A Unique Take On Positioning and Market Segmentation - Case Study Example

TABLE OF CONTENT Executive Summary 1 Tesla Car from USA to Saudi Arabia 2 Introduction 2 Description and Justification for Country Recommendation 3 Competitor Identification 4 Cultural Profile 6 Country of Origin, Foreign and Domestic Consumer Predispositions 6 Market Segmentation, Target Marketing and Positioning 7 Conclusion 9 References 10 Executive Summary The culture and marketing approach of Tesla has always been extremely innovative, competitive and efficient, and different from the other automobile manufacturers. This approach to marketing is unlike the customary marketing management approach of the automobile industry, which prefers mass production and marketing. Most importantly, Tesla cars are made with novel technologies to defy pollution, which is the need of the hour in oil rich countries like Saudi Arabia. The Saudi market, despite its smaller size, does not have its own automobile manufacturing industry. Nevertheless, in the recent past, Saudi Arabia has adopted measures to transform itself into the automobile hub of the Middle East. This situation accords greater opportunity to the US motor market to introduce the Tesla car into Saudi Arabia. Due to its heightened traditional cultural values, any new business expanding into the country should display mutual trust and confidence. In addition, increase in the country’s per capita income and scarce public transport system paves the way for the growth of car business in the Saudi market. Japan is the main competitor for this business, since it holds the major share of the automobile market in Saudi Arabia, with the US having the second rank. The young and old members of the multi-ethnic society of Saudi Arabia are the target market for the business expansion of Tesla cars. This report, after taking all the above issues into consideration, strongly recommends expansion of the Tesla car business in Saudi Arabia. Tesla Car from USA to Saudi Arabia Report submitted with respect to expansion of business in Tesla cars from the United States to Saudi Arabia. Introduction Tesla Motors (Tesla) constitutes an international enterprise that designs, manufactures and markets electricity powered vehicles and components. It is the only manufacturer that sells zero-emission cars in serial production. Tesla was the first automobile manufacturer to produce and market battery electric vehicles (BEVs) that were highway-capable, in serial production[Bir15].Tesla has adopted a strategy of selling sleek and eco-friendly designs at high margins. From its humble beginnings as a single retail store in 2008, Tesla has grown to 18 stores across the world, a production facility spread over 350,000 square-feet, and global sales in approximately 30 nations[Man121].Tesla has continuously defied the traditional business principles, and planned for tremendous growth, by adopting open source principles. This company is poised to achieve the status of the car company of the 21st century[Vau17]. In addition, Saudi Arabia had been expected to undergo phenomenal growth in 2013, due to the expansion of the non-oil sector, and the unprecedented growth in household expenditure and a highly expansionary economic stance of the government. Saudi Arabia’s Central Department of Statistics had disclosed that real GDP had increased by 6.8% in 2012 from 8.5% in 2011 and 4.8% in 2010. This has been illustrated below: [Bus132]. Description and Justification for Country Recommendation The Saudi market is conducive for Tesla cars business expansion. Saudi Arabia has adopted measures to transform itself into the automobile hub of the Middle East. At present, it constitutes the largest importer of automobiles and accessories in the region, with more than 770,000 sales of automobiles a year. The National Industrial Clusters Development Programme has identified the automobile sector as one of the five priority industries of this nation. General Motors, Isuzu and Daimler-Benz have commenced production in Saudi Arabia[Lar17]. The Saudi Arabian market, despite being smaller in size and not having local automobile production, constitutes a strong market for US made automobiles. As of the year 2009, the US had exported more than 42,000 vehicles to Saudi Arabia. This expanded to 90,000 vehicles by the year 2010. In 2012, the number of vehicles exported from the US to Saudi Arabia was in excess of 145,000. Sport utility vehicles (SUVs) manufactured in the US are in great demand in Saudi Arabia[USD156]. The major advantage of using an electric car is that the required electricity can be from any source. Consequently, the Tesla car can be provided with electricity originating from fossil fuels or eco-friendly sources, including biomass, hydroelectric, solar energy or wind[Bas132]. This makes it possible for the Tesla car to remain on the road while negotiating sharp turns and facilitates quicker starts. Competitor Identification The main competitor to the US car market in Saudi Arabia, is the Japan automobile industry. Among the GCC nations, Saudi Arabia has the largest automobile market. Subsequent to the recession, Saudi Arabia has demonstrated a tremendous demand for automobiles. This revival in the automobile market can be attributed to substantial fuel subsidies, increasing per capita income, and scarce public transport. It had been estimated that automobile sales in Saudi Arabia would be around Saudi Rials (SR) 34 billion in 2009. Moreover, Saudi Arabia has an extensive market for second-hand cars. As of 2008, 46% of the vehicles owned in that country had been purchased second-hand. This market had been diminishing at the mean rate of 4% during the past 4 years. The leading exporter of cars to Saudi Arabia has been Japan followed by the US and South Korea[Res102]. The Central Department of Statistics & Information, in 2006, published a report. This had disclosed that Saudi Arabia had imported in excess of 500,000 cars from Japan, US, Europe and South Korea. From 2004 to 2006, the newly acquired Japanese cars had constituted 62.5% of the total number of cars, US 29.5%. 8.5% from South Korea and 6.2% from Europe. This has been depicted below: [Soh10]. [Soh10]. The reality is that the car manufactures and spare parts suppliers of Japan have cornered most of the Saudi market. There are several local factories that manufacture batteries, converters, exhaust systems, filters and radiators. Albeit, some of the spare parts are produced locally, most of the automotive parts are imported from Japan[IBP15]. Nevertheless, Tesla envisages a network effect consisting of dealership, distribution and service network. This company has divulged that one of the common customer queries relates to the servicing of their cars. In order to address this issue, Tesla has instituted and expanded service centres that are owned and operated by it. Moreover, Tesla has taken steps to maximise the value of software and hardware, and to internalise those benefits[Str151]. Cultural Profile Saudi culture welcomes clear standards of proper conduct in society. Saudi culture, can be descried as one that depends to a major extent upon body language, eye-contact, tone of the voice, facial cues, use of silence and other indirect communication cues. Significantly, establishing trust is central to the business culture of Saudi Arabia, and favours dependent upon mutual benefit trust are established means for improving these cultural values[AlS13]. It had been noted by Hofstede that the countries of the Middle East depicted the cultural traits of substantially high uncertainty circumvention, collectivism orientations and power distance. The high power distance index of Saudi Arabia denotes significant disparities in power and wealth in that nation’s society. Moreover, Bjerke and Al-Meer had discerned that high power distance orientation could result from the Islamic perception regarding authority in their society. Cultures with high collectivism tend to entertain very clear standards of proper conduct in social situations and avoid novel situations that do not have clear behavioural norms. In addition, high uncertainty avoidance addresses tolerance for uncertainty[AlS13]. Due to this trait, such societies tend to be reluctant to accept change. Country of Origin, Foreign and Domestic Consumer Predispositions Saudi Arabia has become a lucrative market for foreign firms, due to its young and multi-ethnic society. It is quite possible for the success of a product, in a foreign market, to be dependent upon the attitudes of consumers towards the origin of the product, including country of origin, and consumer ethnocentrism, animosity, dis-identification and affinity. Analysing these factors provides an outcome that should form the basis of strategic recommendations. Saudi Arabia is, from the point of view of strategy, rapidly transforming itself into a modern and lucrative market for foreign companies due to its young and multi-ethnic society. In addition, Saudi Arabia has become a member of the World Trade Organization[Soh10]. As a consequence, foreign firms have been actively lobbying to gain entry into this market. Market Segmentation, Target Marketing and Positioning It had been predicted that the Saudi market would realise the million-car benchmark, by the year 2017. As of the year 2014, the sales data ranged from 600,000 to 820,000 cars per annum. In addition, the annual growth rate of automobile purchases had been 11%. Among the GCC nations, Saudi Arabia has the best qualifications to become the regional automobile hub. This nation enjoys the requisite population depth and prosperous consumer base with high to moderate disposable incomes. The median age of Saudi Arabia is 26 years[Mur142]. Moreover, it has a vast labour force that is comparatively cheap, and a surfeit of cheap energy, central location, and raw-materials with sea ports for regional export. This type of environment will be conducive for Tesla motor market expansion. With regard to the target market, for the Tesla cars, the primary target market has the following demographics: people of age range from 30 to 60 years; families that belong to the upper middle class of society; and a household income that is in excess of US$80,000 per annum. Moreover, the psychographics relate to concerns regarding the consumption of gasoline and the economic value of the automobile[Tes17].Thus, Tesla has a target market comprising of students, families, young and old people with age ranges of 18 to 60 years. Finally, with regard to advertising, the main media are Facebook, Twitter and YouTube[Tes171]. Tesla had adopted the strategy of catering to a wider range of the electric car segment. To this end, it had introduced a middle priced electric automobile. There had been keen expectations that the targeted segment would become very large, on account of increasing consumer awareness regarding environmental sustainability. In addition, this segment has been projected to experience increase in profits, due to the lower costs of manufacturing electric car batteries on account of the economies of scale derived from burgeoning sales volume[Iac13]. In order to launch a successful product, it is necessary for a brand to position a product in a way the addresses consumer requirements in its related market segment. The increasing popularity of the Tesla brand is due to its explicit approach towards its market segmentation and brand positioning. Thus, Tesla has achieved the market position of entry level luxury electric car. This brand caters to the needs of customers who desire an automobile that is eco-friendly and luxurious[Apa14]. This has accorded Tesla with a unique position in the automobile market. In Saudi Arabia, where the pollution levels are very high, customers naturally prefer and need eco-friendly cars, which is an additional benefit to Tesla cars while positioning their product. The economy of Saudi Arabia is 30% of the GDP of the Arabian countries. Moreover, 60% of its population is less than 30 years of age. Furthermore, Business and Entrepreneurship in Saudi Arabia furnishes essential information to investors for foraying into the intricate business environment of Saudi Arabia[Lar17]. Tesla implemented the customary automotive marketing strategy. This accorded importance to the aesthetic, hedonic and illuminating features of their car[Mar162]. Thereafter, this company undertook cognitive rational appeals. Conclusion Instead of merely emphasising the eco-friendly features of their product, Tesla highlighted the aesthetic and hedonic indulgence of their vehicle and the outstanding experiences that would ensue. The above discussed factors are favourable for expansion of Tesla car business in Saudi Arabia. After analysing all of the above issues, such as competitor identification, justification for recommendation, cultural profile, predispositions of customers, target market, segmentation and positioning this report strongly recommends business expansion of US Tesla cars into the Saudi Arabian automobile market. References Bir15: , (Birk, 2015, p. 2), Man121: , (Mangram, 2012, p. 296), Vau17: , (Vaughan-Nichols, 2017, p. 7), Bus132: , (Business Monitor International, 2013), Lar17: , (Larkin, 2017, p. 2), USD156: , (US Department of Commerce, 2015), Bas132: , (Basu, 2013, p. 36), Res102: , (Economics Week, Atlanta, 2010, p. 1048), Soh10: , (Sohail & Sahin, 2010, p. 246), IBP15: , (IBP, Inc, 2015, p. 138), Str151: , (Stringham, et al., 2015, p. 95), AlS13: , (Al-Somali, et al., 2013, p. 820), Soh10: , (Sohail & Sahin, 2010, p. 246), Mur142: , (Murad, 2014), Tes17: , (Tesla Motors Deca, n.d.), Tes171: , (Tesla Motors Deca, n.d.), Iac13: , (Iacobucci, 2013, p. 38), Apa14: , (Apalko1, 2014), Mar162: , (Martin & Väistö, 2016, p. 204), US Department of Commerce, 2015. Trade in US Vehicle Exports, Washington, DC, USA: International Trade Administration. Vaughan-Nichols, S. J., 2017. Tesla Will Rule the Car World. Computerworld Digital Magazine, 3(6), pp. 6-7. Read More