Marketing Mix For Volkswagen Brand Marketing Essay

Marketing Mix For Volkswagen Brand Marketing Essay The Volkswagen Group is one of the worlds leading automobile manufacturers and the largest carmakers in Europe. Company owns ten car brands from seven European countries : Volkswagen, Audi, SEAT, SKODA, Bentley, Bugatti, Lamborghini, Volkswagen Commercial Vehicles, Scania and MAN. Besides automotive industry, company operates also in financial sector. Every car brand operates as independent unit with unique portfolio. Products are differentiated from low-consumption small cars to luxury one. Commercial vehicle sector offers ranges from pick-ups to buses made by Volkswagen and heavy trucks made by MAN and Scania. Firm has 94 production plants around entire Europe and 8 in the Americas, Africa and Asia. Labour power is estimated to 501,956 workers worldwide and production to 34,500 vehicles every single day. The Volkswagen Group exists in 153 countries so far. TASK 1 A  business  strategy  typically is a document that clearly articulates the direction a  business  will pursue and the steps it will take to achieve its goals. In a standard  business  plan, the  business strategy  results from goals established to support the stated mission of the  business. A typical business  strategy  is developed in three steps: analysis, integration and implementation. In the analysis step of  business  strategy  development, one of several methods is used to analyze a firms market, resources, obstacles to success and specific advantages. The goal of strategic analysis  is to identify what a  business  wants to accomplish, the strengths it can bring to bear on accomplishing the goal and weaknesses that need to be addressed prior to integration and implementation. Strategic assessment methodologies can include evaluating the  business  environment, gaming various competitive scenarios, determining what market forces are at work and rating competitors, among others. Integrating a  business  strategy  usually is one of many steps in a larger  business planning process. A  business  plan begins with an overall vision. From the vision, a  mission statement for the  business  is constructed, usually the shorter and more precise the better. A mission leads to specific goals the  business  will achieve to accomplish its mission and that in turn leads to  strategy  to achieve goals. Specific tactics are usually then developed to support the business  strategy. Porters five forces model illustrated in Figure below helps to measure the industrys attractiveness by examining the threat of new competitors and substitutes, the 13 bargaining power of buyers and suppliers and the degree of rivalry between existing competitors. (Porter 1984, 24) Porters five forces emphasizes the external scanning which indicates the opportunities and threats in the markets.(Wheeler Hunger 2006) An opportunity or threat could be events or trends that may affect the company in a positive or negative way when certain strategic actions are followed. (Aaker 1995, 21) These five forces shape the attractiveness of an industry and particularly that the company can make use of these five forces to gain sustainable competitive advantage in the market of competition. This influences the barriers of entry in the industry which includes issue like companys economic size, the product differentiation, demand for capital, and access to supply chain etc. (Porter 1984, 25-48). The first force of the model is the threat of entry of new competitors. This threat decreases the attractiveness of the industry by increasing the level. The industry structure analyses also the threat of substitute products. According to Aaker (1995) substitutes are manufactured by parties identified as competitors but with less concentration on the main industry. And these manufactures have strong 14influence over the profitability of market. The substitutes are able to provide the same requirement as the main competitors. As the substitutes can help a company to improve its price strategy and performance, the customer could choose their product without making any loss in costs. (Porter 1984, 44-46) The bargain power from buyer provide the possibility of the customer to press down price and ask more service which will decrease the profitability of a company and influence the overall business. The characteristics of an industry dominated by customers are through high volume purchase and compared lowest prices. (Porter1984, 46-48) The bargaining power of suppliers exists in markets which are highly concentrated on selling in different segments and customers. The supplier may dominate markets by increase the price level or decrease the products or service quality. The supplier can also affect the profitability of an industry where the cost level cant be covered by increasing prices by using this technique. The suppliers have dominance in the market with opposite circumstance to industry dominated by buyers. (Porter 1984, 49-50) The last element in Porters model is the degree of rivalry between existing competitors. This consists of forms of rivalry such as price competition, new product development, improved customer service and better guarantees. The defending actions against competitors are results of being threatened. The intensity of rivalry is due to various structural factors, such as the number of competitors in an industry, or whether the industry is declining or growing, or companys strategic contributions. (Porter 1984, 38-44) P5F.JPG Figure shows Porters Five Force Model (Porter 1984, 24) Pest analysis stands for Political, Economic, Sociocultural and Technological analysis. It describes a framework of macro-environmental factors for environmental scanning. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operation. (Wheelen Hunger 2006, 73-79) Political Volkswagen outsources a great deal of their manufacturing outside the Europe in continents such as Asia, Africa and South America. Due to these countries being considered as booming economies, government may encourage local residents to try minimizing purchasing products from abroad, but instead use locally produced products in order to maintain the situation of the home market and make a higher value of the GDP. However, these or any other legal or political constraints should not be a significant barricade to continue outsourcing and/or sales in foreign markets. In certain countries such as Denmark and Norway car insurance and registration alone can amount to the price of the car itself. These rules and regulations are becoming ever-increasingly popular and pose a threat to sales of cars in other Scandinavian markets and places which seek to follow such a trend. Almost all of the regulations come from consumers increasing concerns for the environment and the concern for safer automobiles. (Highfill, Copus, Smith, 2004) Economic As an advantage to Volkswagen few markets which proved to show a decline in salesmainly in Spain, which proved to show a decline of 16.8 %. Taken as a whole, sales of VW however, were on the increase- despite overall motor industry taking a dive. VW sales increased in W. Europe by 8.6 % improved sales figures. The main brands which contributed to the sales were Audi, Skoda, Bentley and the VW commercial vehicles. Sales of the VW passenger cars, such as the VW Sharan van grow tremendously in regions/ markets such as Central and Eastern Europe, Asia Pacific and North America. The percentage growth of the following markets is as follows: Asia Pacific with 17.4 % North America had a significant growth of 21.4 % Central and Eastern Europe with a larger 29.7 % Although the most part of the growth came from the Central and Eastern European markets, there proved a decline within the Polish market. As the following figures will indicate, the Polish appear to have opted for the more cost-focused car brand, from the Volkswagen Group- the Skoda. This goes to prove that the Polish customers are evidently beginning to become more cost-focused. This is the strategy the Volkswagen Group use, to aim cost-focused clients with the Skoda and for those seeking more luxury at an affordable cost it offers the clients the range from the Volkswagen product portfolio. Social Poland is doing fine during economic crisis compare to other European countries. There are few reasons for this situation. Firstly, it is a big country with huge and cheap labor power. There are almost 40 million of habitants in Poland, so it is attractive market for foreign companies. Secondly, taxation rate is relative low comparing it to for instance Denmark. Finally, location of Poland makes this country competitive. Poland is settled up between Germany and Russia, two powerful markets but in the same time close to Scandinavia due to sea connection. Poles perceive Volkswagen brand as a car maker which produces stable, affordable and reliable cars. It is based on German hard-working spirit and precision, that is why Volkswagen cars are very popular nowadays also in aftermarket. Another advantage of having car from German manufacturer is the slowest ratio of value loss among other automotive companies. (Business in Poland Law, tax and banking, 2006) Technological Volkswagen has 94 production plants worldwide and additional 8 in Americas, Asia and South Africa. There are two production facilities in Poland. One is responsible for making parts for various models, while the other one makes commercial vehicle called Transporter. Main materials that company uses to produce cars are. Company intensively focuses on developing new technologies and innovation to become the most economical and ecological car producer in the world. Directly quoting words of board chairman, Martin Winterkorn it seems that company is aiming for the leader position within automotive industry. Till 2016 we would like to invest 62,4 mld Euro for Research Development to become number one. . Moreover, company aim also for renewable energy sources like water, wind and sun. German car manufacturer brings practical assistance service for example Park Lane, which make car seeking for space and park afterwards. Another example could be a Temporary Auto Pilot which control car under 130 km per hour. Together with Lane Assist car stays on same lane, so driver can do something else in same time. Above sentences proof that Volkswagen is consequently developing new technologies to make cars better, more ecological, more economical, more technology advanced and remaining affordable to every customer. Without doubts firm is one of the most leading if it comes to innovation in industry. (Volkswagen Technology). TASK 2 Inbound logistics: In general automotive industry right now is mainly using materials like steel, plastic, copper etc . By time going and constant innovation process and ecology care make this materials gets slowly substitute by other materials like aluminum, lithium and even cobalt. Volkswagen do not owe any mining subsidiaries therefore is addicted to suppliers. To secure production continuity company has to secure process of getting raw materials. That is why German manufacturer come up with raw materials strategy. This includes IT system called Central Procurement and Treasury System. Operations: An operation is the process of putting raw materials together and producing the final product. In this case Volkswagen operations process takes place in factories that company possesses. There are 94 production facilities in different locations. Company believes in systematic localization so productions plants can handle themselves the value added process. This process of international outsourcing allows reducing currency risks, transport and duties. Outbound logistics: This section focuses on delivering product to the retailers, outlets, stores or DTC. Firstly it is important to state that company has own logistics department called Volkswagen Logistics which deliver products to Volkswagen outlets. As it was stated before different productions facilities produces various parts and models. From those facilities cars are ready to be transported into outlets. Volkswagen Logistics uses mainly road transport and big trucks to transport ready to use products. Marketing and Sales: This section describes pricing, promotion and selling the final product within value chain. Volkswagen makes adverts spots independently. Usually spots describe specific product or new technology invented to the car. They are played on TV stations, Internet websites, YouTube. Social services where Volkswagen exists like Facebook and Twitter allow users to share experiences with Volkswagen brand. It is a great tool to create a relationship or brand loyalty with actual customers and acquire new one. http://www.coursework4you.co.uk/essays-and-dissertations/images/value-chain-fig1.jpg Figure shows a Value Chain SWOT analysis provides the strengths and weaknesses as an internal factor of the company and Opportunities and Threats for the external environment of the company. Any company has to change its strategic planning according to the SWOT analysis. SWOT analysis will also help the company to analyze the prospects after the acquisition of a Chinese car company. Strengths Volkswagen has strong position in the Chinese market as it has a long experience in this market. Volkswagen has a strong brand portfolio; a good mix of luxury models are included in its portfolio and German engineering with competitive pricing will make a big difference. Volkswagen has a strong research and development department which continuously works for the improvement in the quality, functionality and environmental compatibility. Volkswagen design team can come up with the customize design which will suit the customers of China. Weakness Poor performance in Africa and North America can be issue for concern for Volkswagen. Operational inefficiency and weaker productivity are other reasons for concern for Volkswagen as it has relatively low employee productivity compared to its competitors. Opportunities There is encouraging rate of growth in the Chinese car market. Chinese car market has reached $98 million in 2008. Market consumption has reached to 7.4 million units in 2008 which is an increase of 17.8% compared to previous year. The volume of market is expected to reach 13 million by year 2013 (Datamonitor, 2010). Threats Increase in the production cost due to the increase in the raw material prices. Increase in the government rules regarding the labor may also increase the prices. Increase in the competition may cause price wars due to which there will be fall in prices. There is enormous growth potential in the automotive industry in China and in the coming few years, various factors will derive the demand. There are enormous growth prospects in Chinas car market, the rate of car ownership is low and financial industry for automobiles is immature. As China is a developing country, its economy is expected to increase rapidly, it is least expected that the car industry will grow in a steady or balanced way. The car registration rate rose in 2002 and 2003 was 63% and 70% which were not sustained and the growth rate was moderate in 2004 with 16% and further modest in 2005. This slowdown of growth coincided with the huge investment in the productive field which led to the decline in the prices. However a utomotive sector recovered very strongly with the growth rate of 30% in 2006 and 24% growth rate in 2007 respectively (Automotive Industry Report, 2009). TASK 3 Marketing Mix for Volkswagen Brand For brand strategy of Volkswagen there is involvement of first P according to marketing mix is Product as described in model. The product in this model is defined as that combination of services and goods sell to the customers by the company or organisation in target market (Armstrong Kotler, 2005). From analysis it is found that product is also a part of Brand name. Design and quality are the main product features that possess variety in them. Here an example can be quoted for a brand of Volkswagen Touareg that has been sold in India comprises of a package of seating, engine, breaks and engine etc. (Volkswagen India, 2009). Hence for product strategy the company is equipped with variety and design in their products including warrant for them which in turn results in good response from the customers and make them satisfied and bring loyalty in them. The second P in this model if marketing mix is price. Price is of a product or service is defined as that amount which is paid by customer to the organisation or company for buying their products or services offered to them (Armstrong Kotler, 2005). While discussing the price strategy it has been found that there are 61 dealership offers high prices for the products to sell in India as compared to their rivals like Honda city and Ford, but there is variation that the company charge interest rate by 4.5 5.0 % instead of other rivals make with 8% or more as a loans given by banks or building societies of other rival car makers. This facility is attributed by the Volkswagen financial Services that aided to support the sales of the company to their customers. There is next P for the marketing mix is Place that is also very crucial in Brand management. The place usually referred to that place where there is availability of products of company to their customers. As in concerned to Volkswagen the company involved in using dealers and distributors for the purpose of the sales of their products. There are two modes for the dealers to get authorised either through franchised or direct ownership of company. For the company their network related to their dealers is very important and is maintained in a proper way because the product of the company are introduced through them to the customers, hence it is very important. In the views of Kotler 2005 the company usually share their losses and profits both with their dealers for purpose to maintain the quality of cost leadership. At present the Volkswagen has fine relationship with their dealers in India and also involve in the dealing of their products with Skoda with 61 leaders (Top News, 2010). The last and fourth one P is Promotion. The promotion has variance in their objectives that has to be achieved in market. The promotion is usually handled with the tool of advertisement. The promotions for customers are added through the advertisement that results in the excitement among them. The aim of promotion is to pull in target consumers. These promotions are based on the scheme of non profit but in turn results in the profit for the company (Bradley, 1993). For example the Volkswagen Company in year 2009 has launched a promotion named Pre Monsoon campaign published by Motor beam, 2009. This promotion is for the purpose to establish the brand of company India. In India the company offered a variety of range of services to their customers and fro this company is getting profit from the promotions of the company brand. Market development According to Reiziger (et al, 2003) when a company took entrance into a new market and launch themselves by introducing existing products this is came to know as the development of market, and the main aim of the company is to lure the customers from the their existing competitors in that exiting market i.e. new market. The company Volkswagen has got the entry into Indian market in 2007 by launching their product Jetta, then after two years in 2009 the company has launched two new cars in market with their existing brand using the brand value in market these cars are ionic beetle and the Touarge sedans (Volkswagen India, 2010). Diversification Again in the views of Reizger (2003) this is the entrance of any new company with having the launch of their new product under its own brand is termed to be diversification. This strategy is commonly recognised as most risky one as there is introduction of two new entities one is market and other one is product. For the Volkswagen diversification is not so risky, as it has already successfully launched a variety of cars in the market with its own brand and in accordance with its brand image and with every brand it has inched higher and created sense of the demand in the market on every launch of new products. Most currently the company has as innovation there are four new car that has gone to be launched in 2012 and these new coming products are SUVW, Couple, Up and Blue Sport (Volkswagen, 2010). CONCLUSION Volkswagen is a successful company with long history and well-known brand name. Firm tries to continue tradition from decade as a people car with putting innovation to it. Such successful company like Volkswagen is can aim for the bigger goals. With power and support of the Volkswagen Group firm has a chance to dominate automotive sector. Carried internal marketing and external marketing audit proofed that it is really hard to find a weakness within company structure. To remain successful on the market company have to use winning strategy. No matter what are the circumstances Volkswagen still have to put additional resources for research and development of the newest technology and maintain current labor power and structures within Human Resource Management. Make their products better and better in order to compete with other automotive companies. And finally deal with long term issues like how to substitute petrol. APPENDIX http://www.seeklogo.com/images/V/Volkswagen-logo-F2A46D9A81-seeklogo.com.gif http://t0.gstatic.com/images?q=tbn:ANd9GcT4wE65k57GIDmexFeoF3r7IHdy2mhBUw7aiyb79vnjeeZwYnfkdw Figure shows the 1st model of Volkswagen http://upload.wikimedia.org/wikipedia/commons/0/0b/1st-Volkswagen-Jetta-Sedan.jpg http://t1.gstatic.com/images?q=tbn:ANd9GcR7JKyGkitlyAsnNvL7B_q5aF5goOl8utO5su5BRnzWOVuRC5JJ Latest model of volkswagen