Hyundai and Toyota's Strategic Marketing and Planning - Case Study Example

COMPARING THE MARKETING APPROACH OF TWO COMPANIES (TOYOTA AND HYUNDAI) Executive summary This report analyzes the marketing approaches of two companies in the automotive industry (Toyota and Hyundai). The comparative analysis of both companies in terms of targeting strategies, market positioning and the micro environmental and macro environmental provides a clear indication that the automotive industry requires the adoption of marketing approaches that enhance the competitive advantage of the company within the global market. The two companies have adopted similar approaches such demographic and geographical segmentation however differences arise in marketing approaches essentially due to the management policies which further result to different marketing strategies. However with intense competition and globalization in the automotive industry, both companies have to adopt marketing approaches that can facilitate the expansion of their customer base. Table of Contents Executive summary 1 This report analyzes the marketing approaches of two companies in the automotive industry (Toyota and Hyundai). The comparative analysis of both companies in terms of targeting strategies, market positioning and the micro environmental and macro environmental provides a clear indication that the automotive industry requires the adoption of marketing approaches that enhance the competitive advantage of the company within the global market. The two companies have adopted similar approaches such demographic and geographical segmentation however differences arise in marketing approaches essentially due to the management policies which further result to different marketing strategies. However with intense competition and globalization in the automotive industry, both companies have to adopt marketing approaches that can facilitate the expansion of their customer base. 1 After making an evaluation of the above mentioned questions the company should then develop a strategic marketing plan which entails three basic hierarchical stages; market segmentation, profiling of the segmented markets and the development of a strategy for the market segments. After the company’s executive team has approved the strategic marketing plan the next step is to develop tactical marketing projects and programs, in order to implement the plan. The tactical program usually composes of a plan for project development, a plan for sales development and a customer service plan (Allen 2009). 7 3.1How the Two companies demonstrate that they have a strategic hierarchy 7 The company’s management policy entails making an effort to meet the expectations of all stakeholders, essentially the customers. This gives an indication that the company undertakes the process of strategic marketing and planning. The company first of all undertakes a situational analysis of its customers then develops a strategic marketing plan (Korzeniewski, 2008). 8 For instance in the developing of the Hyundai Sonata, the company developed a strategic marketing and planning program, which further resulted to segmentation of the product in various regions such India and North America. The popular mechanics Magazine, (2005), reveals that in the process of development of various generational brands of the Sonata, Hyundai studied its consumers in order to develop a product that can serve the needs of the customers. The popular mechanics Magazine, (2005), further highlights that the segmentation of the American market resulted to positive reactions from the American consumers. Hyundai’s Product Development and Strategic Planning vice president John Krafcik attributed the success to the development of an effective strategic marketing plan. The Sonata won an award of excellence called the Popular Mechanics Automotive award In the American market due to its passive and active safety features, its comfort ability and affordability which makes it popular among many consumers (Calif, 2005). 8 For instance when evaluating marketing strategies undertaken by the company in marketing the Toyota Camry. EBay, (2005), reveals that the Camry is a popular vehicle in the North American and Australian market. However it’s sales and marketing strategies are a bit cautious, because they are aimed squarely at the aspect of buyer demographics, in most cases individuals who purchase Camry are not usually very enthusiastic about cars. EBay, (2005), further reveals in the Camry is considered a mid size seden and sub- luxury car within its popular market. On the other hand in markets such as Europe the car is less popular essentially because the design is perceived as incompatible with the driving habits in Europe. 9 1.0 Introduction Marketing is one of the most fundamental aspects in business, essentially because it contributes to the success of any particular organization. As a result, the selected marketing approaches adopted by a company, should lead to attaining the main objectives of marketing which include identifying customers, to satisfy their needs and to retain them (Kotler& Armstrong, 2006). The automotive industry is one of the most competitive sectors in the global business arena. This is due to the rise of important trends which usually result from two related developments; increased competition and globalization which are basically reshaping business strategies at a scale that has never been witnessed before. Heightened competition causes manufacturers and parts suppliers to enter and compete in foreign markets in order to leverage not only their brands, but also their engineering, development, and production costs. In general Companies in the automotive industry have to adopt exclusive marketing approaches in order to enhance their marketing standing. This particular report seeks to undertake a comparative analysis of two leading global automotive companies Toyota and Hyundai, in order to evaluate the marketing approaches adopted by the companies, in the midst of intense competition in the automotive industry. 2.0 Company background Hyundai Hyundai Motor Company was initiated by Chung Ju-Yung, a Korean in 1967. The company manufactured the first Korean car; the pony which was later exported to Canada. Some of the company’s product segments developed over the years include Hyundai Genesis, Hyundai Tiburon, Hyundai Sonata, Hyundai Santa Fe, not to name but a few. The company has also made various market expansions including entry into the U.S market in 1985, by the introduction of a four-door sedan brand, Sonata. Additionally Hyundai also made expansions in regions such as Europe and India where it established manufacturing plants, which are presently a successful export and manufacturing firms. Although the company has experienced challenges in its business operation essentially in the 1980’s such as the decline in sales, the company has managed to experience steady growth over the years (Hyundai Excel the Car Directory 2007). Hyundai’s management philosophy is based on striving to develop a lifestyle that is more affluent for humanity and also add to the harmony and co-prosperity of customers, employees and other stakeholders. This particular report will focus on one of the state of art automobile products from Hyundai; the Sonata. The Sonata brand can be described as generational brand which has over the year’s undergone technological transformation resulting to creation of various models. The brand was first unveiled in 1985 in Korea and the latest brand categorized as the sixth generation was released in 2010 (The Car Directory 2007). Toyota Toyota was established in 1918 by Sakichi Toyada in Japan. Initially the company was a Spinning and Weaving Company however the establishment of the automobile department 1933 resulted to the formation of the Toyota Motor Company in 1937. Some of the product segments of Toyota include the Toyopet Model, toyota-camry, the Corolla, Prius, Lexus, Tundra pickup and the Yaris. Toyota has a good take on the global market share. In 1957 Toyota exported the first its fist car to the United States known as the crown. Toyota has continued to expand its market share by moving its production to markets oversees that are less expensive through the strategy of ordering the expansion and construction of six assembly plants in countries such as Pakistan, Great Britain , Turkey, Thailand, Japan and the United States (The Car Directory 2007). The selected Toyota brand for this particular report is the Toyota Camry. The Camry is a mid- sized type of car that is assembled in Georgetown in the United States, China and Australia. The Camry has been ranked as the best selling car in the United States since 1997. The Camry also makes good sales in Australia, Asia and the Canadian markets (Squidoo, 2010). 3.0 Strategic Marketing and Planning Strategic marketing and planning is an approach that aims at making a comprehensive review of opportunities and markets, then making strategic decisions that are long- term which fit within a company’s general strategic marketing goals. Allen (2009) highlights that it is essential for strategic marketing and planning to evaluate the company in the perspective of the customers view point. This can best be done by answering questions such as; What problems or needs drive customers to consider purchasing the companies products? What improvements can the Company make in the customers business or personal life? Which market segments are more attracted to the products of the company? Which customer values and motivations lead people to buy the company’s products? What trends or changes in the customer base affect their general attraction or interest to the company’s products? After making an evaluation of the above mentioned questions the company should then develop a strategic marketing plan which entails three basic hierarchical stages; market segmentation, profiling of the segmented markets and the development of a strategy for the market segments. After the company’s executive team has approved the strategic marketing plan the next step is to develop tactical marketing projects and programs, in order to implement the plan. The tactical program usually composes of a plan for project development, a plan for sales development and a customer service plan (Allen 2009). 3.1How the Two companies demonstrate that they have a strategic hierarchy Hyundai The company’s management policy entails making an effort to meet the expectations of all stakeholders, essentially the customers. This gives an indication that the company undertakes the process of strategic marketing and planning. The company first of all undertakes a situational analysis of its customers then develops a strategic marketing plan (Korzeniewski, 2008). For instance in the developing of the Hyundai Sonata, the company developed a strategic marketing and planning program, which further resulted to segmentation of the product in various regions such India and North America. The popular mechanics Magazine, (2005), reveals that in the process of development of various generational brands of the Sonata, Hyundai studied its consumers in order to develop a product that can serve the needs of the customers. The popular mechanics Magazine, (2005), further highlights that the segmentation of the American market resulted to positive reactions from the American consumers. Hyundai’s Product Development and Strategic Planning vice president John Krafcik attributed the success to the development of an effective strategic marketing plan. The Sonata won an award of excellence called the Popular Mechanics Automotive award In the American market due to its passive and active safety features, its comfort ability and affordability which makes it popular among many consumers (Calif, 2005). Toyota The Toyota Company on the other hand uses the policy known as’’ just in Time’’, which involves producing only what is required, when its is required and the amount that is required. The Company also works on a philosophy that it is vital to develop a detailed production plan that includes parts procurement (Kurtz, 2010). For instance when evaluating marketing strategies undertaken by the company in marketing the Toyota Camry. EBay, (2005), reveals that the Camry is a popular vehicle in the North American and Australian market. However it’s sales and marketing strategies are a bit cautious, because they are aimed squarely at the aspect of buyer demographics, in most cases individuals who purchase Camry are not usually very enthusiastic about cars. EBay, (2005), further reveals in the Camry is considered a mid size seden and sub- luxury car within its popular market. On the other hand in markets such as Europe the car is less popular essentially because the design is perceived as incompatible with the driving habits in Europe. Based on the facts presented by eBay, what is evident is that Toyota unlike Hyundai, is not very keen on the aspect of strategic marketing and planning. This is mainly contributed by its ‘’just in time ‘’policy which advocates for production of only what is required, when its required and the amount that is required, without analyzing the needs of the consumers and then embarking on strategic marketing and planning . 4.0 Macro environmental forces According to Jain etal (2010) Macro- environmental forces are factors eternal or outside the business environment that influences the performance, the decisions and strategies adopted by an organization, Macro- environmental factors are usually uncontrollable. They include changes in technology, legal, political, social, natural and economic factors. There are various macro-environmental factors that affect the automotive industry. One of the major factors is technological changes. In the twentieth centaury technological changes have really transformed developments in the automotive industry. For instance the invention of cars that have capacity to use electric motor and gas engine also referred to as the hybrid car. Such kind of technological changes impact on the demand of a company’s product as a result companies within the automotive industry will soon have to change their marketing and manufacturing strategies. For instance in terms of marketing they have to change the products offered to their targeted market (Jain etal, 2010). The political environment which comprises government agencies, laws and pressure group also greatly shape the marketing environment of the automobile industry. Automotive companies are frequently affected by legislative laws that exist in a particular country. For instance countries are progressively adopting legislation on cutting down car exhaust. This particular legislation affects companies that still manufacture trucks and cars that lead to environmental pollution. Statistics indicate that there is a recent decline in the number of consumers buying heavy trucks and cars that produce heavy exhaust. As a result marketing for such products becomes difficult (Subroto, 2005). The natural environment is another factor that affects marketing in the automotive industry. Kurtz, (2010), brings to light the fact that between the year 2000 and 2006 the world has experienced great shortage of crude oil which further resulted to fierce competition essentially among gas companies. Consequently prices of gasoline have heavily risen in many countries. The main implication of the shortage of crude oil entails adverse effects on marketing activities of automotive industry. This is because the buying behaviour of the consumers changes, which basically implies that companies have to change their production and marketing strategies. For instance Toyota recognized the changes in the microenvironment in 2000, as a result the company embarked on mass production of Hybrid cars. 4.1 Micro environmental forces Micro environmental forces are factors within the organization or internal factors that directly impact the strategies of an organization. Some of the micro- environmental factors include customers, employees, stakeholders, suppliers, and competitors (Kotler & Armstrong, 2006). Micro environmental factors affecting Hyundai The consumers are one the Micro- environmental forces that influence marketing in Hyundai. Hyundai undertakes the initiative of studying its market closely which later influences the type of products produced by the company and the type of market segments created (Hyundai Excel the Car Directory, 2007). For instance in the development of the Hyundai Sanota, the company first took an analysis of the needs of consumers and then developed a product can serve the needs of the consumers. Another micro environmental factor affecting Hyundai are the competitors. Marketing basically involves what one organization can offer better than the other competitors. Hyundai competitors include companies such as Tata motors limited and also Toyota. Although Hyundai has been striving to develop exclusive brands, the competition is still an eminent factor (Cohen, 2005). Employees also form part of the micro environmental forces that influences the operations of Hyundai. The company has employed well qualified staffs who contribute greatly to the company’s strategic plans. Employing a qualified type of staff has assisted the company in terms of developing a quality advantage (Hyundai Excel the Car Directory, 2007). Micro environmental factors in Toyota Toyota has a wide customer base essentially due to global expansion. As a result the company has been striving to meet the needs of the market essentially by innovation (Watanabe, 2007). Toyota also greatly depends on stakeholders. The company as attains greater inward investment which has facilitated its growth to external markets. Toyota shareholders also influence the types of strategies that the company adopts (Watanabe, 2007). Suppliers also influence production and marketing in Toyota. Increase in prices of raw materials has frequently had a knock on impact on Toyotas production and marketing strategies. As a result the company has in incidences been forced to increase the prices of its products. 5.0 SWOT analysis SWOT analysis can be described as the instrument for identification of the weaknesses opportunities, strengths and threats of a business. It basically assesses if a business can perform well in comparison to the various opportunities and threats counters (Scott, 1982). A. Hyundai Strengths: Quality advantage attained as a result of having qualified staff Consumers get good buying experiences Strong domestic market due to customer loyalty 2. Weaknesses: Commodity Price Risks, the barging power of customers is sometimes very high thus making the company reduce its standard prices Exchange Rate Risk which is frequently experienced in the companies global markets 3. Opportunities: Risk Factors Business Risk, In most cases the company has endeavored to take business risks through innovation and expansion  The Company undertakes various Innovation initiatives e.g. the Sanota 4. Threats: Tata motors limited  Economic slowdown  External changes (politics, government, taxes,) B. Toyota Strengths: a. Global Organization, Toyota has greatly expand its business activities globally b. High financial strength, due to highly committed investors Weaknesses a. Japanese car manufactures which increases number f competitors b. Some criticism has been made due to large-scale re-call made in 2005 Opportunities: a. Innovation for instance the creation of the hybrid car to facilitate environmental conservation b. Continued global expansion. Threats: a. Predictions of a downturn in the economy. b. Rising oil prices, this changes consumer behaviour 6.0 Market Segmentation Market segmentation is the activity of subdivision of the market into small homogenous groups which an organization can effectively satisfy. The variables of market segmentation include geographic, demographic, psychographic and behavioral segmentation (Cohen, 2005). Geographic segmentation involves the division of the market into various geographic units such as states, nations, countries, cities and neighborhoods. Geographic segmentation is useful to a company essentially because it assists in positioning retail outlets in locations that are most appropriate, as well as identifying the needs of consumers in various locations (Subroto, 2005). Demographic segmentation involves dividing the market into groups based on demographic variables such as, age, family lifecycle, income, sex, religion, race, education and occupation (Subroto, 2005).For instance a sports car is perceived to be designed for young people. Psychographic segmentation can be referred to as psychological profiles that are made on consumers based on variables such as social class, personality and lifestyle (Cohen, 2005).For instance social class is an aspect that has strong influence on the preference of buyers as a result a company may design a certain car brand in order to suite a targeted social class. Behavioral segmentation on the other hand are based on behavioral variables which are used to segment consumers they include aspects such as buyer readiness, usage rate, loyalty status, benefits, attitude occupational benefits (Cohen, 2005). The general market segments for Hyundai include geographical segmentation for instance the Sanota was greatly marketed to countries such as the India and North America. Hyundai also undertakes demographic segmentation whereby it makes exclusive designs using various such as age. Toyota on the other hand undertakes demographic segmentation, psychographic and behavioral segmentation. 7.0 Target Market: A target market can be described as group consumers that a particular business has decided to put more emphasis through marketing efforts and products (Kurtz, 2010). Hyundai Hyundai Pa’s marketing strategy is differentiated marketing. Their primary consumer target is middle to upper income professionals who need true value for their money and comfortable ride in city conditions. Also, their secondary consumer target is college students who need style and speed. Moreover, their primary business target is mid-sized to large sized corporate that want to help their managers and employees by providing them a car for ease of transport Toyota Since its founding, their company has been aiming to enrich society through car making. Their goal is to be a “good corporate citizen” constantly winning the trust and respect of the international community. Continuing in the 21st century, they aim for stable long-term growth, while striving for harmony with people, society and the environment. / Under Toyota’s guiding principles, they practice openness and fairness in their corporate activities, strive for cleaner and safer car making, and work to make the earth a better place to live. 7.1 Targeting strategy Targeting strategies are the techniques used by marketers in order to effectively satisfy the target market they have chosen (Trout& Rivkin, 1996) .One of the targeting strategies is differentiated marketing. The differentiated marketing involves the targeting the products of a business to different segments through utilizing different marketing mixes. Frequently the product characteristics are usually different within the different segments. The undifferentiated marketing strategy on the other hand entails targeting the products of a business to several or one group of buyers. In the undifferentiated strategy, marketing is basically intended for a group that seems to be the most potential buyers. The targeting strategy is chosen by the evaluation of the buying potentiality of the consumers (Trout& Rivkin, 1996). Hyundai utilizes the differentiated marketing strategy which involves targeting products to different segments using different market mixes. For instance in marketing the Hyundai Sanota, the company used different elements of the marketing mix in order to market the car for instance place the product was concentrated to two regions India and North America. Furthermore the element of price was not similar in both segments. Hyundai also used product differentiation in positioning the Hyundai Pa as the most versatile, convenient, value added car model (Subroto, 2005). Toyota on the other hand utilizes both targeting strategies, for instance the Toyota Camry was not heavily marketed in Europe in addition the production of the Hybrid cars in 2000 was done specifically for a certain targeted market (Watanabe, 2007). 8.0Positioning Strategy According to Trout and Rivkin, (1996) Positioning is an undertaking that involves making the services or products of a company fit into a particular market. In order to undertake effective positioning it is essential to put into consideration the needs of consumers. Subroto (2005) highlights that; positioning strategies are mainly derived from the product. One of the strategies is positioning by attribute, which involves associating the product with its attribute, a customer benefit or a product feature. For instance Toyota puts emphasis on products reliability and its economic value. Another positioning strategy is based on pricing and quality. For instance if a product is a luxury item it should positioned in a segment with people with high financial capability or people with luxurious lifestyles. Positioning is also done on basis of users which basically involves associating the products to the users, for instance companies dealing with heavy goods are usually a target market for tracks. Positioning is also done of the basis of the user’s application which involves associating the product with the use or application (David & Gary, 2001). Positioning is also based on competitors. David and Gary (2001) argue that in most cases companies position their products when making reference to their competitors. A company first establishes the image of the competitor before fitting in their product in a particular market. The strategy adopted by Hyundai in position its products in different markets include Positioning based on quality for instance in 2006 a survey undertaken by J.D power associates revealed that Hyundai was placed third essentially due to effectively positioning its market on the basis of quality (Tobak 2009). Tobak, (2009) also highlights that Hyundai is a company that effectively understands how to move upstream through the use of intelligent product positioning strategies. This is essentially because Hyundai is creating havoc in the automotive industry by the analyzing its competitors and then embarking on innovation and market positioning. Toyota on the other hand also uses the five key positioning strategies for instance when marketing the Toyota Lexus brand, where the company utilized all the positioning strategies. In addition Toyota also uses the positioning based on competitors just as Hyundai does for instance in 1989 Toyota utilized this particular approach when braking though the American market with its salon and luxury cars. Toyota adopted the brand extension strategy while positioning in order to beat opponents such as the German manufactures of BMW and the Mercedes (Trout &Rivkin, ,1996). 9.0 Conclusion and Recommendations The above entailed a comparative analysis of two companies in the automotive Industry. Foremost the report analyzed the concept of strategic marketing and planning for the two companies, a difference emerged between the two companies essentially from the management philosophies of both companies which influence their marketing strategy and planning. The report further evaluated micro- and Micro environmental forces in the automotive industry. In addition a SWOT analysis was only to evaluate the potentiality of the companies in dealing with the market. The report further highlighted the aspects of market targeting and positioning for the two companies. From the above analysis of the micro environmental and the macro environmental forces, other potential market segments that may be an option for both companies include behavioral segments essentially because consumer behaviour constantly changes in the 21 century. References Allen, C, (2009). What is Strategic Marketing Planning? Retrieved Calif, V. 2005 .’’Hyundai sonata wins automotive excellence award for safety’ Popular mechanics magazine. Retrieved Cohen A. (2005) .The Marketing Plan. John Wiley & Sons, Inc. David, A & Gary, S. (2001). Positioning your product. Marketing Journal R etrived EBay. (2005) .Cars - Toyota Camry. Retrieved< http://listing-index.ebay.com/cars/Toyota_Camry.html> Hyundai Excel the Car Directory. (2007) ‘’History Of Hyundai" The-car-directory. Jain, R, Mukesh, Tand Ranju, T.( 2010). Business Environment. FK Publication Retrived Kurtz, D. (2010). 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