2.3 Market Analysis
2.3.1 The Chinese Market
China is a fast growing and open market. New ideas and products from the western hemisphere are adapted and easily introduced.
China’s economical growth is enormous, since end of 70s – after starting to open up the market - Chinese GDP is growing in average o 7% every year.
Generally, it can be said that the Chinese automobile industry witnessed a fast development since the country opened up to the outside world and adopted economic reform policies. China’s entry into the WTO will offer opportunities for expansion as well as improvement of the automobile market. The growing market demand will possibly strong enough to realise economies of scale.
Especially, the 10th Five-Year Plan period (2002-2007) will be very important for the development of the Chinese automobile industry.
China’s large population of nearly about 1.3 billion people could be regarded as engine for Asia’s economical development. Taking the economic growths into account, this will also result in rising living standard of the Chinese people; therefore the number of consumers who buy cars will increase. Well funded middle class offering high purchasing power which means continuous increasing demand in cars, real estate and entertainment electronics. Chinese consumers with increasing amounts of discretionary income now demand the latest and greatest products
In the long-term view, China is a potential and important market offering great opportunities as China is regarded as the world’s fastest-growing automobile market with potential for growth and profits.
SWOT
2.3.3 Critical Key Success Factors
Generally it seems to be that branding, scale and manufacturing productivity and flexibility are three key strategic success factors in the automobile industry. It is very important for any company which wants to be successful that it should be able to balance these factors working a ‘magic triangle’ for success.
Nevertheless, there also other key success factors, as customer loyalty and product momentum. One of the key drivers for success in the short to medium term of being a successful automobile company is the launch of new models.
Branding stands for the ability of a company to develop a distinctive image for its products, which will then allow it to develop customer loyalty and superior pricing.
Scale advantage should allow companies to realise cost advantages in purchasing and by reaching a better spread of R&D and other fixed costs.
Manufacturing productivity and flexibility determines cost competitiveness and the ability to adjust output to demand, avoiding an oversupply of products in the market which puts pricing under pressure. It offers the opportunity to adapt to different market situation, especially on the demand site.
2.4 Core Competitors
2.4.1 Bayerische Motoren Werke (BMW)
BMW manufactures and sells luxury cars and motorcycles worldwide. In many respects, BMW is a benchmark in the industry with strong branding and flexible manufacturing, combined with a succession of home run products. BMW is positioned as the ‘ultimate driving machine’.
BMW’s brand ranks highly in terms of customer. BMW is undoubtedly one of the strongest premium brands in the world, maybe only slightly surpassed by Mercedes in terms of brand recognition and status.
BMW has been very effective in bringing across a luxury image with its products, while at the same time cultivating a very sporty and dynamic message.
With the launch of the new Mini two years, BMW established a premium brand in the sub-compact segment. The vehicle is small, but it is certainly not cheap.
2.4.2 Volkswagen
The VW brand portfolio consists of four main brands: the Volkswagen brand, Audi, Seat and Skoda. VW also owns the Bentley, Lamborghini and Bugatti brands. The previous CEO Piech rightly recognised the value of brands. However, the lack of disciplined brand positioning led all brands to compete against each other in the premium end of the market; at least all attempted to move there.
Volkswagen is still the leader in China’s a foreign automobile company, although it is loosing market share. Volkswagen’s plants are located in Shanghai (A0 Polo, Golf) and in Changchun (Audi A4, Passat). Currently, Volkswagen is selling more cars in China than it does in its home market of Germany.
2.4.3 General Motors
General Motors Corporation manufactures and sells vehicles worldwide under the Chevrolet, Buick, Cadillac, Oldsmobile, Pontiac, Saturn, and GMC brands.
General Motors, with a market share of less than 10%, is the second-biggest foreign automaker in China right now. Its sales increased by about 38% in the first nine months of 2003, owing largely to a strategy that calls for introducing new products in China and then revising them quickly.
2.4.4 Ford Motor
Ford Motors designs, manufactures, and services cars and trucks. Ford is the world’s second-largest automaker, with eight brands marketed worldwide. Like most other automakers, Ford has some brands that are globally recognisable and others that are not. Brands such as Ford, Jaguar, Volvo, Land Rover, and Aston Martin have extremely high global brand recognition.
Ford Motor has been late in entering China and is struggling to get off the ground there.
2.4.5 Honda
The Honda brand is well known throughout the world and ranks with Toyota as having the strongest brand power among the Japanese automakers. Honda annually sells around 2.82m vehicles worldwide, making it the world’s eighth largest automaker and second only to Toyota among the Japanese makers.
The general question concerning the Chinese automobile market to be addressed is how fast business will expand in China and Southeast Asia. Honda’s long-standing motorcycle businesses in China and Southeast Asia have given it a distinct advantage in the form of strong brand recognition and an established network of suppliers. Honda is rapidly building up its operations in China.
3. BUSINESS MODEL
3.1 Vision
The vision of Mercedes-Benz China Ltd. is to create a unique brand identity of smart in China. smart should be a car with a reputation for putting a smile on people’s faces.
3.2 Mission
Mercedes-Benz China Ltd. mission is to make a contribution to the long-term development of China’s automobile industry.
3.3 Competitive Marketing Strategy
3.3.1 Core Strategy
When establishing the core strategy a company has first of all to define its business purpose or mission. Companies have to ask themselves the question ‘What business are we in? What business do we want to be in?’.
Mercedes-Benz or smart certainly will answer this question with stating that they are currently in the automobile business and that they also want to stay there, even as the market leader, in future times. However, especially for smart it will not be the traditional automobile business usual for Mercedes-Benz.
Generally, Mercedes-Benz China Ltd. mission is to make a contribution to the long-term development of China’s automobile industry. smart’s mission is slightly the same with the addition that smart wants to make an innovative contribution to the Chinese automobile industry.
The vision of Mercedes-Benz China Ltd. is to create a unique brand identity of smart in China. smart should be a car with a reputation for putting a smile on people’s faces.
In order to successfully implement this strategy, Mercedes-Benz China Ltd. has the following marketing objectives
- Mercedes-Benz China Ltd., especially smart, does not want to sell cars; the aim is to sell mobility and image to the Chinese population.
- After using the brand awareness and the reputation of the Mercedes-Benz brand as a selling status in the first place, smart will develop its own brand awareness in the Chinese automobile market.
- smart will not enter the Chinese market as car being a basic commodity good. Nevertheless, it should of course fulfil needs and requirements of a car but it should be used a kind of luxury object with major focus on image and reputation. Driving a smart car should build up a positive image.
- Effective marketing communication is necessary in order to be successful in a new market in respect to both China and a new market segment for Mercedes-Benz. The objective is to effectively communicate the innovative image of smart to achieve brand awareness and additionally the major benefits of the smart car itself, namely that it is convenient in large cities also in respect to parking spaces.
- smart should offer a combination of function and driving pleasure, emotion should be the driving force.
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smart should awake the necessity to drive a smart using the following slogan “If you want to feel it, you’ve got to drive it.”.
3.3.2 Competitive positioning
smart’s competitive positioning through differentiation will be combined with positioning through innovation.
smart will create differential advantage through differentiation by creating something that is seen unique in the automobile industry. This differential advantage will be achieved on the innovative design, style and image of the smart car.
Generally, it can be said that smart as a car targets the small automobile sector. However, as smart differs from the traditional automobile it is necessary to establish the smart brand in the market as a fun, lifestyle-oriented, innovative – simply ‘a must to have’.
smart’s new target market will be more upscale Chinese buyers, i.e. wealthy young and trendy business generation that will have the money of the future.
smart will target especially large Chinese cities, i.e. Beijing and Shanghai. Business activity is concentrated along China's eastern seaboard, particularly in Shenyang, Beijing, Tianjin, Shanghai and Guangzhou. Additionally, fast developing big cities as Qingdao, Changsha or Chengdu will be approached.
3.3.3 Implementation of Strategy
First of all, smart will use the brand awareness and reputation of Mercedes-Benz to introduce the smart car. Afterwards, excessive brand management has to be done in order to create an own innovative brand in China.
The marketing mix (product, price, promotion and distribution) translates the company’s strategy from a statement of intent to effort in the marketplace.
In order to implement the marketing strategy successfully smart’s marketing mix will be as follows.
Product
smart being the youngest car brand of the Mercedes Car Group should therefore be a young, trendy, fun, lifestyle-oriented, innovative automobile – a car simply ‘a must to have’. Through the innovative brand, every moment behind the wheel should be an experience in itself.
Price
As smart should be a fun, lifestyle-oriented, innovative automobile – a car simply ‘a must to have’, the price will be relatively high. Through the innovative brand creation smart will give its drivers the feeling that it justifies its pricing premium.
Promotion
The smart message “open your mind” has clearly to be communicated to make the Chinese people understand the meaning of this message.
Mercedes-Benz China Ltd. will run local campaigns in order to get the Chinese population aware of smart. One possibility of getting smart known is to offer smart as an incentives to Mercedes-Benz employees in China. They should drive the smart car as a kind of company car which makes the car visible on Chinese streets, popular and be seen by Chinese people and of course it attracts people through its innovative design.
smart showrooms must be positioned visible and flashy, appropriate within for example important business districts within the target market. Mercedes-Benz China Ltd. will either go into already existing Mercedes-Benz showrooms or build up the so-called smart towers.
When opening a new smart centre or a smart tower, Mercedes-Benz China Ltd. will organise large smart launch parties with lots of entertainment and of course with a lucky draw as this is very common in China and very well perceived.
Advertisement will be done in both newspapers and of course in hip and trendy magazines. Additionally, huge oversized posters will be placed on important landmarks as lately seen on Hong Kong’s building; this advertisement is conceived as innovative by the target customers and represents the image of smart. The message within these advertisements should be both “open your mind” and “If you want to feel it, you’ve got to drive it.”
Mercedes-Benz China Ltd. will use huge automobile events, like Auto China in Beijing, to promote the smart. Additionally, automobile exhibition in the target market will be used to awake awareness of the smart brand.
Worldwide Mercedes-Benz is already successfully practicing promotion on large sports events, therefore this strategy will also be implemented to the Chinese market. Sponsoring of major sports events is also regarded as an important promotion tool as these events are frequently visited by smart’s target customers.
Possible sport events for sponsoring and promotion are the ATP World Tour taking place in Hong Kong (Salem Open) and in Shanghai (Heineken Open Shanghai) Mercedes-Benz is already sponsoring these events, therefore it offers a great opportunity to introduce smart on this events.
Another example is sponsoring Golf events, for example Hong Kong Open are already sponsored by Mercedes-Benz China Ltd. Golf is very popular in China, especially in smart’s target group.
smart will also sponsor running events to show the brand’s commitment, for example Marathons in Beijing, Shanghai, and Hong Kong, the Sun Hung Kai Properties China Coast marathons, or even the Great Wall Marathon. Several “Follow Me” smart vehicles, which have become a central feature of running events sponsored by smart, will also be positioned at the starting line. “Follow Me” smart vehicles drive ahead of the field of competitors. In addition, smart timing cars will drive around the course with timing devices and will display interim times to the runners.
Mercedes-Benz China Ltd. will also sponsor other events, for example fashion shows as they quite common and also well perceived by the target group. This kind of promotion was already successfully done in Hong Kong in the Pacific Centre, in addition to the fashion show Mercedes-Benz exhibited its automobiles. The goal of smart should be to be seen in addition to the traditional Mercedes-Benz automobiles on this event. The message of this promotion should be ‘Combine fashion with a fashion car’.
Distribution
In order to distribute the smart in China Mercedes-Benz China Ltd. will use the already existing and well established dealer network throughout China in the beginning. smart’s will have a innovative distribution system according to an innovative car.
smart will use the already existing showroom of Mercedes-Benz to exhibition the car and additionally, next to certain Mercedes-Benz dealers the so-called smart tower will be build in order to make smart visible for customers.
After successfully entering the Chinese automobile market, smart will build up own distribution channels by building new smart centres and additional smart towers.
BIBLIOGRAPHY
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Johnson G & Scholes K; Exploring Corporate Strategy, 5th Edition; Financial Times Prentice Hall, 1999
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Hooley G J, Saunders J A & Piercy N F ; Marketing Strategy & Competitive Positioning, 2nd edition; Financial Times Prentice Hall,1998
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Harvard Business manager, Harvard Business Review – erweiterte deutsche Ausgabe, Januar 2004
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Witschaftswoche, Edition 41, 02.10.2003
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Rohner, Renate & Wagner, Thomas; Country Notebook ‘China’, ROWA Consulting Ltd., 2003
Renate Rohner & Thomas Wagner, Country Notebook China
Wirtschaftswoche, Ausgabe 41, October 2003
