Automotive company future marketing ideas - Assignment Example

Automotive company future marketing ideas [Insert [Insert and Unit] [Insert [Insert Automotive company future marketing ideasIntroductionFuture marketing strategies indicate that an organization is prepared for either present or future changes especially if it is a radical departure from the present strategy. Marketing strategies determine whether a company will succeed or go bust particularly in the automotive manufacture industry, which is seeing a lot of changes and advances in technology. This is driven by stringent requirements on emissions and rising energy costs that have seen consumers prefer more fuel efficient vehicles.

This paper will evaluate the pros and cons of adopting production of smaller and more fuel efficient vehicles as opposed to continuing with the production of bigger cars which are more profitable and make a conclusion at the end.Literature reviewVehicle manufacture economics debates generally agree that sports utility vehicles and pickups are more profitable than the smaller but more efficient cars. Moving away from the traditionally profitable big vehicles segment to smaller cars is on paper not a very good idea especially with the automotive industry just recovering from a global slump.

The marginal cost pricing principle states that the market price of a good equals its marginal cost which implies the gross margin accruing from every product is zero (Bernanke, 2004). The reason SUVs are priced higher and so more profitable is because companies want to meet their corporate average fuel economy (CAFÉ) targets by selling smaller cars. This enables them sell one bigger car for every small car and so they can accept lower margins of profit for small cars (Kwak, 2009). Selling smaller cars therefore would still allow for profitability if bigger cars are reduced.

The other reason why the strategy is good is that small cars are bought usually by younger first time buyers and so selling them a small car cheaply will tie them to come and buy a bigger car in the future say when they are into their mid thirties of early forties. Smaller cars have a lower price and therefore are likely to have more buyers than the big more expensive cars especially for first time buyers. Higher volume sales will offset the lower profit margins in selling smaller cars. With high energy prices and environmental awareness, consumers in the future will prefer smaller more efficient cars that are environmentally friendly (“Rush lane”, 2011).

Smaller cars are also easier to maneuver in traffic and when parking especially with growing congestion in urban areas and many more cars getting on the road. Smaller cars are also considered easier to handle when driving and this benefit can be applied to avoid collisions and accidents when driving (“National Academy of Sciences”, 2003).However, small cars still have the direct economic disadvantage of having lower margins compared to larger cars. This will affect a company’s bottom line if it phases out the larger cars as the firm must maintain high volumes which is dependent upon many factors; key among them the economy and demographics.

Bigger cars are considered safer when driving and customers who rate safety highly will be lost by producing only smaller cars. Smaller cars being small have smaller spaces and will be unsuitable for bigger families for instance when driving long distances. The smaller cars also sacrifice comfort and space, which will lead to loss of customers with an eye for comfort and luxury.ConclusionCurrent trends show rising energy prices that make it prudent to produce smaller more fuel efficient vehicles.

Based on the marginal cost principle, smaller cars may not be less profitable but a way for producers to meet their CAFÉ targets by accepting lower margins on small cars. People are beginning to prefer smaller cars for fuel efficiency, and ease of handling. Big cars on the other hand offer safety, space, and larger capacity. It is therefore prudent to focus on smaller cars in the future but retain larger cars although on a smaller scale; they should not be completely phased outReferencesBernanke, B. (2004). Principles of microeconomics (p. 180) New York: McGraw Hill group of companies. Kwak, J. (2009, June 02).

Why are SUVs more profitable? Retrieved from http://wallstreetpit.com/4707-why-are-suvs-more-profitable National Academy of Sciences (2003). Effectiveness and impact of corporate average fuel economy (cafe) standards (pp. 107-109). Washington, DC: National Academy Press.Rush Lane. (2011, Nov 12). Mercedes Benz to launch more small cars in coming few years Retrieved from http://www.rushlane.com/mercedes-benz-to-launch-more-small-cars-in-coming-few-years-1225554.html