This publication is the Marketing Plan for Volkswagen, which includes the analysis and research of Volkswagen. This publication is done by: Christopher Soh Xuan Yi, Johan Cho Yao Song, Luqman Al-Hakim, Lam Kum Yuen Leon (All from UCD). Our University College Dublin (UCD) lecturers overseeing this publication are: Professor Markus Vanharanta & Dr. Ajit K. Prasad. Christopher Soh Xuan Yi is currently an Undergraduate Business Student at the prestigious University College Dublin. He can be contacted directly at:
[email protected] Executive Summary Volkswagen Group is a German multinational automotive manufacturing company headquartered in Wolfsburg, Germany (Jurevicius, 2013). Founded in 1937 but only began production in 1945 after being converted from an armament factory (Volkswagen, 2016). Volkswagen’s perennial top sellers worldwide include the Jetta and Golf models (Forbes, 2016).
By May 2015, Volkswagen has 119 production facilities across 31 countries, and sells its vehicles in 153 countries (Volkswagen, 2015). As of May 2015, it has 592,586 employees producing 41,000 cars worldwide every weekday (Volkswagen, 2014). In the same year it generated a net income of $268.55 billion US dollars and a market capitalization of $126 billion US dollars (Forbes, 2015). Their immense growth has led to an industry ranking in both 2nd in the world and in Singapore, in sales and market share (Volkswagen, 2016).
The purpose of this plan focuses towards generating greater brand awareness, gaining a larger market presence to achieve higher sales-revenue. Through market research and data from interim and investor reports, it aims to retain and increase customers, generate greater sales and profit margins.
The following will be elaborated in the tables presented in this plan. Figures shown are based on predictions of the next three years attainable by meeting the objective of being customer focused. Procuring new customers and retaining existing customers would be essential in the process of improving its positioning while reducing competition and increasing sales.
An analysis of the intrinsic and extrinsic conditions that impact the organization would first be analyzed, followed by a marketing mix to spur growth and bran repositioning and finally financial forecast will be projected with evaluative tools to evaluate the effectiveness of plans and monitor them.
With the implementation of the proposed marketing strategies, Volkswagen can expect to see an increase in local market share and brand equity. Therefore, leading to a greater success in its revenue growth and enhanced positioning. 1.0 Introduction of Volkswagen Group Volkswagen Group Singapore is an automobile retailer, and has two dealerships which offers sales and service facilities (Volkswagen Singapore, 2016). This plan focuses on the Volkswagen Golf model and the reason is because Singapore is more of a sedan car market, leaving the hatchback Golf unable to match-up and compete with competitors sedans (Leow, 2016).
2.0 Situation Analysis Volkswagen had been in the automobile manufacturing industry since 1937. Over the years it rose to popularity with a consumer needs centric mindset. In 2009 it became the largest automotive manufacturer worldwide (Autocar, 2015). However in 2015 it was overtaken by its rival Toyota, as the top ranked automotive company in terms of sales (Morris, 2015). In 2015, it was ranked 7th in terms of sales in Singapore, whilst managing to clinch 2nd spot in the overall car group rankings (Focus2move, 2015). This analysis will analyze the internal and external environment of the organization, the firm’s capabilities, customers, and business environment in order to generate strategies to outdo their competition in Singapore. This retains and increases customer base, resulting in increased profits and company equity in Singapore.
2.1 PESTLE Analysis Using PESTLE analysis, we will examine the factors in the external environment that potentially impacts Volkswagen.
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2.1.1 Economic The different economic factors hold a significant impact onto the automobile industry. The lack of control over these factors affects the way Volkswagen operates. Additionally, consumer demand and behavior in managing income are affected by these factors. This affects the organisation’s profitability:
Prices of Commodities (E.g Oil, Steel)
Changes in Interest Rates
Economic Growth
Changes in Disposable Income
Fluctuations in Exchange Rate
Level of Unemployment
Inflation Rate
Today, Volkswagen has different subsidiaries within its portfolio (such as Ford, Lamborghini, etc.) serving the different segments in Singapore. Thus it is imperative to position the Golf to meet the needs and capture majority of the Singapore car market.
2.1.2 Technological Innovations from R&D have brought about advancements in the technological landscape. These advancements have provided opportunities to redesign and improve the production process and the operating infrastructure. This brings about improved product quality, greater efficiency and lower associated costs. These technological trends includes:
R&D Creates Alternative Sources of Fuel (Electricity, Hydrogen, Fuel Cells, Hybrid Power Cars)
Improved Technology Reduces CO2 Emissions
Automation and Technology (E.g Web procumbent technologies, JIT Management, advanced logistics software) Increases Production Efficiency and Lowers Cost
Integration of Internet-Enabled Technologies in Automobiles e.g. GPS
Shift towards Driverless Technology
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2.1.3 Political & Legal The government has imposed strict regulations when it comes to trade, environment impact and incentives to buy cars. These legal implications poses limitations that stifles the business environment in Singapore (Agalawa, 2009), and affects consumer behavior. These include:
Import Laws poses limitations on the import of certain automobiles and components
Government Tax (e.g. ERP and COE) to limit number of cars on road
Tax Rebates for environmentally-friendly vehicles
Penalty for Carbon Surcharge
Vehicle Emissions Standard
This applies to the recent Volkswagen emission scandal, which has a negative impact on Volkswagen’s brand equity. Volkswagen sales in Singapore have dropped to 7th position from the previous position of 2nd (Leow, 2016).
2.1.4 Social Cultural The trends Singapore’s society and its culture also impact the usage and the choice of car or automobile that they choose. The carbon footprint and brand image of automobiles are also a concern in Singapore, where society is conscious about image portrayal (SBR, 2013). Other examples include:
Lifestyle and preferences of people that impact their needs in a car
Social trends
2.2 Industry Analysis (Porter 5 Forces) We will make use of Porter’s 5 Forces to examine Volkswagen’s relative position according to competitors. This analysis will provide understanding of the competitive landscape in the automobile industry in Singapore.
2.2.1 The Industry Structure Competitive Rivalry between Existing Players: HIGH Within Singapore, there exists numerous automobile organisations. Volkswagen and many of the large competitors offers a wide product width and depth across different segments, with the top 3
five players (including Volkswagen) occupying 49% of the global automobile market (Adam, 2014). Whereas the large players occupy a large market share, the industry is highly fragmented.
Volkswagen and its competitors (Toyota, Honda, etc.) compete for local market share and resort to competitive pricing (Volkswagen, 2015). Additionally, the Volkswagen Golf competes in the hatchback market with competitor hatchback models from Toyota, Mazda and Honda (Navoda, 2012). Whereas brand loyalty produces a certain level of consistent sales and mitigates the threat of competitor products to a certain extent, the low costs of switching to competitor brands combined with number of competitors creates a high intensity of rivalry.
Competitors who also design similar hatchback models in the market (In Singapore):
Toyota
Honda
Mercedes
Mazda
BMW
2.2.2 Industry's Ability to Retain Value Bargaining Power of Buyers: MEDIUM The majority of buyers are willing to wait for prices to lower, whilst expectations for services and quality increases. Additionally, buyers have a wide variety of car models to decide from. The presence of competitors have increased the factors that affects purchase decision, which includes quality, price, after-sales service and design of the car. These are additionally affected by the lifestyles of people which influences their choices (Navoda, 2012).
Due to the similarity in the designs and specifications of the Golf against other competitors, buyers are not limited to a few choices of cars. The availability of competitor cars combined with the low cost of switching brands, provides buyers with high bargaining power.
However, cars are not the only means of transportation; with public transportation an alternative. Cars are considered ‘luxury’ transportation modes, and the influence of buyers is divided across 4
the fragmented market. As no single group of buyers hold significant influence on products sold and pricing levels. As a result, this factor moderates the bargaining power of buyers.
Bargaining Power of Suppliers: LOW Suppliers have moderately low power in the automobile industry. The primary reason is attributed to the supplier’s reliance on the auto manufacturers. Each manufacturer has multiple suppliers for different components; Volkswagen has more than 40 different suppliers for a model. The main considerations for the suppliers are the quality, cost, and delivery of the products. Whereas manufacturers are contracted to use suppliers, the cost of switching lowers past the duration of such contracts. Inability to meet these considerations results in manufacturers switching to other suppliers (Volkswagen, 2015). Lastly, as a result of the many suppliers in the industry, suppliers have low bargaining power.
2.2.3 Long-Term Viability Threat of New Entrants: LOW The economic costs (for R&D and Manufacturing) associated and legal restrictions create significant barriers of entry. High amounts of capital from physical manufacturing plants, cost of raw materials and human capital are required, and the ability to achieve economies of scale is required to achieve long-term sustainability (Kallstrom, 2015).
Additionally, brand equity is an important point of differentiation given the high involvement nature of automobiles. Many automobile brands with Volkswagen included, are generally well established in Singapore, and possess a degree of brand loyalty. Thus, the high barriers of entry, strong brand recognition, established market share across different segments provides Volkswagen with competitive advantages over new entrants.
Threat of Substitutes: Moderate The wide availability of substitute products that provide the similar transportation needs includes other means of transportation such as taxis and public transportation. It is identified that means of transportation are primarily based on the cost of operating, which is dependent on individual
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financial ability. As a result, the threat of substitutes is dependent on economic stability, thus it is identified to be relatively moderate.
2.3 SWOT Analysis Using SWOT analysis (Figure 1.0), we will examine the various existing factors that can potentially impact the success of Volkswagen in Singapore, in order to make more effective strategic decisions in the marketing plan. A detailed explanation of individual factors is attached for further reference (Refer to Appendices 1.0).
Internal
Figure 1.0: SWOT Analysis Table Helpful
Harmful
Strengths
Weakness
Strong Global Presence
Competitive Market Unable to Capture Significant Market Share
Strong Brand Portfolio is Diversified
Cars Lack Environmental-Friendly and Fuel-Efficiency
Synergy
Negative Brand Image from Emission Scandal
Opportunities
Threats
Consumer Preference Towards ‘Green’ Fluctuation of Fuel Prices External
Vehicles Increasing Popularity of Hatchback and Rising Prices of Raw Materials Continental Cars Growing Economy Without
Market High ERP and COE Cost
Monopoly
2.4 Overall Analysis The costliness of cars has cause tension and is a physical divide between the rich and poor. Only a select few have enough disposable income to afford a vehicle, so everyone else must use taxis, the Mass Rapid Transit, or buses. Whilst public transport is generally well-maintained and well6
run, there are plenty who resent using. Part of this resentment has to do with the prestige that a car brings in Singaporean culture, where the socially prevalent goal is to attain the "5 Cs": car, condo, cash, credit card, and country club (Kirk, 2013). With that in mind, cars are highly desirable in Singapore. This makes pricing and value the most vital factors when it comes to selecting a car (Woo, 2007).
3.0 Marketing Objectives: Build stronger brand awareness where the brand becomes a household name and favorite Increase sales of the Golf by 80% within 3 years Increase market share in Singapore to 25% Improve brand image
4.0 Target Market The profile of a Volkswagen customer consists of the following factors:
Demographics
Geographic
Age: 25-50 Years Old
Lives in Singapore
Employment: 80.5% Employed
Total Car Market: 550, 000
Marital Status: 22.2% Single/Divorced
Total Market: 56, 000 (10%)
Education: 32.3% Degree Holders
Target Market: 10, 000 (1.8%)
Mean Income: SGD $4,001 (
