Marketing Mix for the US car Market Chery Cars China - Case Study Example

GMS Draft Feras Nadeif Table of Contents Introduction 3 1. Company Overview 3 2. Automobile market in the United s 3 3. Marketing Mix 42. Marketing mix adopted by Chery Cars in other countries 4 3. Competitor automobile brand’s marketing mix strategy in the US 6 4. Recommended Marketing mix strategy 7 4.1. Marketing strategy for Chery cars in the US 7 Reference List 11 Lamb, C., Hair, J. and McDaniel, C., 2011. Essentials of Marketing. Connecticut: Cengage Learning. 11 1. Introduction 1.1. Company Overview Chery is a state-owned automobile manufacturer that is mainly engaged in production of cars, SUV’s and minivans. The company has gone on to become the seventh largest automobile manufacturer in China (Chery, 2014a). Headquartered in Anhui, China, the company operates in Argentina, Malaysia, Russia, Iran, Egypt, Indonesia, Uruguay, Thailand, Pakistan, Ukraine, North Africa Venezuela, Vietnam, and the Middle East. The company has grown gradually since its inception in 1997 and production level reached an all-time high when they sold nearly 700,000 units in 2010. However, since then, sales dropped to 640,000 units and further to less than 500,000 in 2011 and 2012 respectively. In March 2012, Chery went into joint venture with Jaguar Land Rover in order to manufacture and sell Jaguar Land Rover vehicles and set up a research and development facility in Changsu (Chery, 2014b). In order to increase sales to near the 2010 level, the company is considering strategies to enter the substantial U.S.A. car market, possibly with a joint new brand marquee. 1.2. Automobile market in the United States The automobile industry in the US is mostly dominated by world class vehicle manufacturers such as, GM, Toyota and Ford. In the contemporary society, people are increasingly making long tours. This factor combined with the tough road conditions has swelled demand for MUVs, SUVs and other spacious vehicles. 15.6 million units were sold in the year 2013, which was 7.6% more from the previous year (Reuters, 2014). The following table depicts the market share of top vehicles brands operating in the US. Figure 1 US Auto Sales: 2013-2014 (IBN Times, 2014) The rising demand for superior quality vehicles among US residents presents a huge opportunity to Chery Cars for gaining entry with their affordable SUVs, coupes and sedans. 1.3. Marketing Mix According to Lamb Hair and McDaniel (2011), marketing mix can be referred to as an action or tactic implemented by a company in order to promote its brand in the market. Standardized marketing mix strategy mainly involves implementation of similar marketing and branding approaches and selling of similar products throughout the world. On the other hand, adapted marketing mix refers to adjustment of marketing as well as selling strategies in different target markets with a sole objective of generating greater ROI and gaining market share (Williams and Cutis, 2012). In such a context, Chery Cars will have to formulate and implement an effective marketing strategy that is appropriate for gaining entry in the US automobile sector. 2. Marketing mix adopted by Chery Cars in other countries 2.1. Product The popularity of brands and products differ from one region to another. For examples; SUVs and Sedans manufactured by Chery are very famous in Brazil. Likewise, city cars such as, Chery QQ, is more popular in Iran and Malaysia. According to Forbes (2013), passenger cars are the most exported Chery cars throughout the world. 2.2. Price As mentioned above, Chery Cars has been consistently following adapted pricing strategy in majority of its target markets. Prices have been kept relatively flexible compared to that in China. Chery follows a market based pricing strategy, where vehicles are priced inclusive of tax, transportation costs, advertising and marketing costs (Shoham, 1995). 2.3. Promotion As far as promotion of the brand is concerned, Chery Cars has been mainly implementing a geocentric approach. The company gained entry in the Middle Eastern market (such as, in Iran) by establishing contracts with dealers, which have enabled the company to conduct word of mouth promotion (McKinsey, 2007). 2.4. Place Chery mainly focuses on target markets such as, Malaysia, Egypt, Iran, Indonesia, Argentina, Middle East and North Africa. The company has also established foothold in rapidly developing markets such as, Brazil, by establishing manufacturing facilities and assembly plants. Chery mainly implements dealership strategy, as far as ensuring robustness of distribution channel is concerned (Rose and Hinings, 1999). 2.5. Process Chery cars are mainly manufactured using either complete or semi-complete knock-down kits. The designing and manufacturing of parts is done in mainland China and are, thereafter, transferred to respective target markets. A completely new manufacturing facility has also been set up in Brazil in order to smoothen overall manufacturing and delivery process and the company is also planning to establish another plant in Philippines (Bloomberg Businessweek, 2014). 2.6. People Chery, in order to gain a broader insight about the foreign market, partners with local advertising agencies. The company has been following an adapted strategy in countries with mixed cultures and has also set up number of offices in target markets. 2.7. Physical evidence Chery has set up head offices and branch offices in various regions where it operates. The company also markets its products through one international website and various country oriented websites. 3. Competitor automobile brand’s marketing mix strategy in the US According to Forbes (2010), Toyota is one of the best selling automobile brands operating on US soil. An analysis of the company’s marketing strategy will enable the researcher to recommend an appropriate marketing mix strategy for Chery Cars. 3.1. Product Toyota launches vehicles that are appropriate to local road conditions and regional environment. Sedans and SUVs are the most sold Toyota models in the US. According to Harvard Business Review (2007), main product advantage for Toyota has been the rising demand for fuel efficient vehicles. 3.2. Price Toyota has been following both low cost and differentiation as generic pricing strategy. The company is also known for offering products at discounted price during festive seasons. The pricing strategy adopted by the company is highly flexible considering changes that are made in regional transportation cost and regional tax policies (Liker, 2004). 3.3. Promotion As far as implementation of advertising and branding strategies is concerned, the company follows a 360 approach, involving tying up with local media advertisers and local advertisers so as to reach target customers (Berkowitz and Rudellius, 2000). 3.4. Place Toyota is known to adopt dealership strategy in order to sell its products in the US. The company believes in building long-term relationship with distributors (Taylor, 2003). Toyota has also designed number of TV campaigns worldwide so as to be able to supervise dealer marketing (Barney, 2006). 3.5. People Similar to Chery Cars, Toyota has also been following a geocentric approach in order to manage its employees belonging from different cultural backgrounds. The company encourages organization learning by solving internal and cultural issues (Jeannet and Hennessey, 2004). 3.6. Process Toyota greatly focuses on enhancing its car maintenance and after sales services. In addition, the company puts in a lot of effort in improving offline and online customer complaint and feedback services (Harvard Business Review, 2007). 3.7. Physical environment/evidence The headquarters of Toyota in US is situated in Torrance, California. The sales and distribution is conducted through divisions based in 50 states across the country (Harvard Business Review, 2007). The regional distribution is carried out from 12 parts assembly plants and 5 vehicle assembly plants (Taylor, 2003). 4. Recommended Marketing mix strategy Given the fact that China and USA are considerably different from each other in terms of culture, key cultural forces such as, language, ethical values and cultural beliefs, will have a significant influence on the marketing mix strategy to be adopted by Chery Cars. The company will be better off following a strategy, which combines attributes of both the marketing mix strategies. 4.1. Marketing strategy for Chery cars in the US As of now, Chery cars have been mainly following a standardized marketing strategy in its home country as well as other countries of operation. However, as far as gaining entry in the US automobile market is concerned, Chery cars will be adopting a mix of both standardized and adaptive marketing strategies. 4.1.1. Product Chery Cars sells its cars under brand names, Chery Marque and Karry. Currently, the company does not have any plans of modifying its mainstay product. In countries such as, Indonesia and Malaysia, where conditions of roads are quite similar to China, the products have not been modified by Chery Cars (Yip and Hult, 2012). Even so, hugely different environmental conditions in the US may compel the company to modify its products in order to suit needs of customers. Chery Car has to follow an adapted strategy. In this case, minor modifications in the product may increase demand. Even though the core product has to be kept intact, minor changes such as, new colours, tyres and seats, can be done to the cars. 4.1.2. Price Chery has consistently been following localised pricing strategies (adaptation pricing) in most of its target markets. However, in countries where intensity of competition is substantially higher, the company implements aggressive pricing strategies. A company follows ethnocentric pricing model by keeping the price of its products in foreign market similar to that in the home market. Geocentric pricing is the combination of adaptation pricing and ethnocentric pricing. On the other hand, the practice of setting different prices of a product in separate markets is termed as polycentric pricing. In such a context, it can be said that Chery cars needs to implement polycentric pricing strategies while gaining entry into the US automobile industry (Janet, 2012). The price have to be set relatively higher than that set in China because of higher technical and transportation costs. The company should follow a polycentric model by keeping its prices flexible that can adapts to changes in the market (such as, changes in taxation policies in the US market) (Lasserre, 2013). 4.1.3. Place In order to achieve greater regional responsiveness, companies more often than not follow adapted or local placement strategies. Chery, on the other hand, has been consistently following a geocentric approach where distribution is focussed both on local channels as well as final customers. The products can be distributed through local dealers. The company can also set up exclusive showrooms. The choice among the two distribution channels will depend upon the region as well as the level of sales. Exclusive showrooms will be established in high profile areas, which generate higher level of sales. 4.1.4. Promotion According to Hammond (2009), a company follows an adapted marketing mix, when cultures and regional traditions are considered, while designing advertisements. Chery Cars will implement a polycentric model where marketing and promotional channels are selected in accordance with locations and regions across the US. Given the fact that there is a significant socio-cultural difference between the US and China, Chery Cars should follow adapted branding and promotional strategy. The company can also employ celebrity endorsement. Based on the target demographics, hoardings and billboards can be placed nears malls, local transportations and buildings (Venail, Midgley and Devinney, 2005). 4.1.5. People Usually, companies employ a geocentric approach in order to manage employees. A diverse workforce belonging from different cultural background encourages innovation within the organization. Chery Cars will look to mirror this strategy while seeking entry into the US. Chery should hire promising young talents as well as experienced professionals who can contribute significantly towards providing the company with valuable insights regarding the US automobile market. At the same time, values and ethics of the company will remain intact so as not to lose its identity while operating on the foreign soil. 4.1.6. Process Process involves efficiency with which Chery Cars will deliver its products and services to customers. The process associated with design, production, distribution and after-sales services has to be improved in order to render them highly efficient. Time is a vital factor; hence, delivery process has to be quite sound in order to offer customers with best-in-class driving experience (Marcouse, Surridge and Gillespie, 2011). Chery cars can frame new guidelines and ethical policies focusing on distribution and after sales services. The codes shall be drafted in such a way that these encourage employees to provide world-class buying experience to customers. 4.1.7. Physical environment/evidence Physical environment includes infrastructure and external looks that has a considerable amount of influence among consumers. Currently, the company is following a standardized strategy. Majority of the activities such as, distribution and sales in emerging markets, are handled by the international headquarters. Nonetheless, as far as entry into the US car market is concerned, Chery Cars will have to engage in real estate and leasing policies with the US government (Simonin, 2004). The company should follow an adapted strategy while setting up its infrastructure. The ambience should be appropriately designed in order to instil a good feeling among customers. Showrooms should be placed in high profile areas. The company should set up its sales and marketing branch offices in commercial places in the US as well as design them in a way that grabs the attention of target customers. Reference List Barney, J.B., 2006. Strategic Management and competitive advantage: Concepts. New Jersey: Pearsons. Berkowitz, K. and Rudellius, H., 2000. Marketing. Berkshire: McGraw Hill. Bloomberg Businessweek, 2014. Company Overview of Chery Automobile Co., Ltd. [online] Available at: [Accessed 16 April 2014]. IBN Times, 2014. March US New Auto Sales Forecast: Chrysler Sales Seen Rising, Market Share the Most; Nearly 1.5 Million Units Sold, Say Forecasters. [online] Available at: [Accessed 16 April 2014]. Chery, 2014a. History. [online]. Available at: [Accessed 16 April 2014]. Chery, 2014b. Overview. [online] Available at: [Accessed 16 April 2014]. Forbes, 2010. Full List: Americas Best Car Brands. [online] Available at: [Accessed 16 April 2014]. Forbes, 2013. Chinese Carmakers Go Global. 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London: Routledge. Yip, G. and Hult, T., 2012. Total Global Strategy. London: Pearson Education. Read More