Market Analysis of Delta Signal - Case Study Example

Delta Signal Name: Class: Company Name: Delta/Signal Corp. Address: 473 Concord Avenue, Lexington, Ma 02173 Industry: Automobile. Form of Ownership: A public Company. Nationality: US based company. Total Number of employees: 80, 000. Delta/Signal Corp is a company based in the US with vast presence in European countries such as England and Sweden. It is established in Massachusetts and it is represented by a company number 042956879. It was registered on March 31st 1987 and it is listed by SOC under Involuntary Dissolution. Currently it has three directors namely Frank P. Fotis who is the Company’s president and Treasurer and Robert W. Sweet Junior who is the company’s Secretary. The company has branches all over USA and has also managed to open production lines in European countries like England, Sweden, Switzland and Germany. The company lacks presence in the Asian markets, hence a good time to venture there for the continent has many emerging economies there like China and India who are densely populated and can provide a larger market especially in the area of low cost cars and cars for the middle class. Before deciding to venture in the Chinese market the company has to put into consideration the Macro environmental factors that they will face and have to overcome so as to succeed. These factors are broadly studied under the Umbrella of PESTLE analysis, which stands for Political, Economical. Social, Technological, Legal and Environmental factors. It is important for Delta to understand the complexities and challenges that face China’s business environment. China is an emerging market with positive economic growth and changes in its social systems. The ambitious growth targets the country has set provide both business opportunities for the Automotive Company as well as a lot of social costs. Their massive urbanization program will make the company to achieve sales targets as many people especially the middle and lower class levels will definitely acquire vehicles. Their good Infrastructure is also a plus as it encourages use of cars. The Company being foreign needs to understand the legal structure of Chinese markets as that is one of the most challenging factors when it comes to investing in China. The laws are of three kind’s domestic laws in china, international laws governing international business and the domestic laws in their country of origin in this case America. They will need to invest hugely in employing law experts to clearly analyze these laws and how they will affect their business operations. The Chinese government has enacted a law that requires companies operating in the engineering sector to share their technology to be able to sell their cars in china. This is a complicated issue as most companies with advanced technology always use their technology as a competitive strategy hence it becomes hard to “share proprietary technologies” (Kotter, 2012, p. 18). The resilience of the Chinese Economy during the time of Economic depression proves that moving to China is a positive move. Delta’s countries of operation were seriously affected including their mother country US. So they suffered increased labor and inflation rates which saw they experience massive losses. China’s environment is also good for business, due to the dense population which makes the demand for the medium cars high. The country has also advanced its technology, so diffusing Delta’s technology and that of China will help reduce the costs involved and succeed technologically in the country. Market Analysis. Market analysis will help Delta Company to study the attractiveness of operating in China and the dynamics involved in the Chinese market especially in automotive industry. It is part of the analysis of a global environment thus part of the industry analysis. The company will use their strengths, weaknesses, threats and opportunities in relation to the Chinese market and find out if they can actually survive in that environment. The market Analysis will help in the formulation of defined business strategies to use in approaching the Chinese markets. The analysis will provide Delta Company with a plan to make decisions concerning workforce, inventory, technology to be used, promotional activities and whether to establish a plant or just import already manufactured cars from their mother plant in the US to CHINA. China has an extensive industrialization process that is encouraging the rapid growth of the automotive industry. They have proven this by developing a good infrastructure and good development plans that encourage the growth of the sector. Delta/Signal Corp can take advantage of the Chinese firms that operate in automotive industry being in the early stages, thus offering very little competition. The Chinese companies can only serve the internal Chinese market on a small scale and Delta being a large company and recognized globally opening a plant in China will really boost their chances of increasing their sales (Kotter, 2012, p. 38). The company should look for a way of establishing assembly lines that serve the heavily populated medium class Chinese citizens. The government of China has also embraced the foreign investment policy especially in the automotive industry, as they believe this will stimulate the growth of other sectors like what happened in the US. Research has proven that Chinese citizens are the greatest consumers of products form the US, either through importation or through US companies established in their country. Therefore Delta/Signal Corp can take advantage of this factor and grab the big market share. The global depression that impacted negatively on the U.S. manufacturing sector made China a desirable place to open a car manufacturing plant. The capacity of china to survive global depression gives it an upper hand in the Asian market to attract many foreign countries to establish operations in their markets. This has been backed by a research that was conducted in 2008 which showed that China produced more than 8 times the vehicles they produced in the 90’s. This is an indication that, there exist a demand for cars in China and Delta cannot let the opportunity escape them. In fact if China maintains the trend, studies show that they will overtake U.S. to become the leading auto market globally. Delta/Signal Corp can establish a “technological co-operation” with Chinese Automotive firms and diffuse the two technologies to help in coming up with cars that suit the Chinese community. This will be easy because of the government policy that encourages joint ventures to help the local industries to grow. Delta will have an easy time in China because they already meet the standards set globally when it comes to product quality, environmental features and provision of safe cars, thus they can only become better by growing their value chain. They can also take advantage of the bilateral agreement between China and America which is encouraging trade between the two countries which has been on the low in the recent past. Market Segmentation. The success of Delta Company will depend on how well they do their market segmentation. They will be forced to divide the broad target Chinese market in small subsets of consumers they are targeting. In this case their focus will be on the middle- earning class in China, whom the company intends to sell low-cost and easy to afford vehicles. The segmentation will also focus on the Chinese lifestyle, as this will be a big determining factor on deciding on the model and design of a car to sell to the market segment they are targeting. China’s population majorities are the middle class citizens and since these are the people Delta is targeting, it has to take advantage of their density to plan a market strategy that will see them succeed (Drucker, 2010, p. 43). The company will be safer establishing its operation in one of the coastal cities that has seen a rise in their income and overall standard of living. The company has to do extensive market research that will focus on the big conglomerate and heterogeneous market, which are put in small segments depending on their level of education, income, family composition, culture and their occupation. In addition the company should come up with a strategy that will see their cars targeting the middle class more affordable. This will help to kill the notion that foreign goods and those produced in china through joint ventures are always expensive. Delta should also choose a location that will significantly impact on the purchasing power of their market segment, the innovations they come up with, and the willingness of the people in the area to purchase foreign cars (David, 2009, p.67). Market segmentation will also help them to identify the regional differences in terms of consumption patterns and the culture that will help them identify a good marketing strategy to get these clients. Without a doubt the company should establish a plant in the coastal region where research has shown that the citizens in this area have embraced foreign goods. The buying patterns of the citizens in the coastal region favor Delta to a great extend, largely because they have embraced foreign goods. They value quality provided by foreign goods and believe that they will meet their needs. This is a positive gesture, because price of the cars Delta will produce in China will not matter so much to the clients as long as the car meets their needs and quality they need. It is also important for the company to focus on understanding the mechanisms of consumer trends in China, to be able to come up with realistic goals and make decisions based on researched and informed grounds, as they look forward to commit their resources to establish business in china (David, 2009, p.67). Delta Company can only grow further in China if after operating in the coastal regions for a while, it can choose to expand their operations in other cities. This will work for them because of China’s diversity in their culture, purchasing power, geographical segmentation, and the big regional differences they have. The company should also work on their brand to fit the market segment they have chosen. As discussed earlier clients from the coastal area value quality and Delta being a foreign company they should invest a lot in research and development that will help them come up with a technology that will produce high quality cars that will serve the middle class. They can choose to diffuse their technology with that of China which will help the customers to embrace the product more. The customers from the coastal region especially Beijing love to shop for expensive and classy products, thus the company needs to integrate all this factors of brand, quality and shopping patterns to produce a car that will suit all the customers’ demands. Marketing Infrastructure. The main areas of focus while studying market infrastructure include, the distribution channels the company will use, the mode of advertising, the dominant promotion strategies and the pricing strategy. a) Distribution Channel. A distribution channel helps a company to bridge a gap that exists between producer of a product and the consumer, whether the two individuals are in the same location or different regions. It is very effective and efficient in ensuring that the customer gets the product in a safe and sound manner. Delta Company can choose to deal with the clients directly, thus eliminating the need for middlemen, who in this case represent the retailer and wholesaler. It might also prove cumbersome for the company to perform all the transactional, logistic and facilitating functions; hence need to do a market research that will offer the best channel of distribution to choose (Cameron, 2012, p.46.) Delta Company has various options it can choose from. The direct distribution channel can be employed, because they will definitely have showrooms where the customers can come to view the cars and choose to buy them, hence the company will be dealing directly with the consumer. The company can also partner with Chinese distributors who understand the market best hence they will ach as wholesalers or retailers. Choosing an appropriate distribution channel is very important, because it helps in cutting distribution costs and also creates a good relationship with a client. Dealing with a client on one-to –one basis helps the Company in achieving customer integration (Drucker, 2010, p. 43). The company can succeed in company integration by allowing the customer to explain his needs and the mode of a car he needs and they can include this during the manufacturing process to ensure that the clients’ needs are completely met. It also helps in Routinization, which enables the right product to be found in a place where the customer expects to find it such as showrooms. These help the customer to compare the car models and their prices and what payment mode he will use to pay for the product. This process is advantageous both to the consumer and producer because the producer will be able to know what to produce, when to produce and how many he needs to produce. B) Advertising media. While addressing the issue of advertising, the company should be very careful due to the existence of language barrier between China and America their mother company. China has the most complicated and challenged media markets in the world, because of their population size, diversity, marketers who are savvy and their complex structures. The country has multiple, fragmented, complex and the most evolving markets, which gives the marketers many advertising platforms. Digital generation has boosted advertising a great deal because of the consumers’ easy access to internet through either a phone or a computer. Delta Company can take advantage of that and use the digital platform to advertise their products through social network such as face book, Twitter, YouTube and Instagram. The other major platforms they can use include events and sponsorship (Kotter, 2012, p. 38). Chinese market capability of involving themselves in hyper fragmentation will make Delta’s marketing group have an easy time for they will be offered with numerous choices, during formulation of media plans. The company should take advantage of this, unlike in their mother country where they had very few media choices. However this can prove to be a big challenge, thus need to come up with a strategic plan that will help them in evaluating the many choices while creating media effectiveness that will help them generate big returns (Cameron, 2012, p.46.) Delta Company should take advantage of the improvement in “China’s advertising market” and come up with a mode of advertising that will suit them. The company needs to take advantage of the rising economic fortunes of the Chinese citizens, the vast number of retail distributors and many television stations around to succeed in promoting their brand. The strategy should also put in mind the media inflation on the rise, which will shoot their advertisement costs, hence need to do early budgeting. They should however use television stations like CCTV, Shangai Media group and Beijing TV that are very popular especially to the middle class economy (Drucker, 2010, p. 43). The company can also familiarize itself with the new rules and regulation governing media advertisements to avoid being caught on the wrong side of the law. With an internet population of over 420 million citizens, this is a very successful medium to use in boosting their sales. With all these strategies the company will definitely succeed in creating awareness of their car models in China. Pricing strategy. Pricing strategy will either break or ruin the company’s plans of establishing presence in the Chinese market. The Chinese market poses a big challenge to most western companies. Their economy has grown in two digits despite the global depression in European countries. The country is poised to overtake America by 2020 hence it remains an important engine for the growth of the world’s economy. This factor is very important for Delta to consider while coming up with its pricing strategy (Drucker, 2010, p. 43). The rising incomes of the people from the coastal region where the company intends to establish its plant should also be considered. These customers have embraced consumer spending and have a clear open business culture and environment. This means that as much as they do not mind buying a car, they do a lot of window shopping not only for price but also the quality the car offers. The company can choose to price their cars lower that their competitors but at the same time not ignore the quality aspect. This will make them a market leader within a certain period of time Competition is also another factor to consider while addressing the pricing strategy. Most automotive companies reside in China thus there is need for Delta to carry out research both on the quality of cars the competitors sell and their pricing strategy. They can then integrate these with their own plans and the needs of the consumer to come up with a good price for the different car models. Having identified the market and location, it should not be tasking for the company to arrive at the best pricing strategy. Competition Analysis. China’s market size in cars is expanding rapidly as a result of China’s advancing economic fortunes. The residents’ purchasing power has also gone up and the government has loosened their control policy that has seen a reduction in the “administrative barriers”. The government has also cancelled the restriction on the number of manufactures of cars the country can accommodate, thus promoting competition. Delta Company will face competition from both the local and foreign industries. The main foreign companies that will offer great competition to Delta are Volkswagen and Toyota, because of their financial capacity and the fact that they have been in China for along time (Rothaermel, 2011 p.56). Delta have chosen to concentrate on the middle class citizens which eliminates the completion Volkswagen gives as it concentrates in manufacturing of luxurious cars. However Toyota is also focused on middle class consumers hence need of a very clear strategy that will make Delta succeed. The company intends to use the pricing strategy to bit Toyota. It plans to set their prices lower than Toyota and still produce high quality cars that will be appreciated by their market segment. They also plan to focus on extensive media campaign and gain grounds against Toyota. Toyota has been facing quality challenges in the recent past, so Delta intends to take advantage of that and market themselves as the better option. The company intends to counter competition from local automotive companies by entering into a joint venture with one of the local companies, for some car models. This is a good strategy for the company will be maintaining its foreign image but at the same time localizing their production (David, 2009 p. 34). Company Analysis China benefits a lot from its advanced worldwide economic integration, and their well advanced technology, to make them the best foreign country for china to establish their operations in. This is the perfect time for Delta to enter into the Chinese market and grow their expansion plans. With a good Marketing strategy, cost benefit analysis and proper market segmentation the company will surely succeed. The company has chosen a low cost strategy due to the market segment it has chosen. It is however important to note that low cost does not mean low price, however it is strategic management policy that embraces low price in the context of business practice. The company should make a feasible and well calculated move of entering the market first with good quality products for the low end markets, as they take advantage of their late entry as they wait for an opportunity that will make them expand. The company should come up with a brand that they can keep on upgrading as they continue to establish presence in the market. The company should embrace variation that will help it to provide their market segment with a unique and very valuable car model. They should explore their variation business model which makes the “price premiums” greater and better than the additional cost that comes as a result of variation. They should focus on a quality product in terms of its performance and appearance; good sales system of delivery, by giving good after sales service including provision of spare parts; and having a good marketing channels that give good foundation for establishing a “variation business mode” (Drucker, 2010, p. 43). Apart from developing a good brand and committing a lot of funds in areas of research and development, the company should focus on diffusing their technology with that of their mother country, to effectively achieve the low cost strategy. In order to achieve competitive advantage, the company should research adequately in areas of production factor, the organization structure, the competition in the industry, and the organizations strategy. This together with the study on related industries that will support their existence and the demand conditions in China will help the company successfully go through four phases. The four phases include; production factor face, innovation face, investment phase and the wealth driven phase. If the phases are well integrated with research and development and a good organization structure will see a company be in a position to fight any competition being experienced in the industry, whether they are new or not. Delta Company’s entrance into the Chinese market at a later stage is an advantage they can exploit. This is so because the company will be able to learn from the failures and successes of the other automotive companies both local and international. This will help them not to repeat the mistakes committed by others and align their strategy towards competing effectively with the rest. This will also help the company to reduce costs involved in doing research as they can depend on research done by other companies (Drucker, 2010, p. 43). A company cannot succeed without competent workers; therefore the Human resource department should be able to link up with all the business units in the company to make sure they have a well skilled and experienced workforce. Marketing as a department should be able to provide a mix of employees all over the world. They should use employees from China who understand the market segments better at the same time employees from the mother country that understand the modeled cars. The marketing manager should then try to achieve correlation between the two, do extensive training programs and produce a highly effective workforce. Conclusion. Delta Company needs to come up with an extensive marketing strategy that will help them expand in the Chinese market. As much as the Chinese markets economic growth and technology will give the company an easy time, it is still very important for the company to do research and come up with a good market Analysis of their market segment. Market Analysis will help them use their strengths and opportunities to increase their base in China and help them work on their weaknesses and threats to improve on their performance. The fact that they are entering the Chinese market at a later stage will help them to have a short learning process for they will be able to learn from other companies operating in the same industry. This will also help them reduce on their research costs as they can use other companies as examples. Market Analysis should also help the Company to fully understand the market infrastructure of the Chinese market. Delta will be able to choose on direct channel of distribution and at the same time use a local distributor who understands the local market better. The two channels are the most appropriate because of the market segment Delta has chosen. The Chinese middle class are the largest in population, therefore there is need to have more than one distributing channels. The market segment is also focused on quality thus need to have a direct contact with the customers and give them a one-on one customer service which will help in building customer integration . Advertisement will also help the company in building their brand. Therefore there is need to look for a good advertisement medium to use that will help the company not only reach a huge number of clients, but is also cost effective and helps in boosting the sales. In this case the Internet and Television were the most appropriate mediums of advertising because of their popularity in the middle class Chinese market. Pricing strategy of Delta depended on a number of factors; however the most important one was the market segment the company had chosen to serve. The middle class have high purchasing power, they value quality and they like shopping due to their increased income fortunes stimulated by the Chinese economic growth. The company should consider all this to be able to come with a price that will increase their sales. The company should also be ready to face competition from both foreign and local companies. Foreign companies give stiff competition compared to local companies. The competition from local companies can be countered by doing joint ventures. Bibliography Bremer, M. & Lamer, M. 2010.“Organizational Culture change: unleashing your organizations potential in circles of 10”; 3rd edition, London, Lambert Academic Publishing Drucker, P. 2010, ‘Conceptual Foundations of good market research’, Harvard Business school, New York. Cameron, E. 2011. ‘Making sense of foreign investments’, Lambert Academic Publishing, London David, R. 2000. Strategic Management: concepts and cases; Prentice Hall, New Jersey Kotter, J. 2012. Leading change: Harvard University, New York, Kaplan, R & Norton, D. 2010, 'the Industrial market Research’, Prentice-Hall, New York. Rothaermel, F 2012.Strategic Management: Concepts and cases; 2nd Edition, New Jersey, McGraw-Hill Read More