer to buy those cars which are comparatively lower priced but have various features, and any company to establish itself in this market needs to be tech savvy that is it should be having a superior advantage of technology as compared to its competitors, As it is the requirement of customers in Swiss market to have a car which provide them comfort and good mileage, so companies should always focus on building a car which is having a good comfort and which is so designed that it meets the demand of customers.
This is the reason why Volkswagen is the market leader in Swiss market as it provides comfort and quality at an affordable range. Strong Distribution network Strong network for distribution is the most important critical factor for automobile industry. It forms a basic necessity to have a strong distribution network because cars are not sold directly to customers, but are first sold to regional and local dealers who are behaving as a franchise to the automobile company. If the distribution network is strong then the company can easily become the market leader.
So selecting a distribution network is a very important decision and critical for company and is area like Swiss where most of cars are imported there it becomes even more important due to heavy competition from other companies. FUTURE GENERIC BUSINESS STRATEGY Cost leadership strategy Cost leadership is about minimizing the cost to the organisation of delivering products and services. The companies that attempt to become the lowest-cost producers in an industry can be referred to as those following a cost leadership strategy.
It is a strategy of company where in the firm following this strategy will set out itself to become the lowest cost producer in the industry. The company with the lowest costs would earn the highest profits in the event when the competing products are essentially undifferentiated, and selling at a standard market price. Companies following this strategy place emphasis on cost reduction in every activity in the value chain. The sources of cost advantage are varied and depend on the structure of the industry.
It may take into consideration economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average. Differentiation Strategy Differentiation involves making your products or services different from and more attractive those of your competitors.
How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support and also brand image that your customers value Focus Strategy Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers.
This makes their particular market segment less attractive to competitors As with broad market strategies, it is still essential to decide whether you will pursue Cost Leadership or Differentiation once you have selected a Focus strategy as your main approach: Focus is not normally enough on its own. I would like to Suggest Phuket Automobile to take COST FOCUS strategy for building a competitive advantage over its competitors. Because I feel that the company cannot apply a cost leader strategy as it is impossible for company to become a cost leader in this highly competitive market.
The differentiation strategy is also not possible because if company bring something new then it may increase the cost of the car which will make the car of Phuket automobile rise. Though it is a good idea to differentiate the product but the differentiation there is very low chance of differentiation as, Phuket automobile is coming up with Phuket Saloon and Phuket Persona which are giving more or less the same feature as other company. So the strategy of differentiation is of no use as per my understanding. And there are other competitors who all are giving such kind of services so there is no point of using cost differentiation strategy.
So if company makes a strategy of Cost Focus it would help company to gain a competitive advantage, this can be done by identifying the target customers and then pricing their product at lower price for that segment. They should target the niche segment and they can capture the market easily. Like Phuket automobile can target those customers who want a hatchback car with a high Speed and higher performance. The Phuket Automobile can target these customers and can . priced its products such that other companies do not possess threat to Phuket automobile in that segment.
As in the hatchback segment no company is providing car with 1. 3 litre 4 cylinders engine with 75 hp minimum model. So we can say that company should have a cost focus strategy as it would be beneficial for a new entrant to lower the price of its products to enter into the market and gain some market share. And in addition the people of Switzerland is also mainly interested in buying those cars which are at a lower cost but is having all the relevant and latest features, because customers are more interested in small lower price cars which give them basic feature and more for lesser amount.
Therefore according to me if company use the strategy of Cost Focus then it will help company to gain advantage over its competitors in long run. INDUSTRY SEGMENTATION The industry of Automobile is segmented into three main segments – 1) High end Segment – BMW, Mercedes, Porches. These cars are considered to be in high end segment as they provide luxury and comfort at a higher price. 2) Mid Segment – Volkswagen, Skoda Toyota is considered to be playing around mid-segment market which is a normal priced product with complete features provided by them.
These companies have a larger market share in Switzerland automobile market due to its price and quality point of view. 3) Low Segment – Ford, Opel, Renault are considered to be on a lower segment in the automobile industry as they are priced lower and the features which they provide is also lower. Phuket Automobile should target mid segment in Switzerland Automobile market because people there prefer car of normal price. CONSUMER SEGMENTATION: Market segmentation is a concept in economics and marketing.
A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. Segmentation of market can be done on the basis of Geographic, Psychographic, Behavioural and Demographic segmentation. Phuket automobile have segmentation according to: Geographic Segmentation Phuket Automobile has done segmentation on the basis of Geographic location where in they will sell their cars only in Switzerland.
The company is trying to test market in Switzerland in Europe. This is how Phuket Automobile can do segmentation on the basis of Geographic. And people in Switzerland are not ready to buy higher level rate cars so according to income segmentation Phuket should target middle level people. Demographic Segmentation Family Size – Segmentation of automobile can be done on the basis of family size of the consumers as Phuket automobile is making a car which is a small hatchback. Only small family.
Income – people in Switzerland are not ready to buy higher level rate cars so according to income segmentation Phuket should target middle level people. Social Class and Lifestyle – The segmentation of Phuket automobile can also be done on the basis of social class of the people and their lifestyle. Those who want to have a small car with good speed and mileage and those who want to go for an outing can use these cars which are developed by Phuket automobile. So company can also segment the customers on the basis of their lifestyle and their social class. FUTURE COMPETITIVE ADVANTAGE Analysis of Present Situation in Market
The present situation in Swiss Automobile segment is considered to be almost saturated, as the data suggest that every house have 5:4 ratio of having 1 car and 5:3 ratio showing that this house having 2 cars. , Switzerland has the highest rate of car ownership in Europe . It is also worthwhile to note that Swiss market does not accept Japanese technology cars so easily and that the reason that Japanese car manufacture (Toyota) fall in 10th position in the top 10 list of car manufacturer in Swiss. The present trend also suggests that people in Swiss market now are inclined more towards low priced full featured cars.
The people in Swiss are now going for a small Car packed with features; the sedan and hatchback are moving the market. As it has been discussed earlier that the market is at the verge of Saturation, so entry of Phuket Automobile in such a market condition is questionable and also it would be difficult for company to perform in such a tough market condition. FUTURE ACTION PLANS * Technological advancement: To compete in market and capture the market share it is necessary for Phuket to upgrade its cars with better and better technologies which will help them to increase their sales in the Swiss market.
* Increase contacts: Phuket is entering into new market so it is necessary for the company to establish the good relationship with the other existing player and build the image in front of the customer * Developing Dealership Network: To sustain in this market Phuket Automobile should have proper and well organized dealer network which help the company to establish itself in Swiss market.
Subject: Automotive industry,
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 8 February 2017
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