Marketing Strategies of GM Holden - Case Study Example

Marketing Plan – GM Holden Student’s name Course Tutor’s name Date EXECUTIVE SUMMARY This marketing plan details how General Motors Holden (GM Holden) can attain two objectives namely: positioning itself in the ‘small’ car market segment, and by so doing, appeal to consumers who are looking for environment-friendly and fuel efficient cars; and increasing its export market for purposes of ensuring that the company remains profitable in both the short- and long-terms. The marketing plan identifies GM Holden’s target market as the loyal customers who have continuously bought into the Holden brand; first time car buyers, especially the young people who have probably got their first jobs; and both the small and big car consumers in the export market. The marketing plan further details how GM Holden can make products that appeal to the consumer market, price and promote them appropriately, and use its existing dealer network to distribute them to consumers. The marketing plan ends with an estimated profit and loss statement, which projects increased profits for the company, based on the assumptions that the marketing plan would result in better sales for the company. TABLE OF CONTENTS Issues analysis 9 From the SWOT analysis above, it is evident that GM Holden needs to devise ways of addressing the small car market more efficiently. Additionally, there is a need to devise strategies of handling the competitive pressures posed by cheap imports. Moreover, GM Holden needs to devise strategies of remaining profitable despite the rising cost of manufacturing in Australia. 9 MARKETING STRATEGY 9 Objectives 9 i.To position GM Holden in the ‘small’ car market segment, and by so doing, appeal to consumers who are looking for environment-friendly and fuel efficient cars. 9 ii.To increase GM Holden’s export market for purposes of ensuring that the company remains profitable in both the short- and long-terms. 9 Target market 9 The main target market for GM Holden within Australia will be the loyal customers who have continuously bought into the Holden brand. As customers move from the big cars into the small car market, GM Holden will be at hand to provide the small car alternatives they need. As has been noted by MacDonald and Sharp (2003), loyal customers always gravitate to the brand they identify with and thus marketing to them is rather straightforward. 9 GM Holden will also target first time car buyers, especially the young people who are probably on their first jobs. This will have to be environment-conscious Australians, who are also budget-conscious. To the described target market, GM Holden should market the Holden Cruze hatchback as the car that is not only low on emissions, but also has an efficient fuel consumption capacity. 10 To expand its export market, GM Holden needs to target the different markets with different car models, depending on the terrain therein, consumer preferences, and their sensitivity to oil prices. As indicated by Holden (2012), there is an export programme that will distribute Commodore to North America in 2013. The Commodore will first be positioned as a race car, a platform that will probably push its appeal among the consumers. In addition to North America, other export markets especially in the Middle East ought to be considered. Saudi Arabia and the United Arab Emirates are just some of the viable target markets in that region. 10 Marketing mix 10 Product 10 The Holden products will be sold either based on their fuel efficiency (Cruze hatchback) or their performance in rugged terrain in addition to fuel efficiency (Commodore). According to Hinchliffe (2011), Holden Cruze has a combination of traditional controls and modern styling, as does the Commodore. Within Australia, these cars will be marketed as inexpensive and convenient to maintain especially considering the availability of spare parts, and multiple dealers. 10 Price 11 The Cruze hatchback retails at $30,490, and an estimated 6.9 per 100 kilometres fuel consumption limits (The Motor Report, 2012). The car is competing based on better pricing with comparable cars like Volkswagen Golf 118TSI, Mazda3 SP25, and Ford Focus Titanium selling for $31,990, $33, 670, and $33,090 respectively (The Motor Report, 2012). The Commodore (Utility SS-V) on the other hand retails at $44,490 in Australia and has an estimated fuel economy of 12.4 litres per 100 kilometres (Car Showroom, 2012). In the export market, the price for the Commodore will most likely change to factor in the export costs. 11 Promotion 11 Yeshin (2003) recommends the use of mass media in promoting products, and hence GM Holden will use mass media tools such as billboard advertisement, TV, radio, and magazines as the main promotional tools. In Australia, the products will be promoted as the authentic Australian cars that have factored in the Australian lifestyles, the need for fuel-efficient cars, and the need for comfortable cars in their design. In the export markets, the cars will be promoted as fuel efficient, comfortable, and environment-friendly. 11 Distribution 11 In Australia, GM Holden will use its existing dealer network; while in the international market, it will use existing General Motors dealers. 11 ACTION PROGRAMMES 12 Several market programmes will be undertaken by GM Holden’s marketing department for purpose of attaining the marketing objectives identified earlier. The action programmes will include designing and placing advertisements in different media channels; creating a website where customers can view the different Holden car models, place orders and pay for the same; and establishing a marketing department that will specifically handle the export markets. The timeframe for the above mentioned programmes will be within the next six months, and is expected to cost approximately $5.072 million based on estimates shown below. 12 Profit and loss statement 13 This profit and loss statement is based on GM Holden’s $89.7 million profits for the year 2011 (Pineda, 2012b). With the new marketing initiatives, it is expected that the profits will increase. 13 Controls 14 Benchmarks will be put in place to ensure that the promotional activities detailed in this plan will take place within the stipulated 6 months period. For starters, the marketing department will seek management approval for the same, and seek financing for the action programmes. The right skills and expertise will be charged with ensuring that time limits are put in place and adhered to. In the end, and as has been indicated by Luther (2001), the effort put into marketing should be seen to pay off through increased sales and profitability. 14 REFERENCES 16 Australian Government 2012, ‘How the GM Holden investment will benefit Australia: factsheet’, pp. 1-4, viewed August 28, 2012 16 Bracks Report 2008, ‘Review of Australia’s automotive industry’, Final Report, pp. 1-200. 16 Deloitte 2011, ‘Australian industry overview 2011’, Deloitte Motor Industry Services, pp. 1-60, viewed 28 August 2012, 16 GM Holden Ltd 2004, ‘GM Holden community and workplace’, Port Melbourne, pp. 1-20. 16 Harman, A 2012, ‘GM Holden develops all-new LPG system for Commodore’, Wards Auto, viewed August 28, 2012, 16 Holden 2011, ‘New Holden export program bound for Daytona’, General Motors Inc., viewed 29 August 2012, 16 Holden Lion 2012a, ‘Introducing the Holden Volt’, Holden Lion eMagazine, viewed 28 August 2012, 17 Holden Lion 2012b, ‘Rethink commodore we did’, Holden Lion eMagazine, viewed 29 August 2012, 17 Holden.com 2012, ‘Corporate profile’, viewed 28 August 2012, 17 Johnston, E., & Yeates, C 2011, ‘Holden’s ‘near-death’ fright’, The Sydney Morning Herald, viewed August 28, 2012, 17 Luther, W 2001, The Marketing plan: How to prepare and implement it, American Management Association, New York. 17 Macdonald, E., & Sharp, B 2003, Management perceptions of the importance of brand awareness as an indication of advertising effectiveness, Marketing Bulletin 14(2), 1-11. 17 Mercer, P 2012, ‘Australia car industry seeks revival amid slowing sales’, BBC News, Sydney, viewed August 28, 2012, 17 Nuguid, A 2012, ‘Motor vehicle manufacturing in Australia’, IBIS World Industry Report C2811, pp. 1-40. 17 Pineda, E 2012a, ‘GM Holden commences weeks of Australian test drives for hybrid volt’, International Business Times, viewed August 28, 2012, 18 Pineda, E 2012b, ‘Cruze powers up GM Holden’s 2011 $89.7m profits’, International Business Times, viewed 29 August 2012, 18 The Motor Report 2012, ‘2012 Holden Cruze Sri-V Hatch review’, viewed August 29, 2012, 18 Thornton, G 2010, ‘Regular research papers and articles providing sector specific insights and issue analysis- automotive sector’, Industry Intelligence Unit, June, 1-10. 18 Yeshin, T 2003, ‘The integration of marketing communications’, In Michael, M J (Ed). The Marketing Book, 5th edn, Butterworth Heinemann, Boston, MA. 18 CURRENT MARKETING SITUATION (SITUATIONAL ANALYSIS) The Australian car industry has been described by some pundits as being on its ‘death bed’. Writing for the British Broadcasting Corporation for example, Mercer (2012) explains how the car manufacturing sector that had seven manufacturers in it has slowly declined, and this according to him has led many of them to close shop. Currently, only three manufacturers are remaining in the Australian car industry. They include General Motors Holden (which is the focus of this marketing plan), Toyota, and Ford. With its headquarters in Port Melbourne, GM Holden has operated for more than 60 years in Australia. The company has a vehicle manufacturing and assembling plant in Adelaide, and an engine manufacturing facility in Melbourne (Holden.com, 2012). To date, GM Holden has manufactured 43 car models, which have been sold within and outside Australia. The latest models include Holden Volt, which is currently undergoing test drives (Holden Lion, 2012a; Pineda, 2012a), and the Holden Cruze hatchback, which was released in 2012 (Nuguid, 2012). The new models aside, some of the popular Holden models that have captured the Australian market include the Sport Wagon, the Commodore sedan, the Ute, and the Caprice. Lately, GM Holden is trying to make inroads into the small car market through its Cruze model. Brand As the first car maker to manufacture a car from scratch in Australia in November 1948, GM Holden has managed to cement its brand as enduringly Australian. According to Campbell (2011), the FX was the first car that the company made in Australia, and it was an instant success as Australians embraced it eagerly thus commencing some sort of brand loyalty that has arguably continued to date. The brand image is further cemented by the lion emblem on all Holden cars. Customers The government Australia remains the single largest customer for GM Holden. According to Bracks’ Report (2008), 39 percent of new car purchases are acquired from Holden, while 32 percent are acquired from Ford, 23 percent from Toyota, and 5 percent from Mitsubishi. Apart from the government, Holden has customers in the business sector, and others who purchase cars for non-business use. Overall, and as has been indicated by Deloitte (2011), GM Holden commands 5.7 percent of the locally manufactured cars market, while Ford and Toyota command 4.8 percent and 3.6 percent respectively. Currently, the local car manufacturers command approximately 14.1 percent of the Australian cars market, while approximately 85.9 percent of the market is flooded with imported cars. Besides its fully assembled cars, GM Holden sells Ute bodies to other car assemblers including Chevrolet, Vauxhall and Bedford. Moreover, it manufactures and exports V6 and Family II engines to automakers in Sweden, Mexico, South Africa, China, Thailand, and Korea (Holden Corporate Affairs, 2008). Information posted at Holden.com indicates that its prominent corporate customers in the international arena include Vauxhall, Opel, Chevrolet, Saab, Cadillac, and Buick (Holden.com, 2012). Considering that GM Holden manufactures and markets engines and parts in addition to the assembled Holden vehicles, it is therefore evident that the company has a wider customer base. Competitors Ford and Toyota are the main competitors for GM Holden in the locally manufactured car market segment. The Holden Commodore for example faces stiff competition from the Ford Falcon in the big car market, while at some point, the competition from Toyota Lexus in the luxury car brand segment led Holden to stop manufacturing its Monaro brand (Thorntorn, 2011). The main competition faced by Holden however comes from the car imports, which are often cheaper, and provide consumers with a wider variety of models. In 2010 for example, consumers bought a total of 146, 314 totally locally manufactured cars, and 889, 260 imported cars (Deloitte, 2011). In other words, the number of imported cars sold in the Australian market in 2010 was six times more what the local manufacturers sold in the same market in the same year. Some of the models that have outdone Holden in sales in the Australian market include the Isuzu Ute, Jeep, SKODA, Hyundai, Volkswagen, land Rover, Kia, Suzuki, Nissan, Mercedes Benz, Proton, Audi, Lexus, and the MINI (Deloitte, 2011, p. 15). The Volkswagen specifically remained the brand to watch in 2011 as its growth in Australia grew significantly in the last six years, with 15 models competing in the Australian car market. Employees According to the Australian Government (2012), GM Holden creates 12,000 jobs both directly and indirectly throughout the automotive component sector. Technological environment Australians’ ability to put their expertise in designing and engineering cars has been cited as the unique advantage that local manufacturers have over the importers (Mercer, 2012). However, it is their use of technology to develop cars that have an appeal among the ever-changing consumer market that will determine whether or not they compete well. Holden for example has realised the yearning for small, fuel-efficient cars among the consumers and has hence manufactured the Cruze Range model, and recently, the battery-powered Volt. According to Pineda (2012a), the latter model was manufactured in response to the increasing need for environment-friendly vehicles. The technological environment is further evident in GM Holden’s use of liquid petroleum gas (LPG) systems in the Sport Wagon, Commodore sedan, pickup and other long-wheel models (Holden Lion, 2012b). According to Harman (2012, Para. 2), the LPG system was the result of “an intensive engineering project that clocked 810,000 development miles (1.3 million km) to deliver a vehicle designed for Australian conditions and driving tastes”. In other words, GM Holden is ready to foster a technological environment that will respond to changing consumer needs. Political environment The political environment is considered friendly to both local car manufacturers and importers (Derby, 2011). For the manufacturers, political leniency is evident in the continued support that the local manufacturers get from the political class. In 2012 for example, the Australian Government (2012) revealed that “the Australian, South Australian and Victorian governments” were contributing “$ 275 million as a strategic co-investment with GM Holden” (p.1). The viable political environment seems to be pegged on the belief that GM Holden plays a pivotal role in the economies of three regions namely: the Victorian economy; the South Australian economy; and the overall Australian economy. Despite government’s leniency however, it appears that imports are creating more competitive pressures for GM Holden and other local car manufacturers. Derby (2011) for example notes that the 10 percent Goods and Services Tax (GST) and the 5-10 percent duty that Australia imposes on car imports are relatively lower compared to the conditions in other countries. As such, the low tariffs create incentives for importers who are able to compete on a price advantage with the local manufacturers. Economic environment The economic environment in which Holden is operating in has been weakened and made more cautious by the 2008/2009 financial crisis that hit most of the developed countries (Johnston and Yeates, 2011). Although the Australian economy did not suffer major shocks, GM Holden’s ties with its American parent company General Motors Inc., meant that it failed to receive funding at the height of the financial crisis when GM filed for bankruptcy. Through the intervention by the Australian government and the loans acquired from General Motors’ financing organisations in Mexico and Europe, GM Holden was able to wade through the tough economic times. Notably, after a five-year loss making streak, GM Holden was able to recoup to profitability in the 2010-2011 financial year (Derby, 2010). The economic environment however remains unpredictable especially because consumer spending preferences have changed, steel prices have increased, and shifting the cost burden to the consumer no longer remains a viable option especially in a market that is flooded with cheap car imports (Derby, 2011). The rising fuel costs have also led to a situation where consumers prefer fuel-efficient cars (Thomson, 2009). Social/ cultural environment GM prides itself in diversity and inclusivity in the workplace (GM Holden Ltd., 2004). Arguably, some of the strongest traits of the social cultural environment in the company were evident in 2009, when the company decided to reduce pay for its workers (by reducing the number of shifts) rather than dismissing some of the workers (Thomson, 2009). The decision to save jobs through such a strategy was arrived at after consultations with the government, labour unions, and employees (Thomson, 2009). In other words, GM can be said to have fostered a socio-cultural environment where it is consults and receives support from the relevant stakeholders in its internal and external business environments. GM HOLDEN’S SWOT AND ISSUE ANALYSIS SWOT analysis Strengths Impressive performance in Australia Established brand loyalty among some of its consumers Favourable prices A diverse customer base in and outside Australia Weaknesses GM Holden failed to respond to the need for small, fuel-efficient cars in good time hence giving importers a leeway to gain market (Nuguid, 2012). The loss-making of 2005-2010 has compromised its financial security Its parent company General Motors Inc. still interferes in the selection of the Board of directors at Holden and this could dent Holden’s Australian image. Opportunities GM Holden can improve its market share especially considering the good will from employees, and the support from government Australia has a dynamic car industry, hence GM Holden has an opportunity to make the right product, sell them to the right, at a price that will appeal to them The entry barriers into Australia’s car market are high thus meaning that competition will be limited. The inclusion of small cars in Holden’s range of car models means that the automaker can appeal to diverse customer preferences The export market for both fully assembled cars and components still has viable opportunities that GM Holden could utilise (see figures 1 and 2 below). Threats The manufacturing costs in Australia are high (and rising) compared to some Asian countries and this could jeopardise the profitability of local car makers (Bracks Report 2011, p. 13). Australia lags behind other developed countries in its support for research and development, and this could reflect badly on the technological environment. The ever increasing imports pose a major threat to GM Holden and other local car manufacturers Stiff competition from Ford and Toyota in both the big car and the small car market segments. Source: Bracks report (2011, p. 16). Figure 1: Australia’s major car export destinations Figure 2: Australia's major components export destinations Source: Bracks report (2011, p. 16). Issues analysis From the SWOT analysis above, it is evident that GM Holden needs to devise ways of addressing the small car market more efficiently. Additionally, there is a need to devise strategies of handling the competitive pressures posed by cheap imports. Moreover, GM Holden needs to devise strategies of remaining profitable despite the rising cost of manufacturing in Australia. MARKETING STRATEGY Objectives i. To position GM Holden in the ‘small’ car market segment, and by so doing, appeal to consumers who are looking for environment-friendly and fuel efficient cars. ii. To increase GM Holden’s export market for purposes of ensuring that the company remains profitable in both the short- and long-terms. Target market The main target market for GM Holden within Australia will be the loyal customers who have continuously bought into the Holden brand. As customers move from the big cars into the small car market, GM Holden will be at hand to provide the small car alternatives they need. As has been noted by MacDonald and Sharp (2003), loyal customers always gravitate to the brand they identify with and thus marketing to them is rather straightforward. GM Holden will also target first time car buyers, especially the young people who are probably on their first jobs. This will have to be environment-conscious Australians, who are also budget-conscious. To the described target market, GM Holden should market the Holden Cruze hatchback as the car that is not only low on emissions, but also has an efficient fuel consumption capacity. To expand its export market, GM Holden needs to target the different markets with different car models, depending on the terrain therein, consumer preferences, and their sensitivity to oil prices. As indicated by Holden (2012), there is an export programme that will distribute Commodore to North America in 2013. The Commodore will first be positioned as a race car, a platform that will probably push its appeal among the consumers. In addition to North America, other export markets especially in the Middle East ought to be considered. Saudi Arabia and the United Arab Emirates are just some of the viable target markets in that region. Marketing mix Product The Holden products will be sold either based on their fuel efficiency (Cruze hatchback) or their performance in rugged terrain in addition to fuel efficiency (Commodore). According to Hinchliffe (2011), Holden Cruze has a combination of traditional controls and modern styling, as does the Commodore. Within Australia, these cars will be marketed as inexpensive and convenient to maintain especially considering the availability of spare parts, and multiple dealers. Price The Cruze hatchback retails at $30,490, and an estimated 6.9 per 100 kilometres fuel consumption limits (The Motor Report, 2012). The car is competing based on better pricing with comparable cars like Volkswagen Golf 118TSI, Mazda3 SP25, and Ford Focus Titanium selling for $31,990, $33, 670, and $33,090 respectively (The Motor Report, 2012). The Commodore (Utility SS-V) on the other hand retails at $44,490 in Australia and has an estimated fuel economy of 12.4 litres per 100 kilometres (Car Showroom, 2012). In the export market, the price for the Commodore will most likely change to factor in the export costs. Promotion Yeshin (2003) recommends the use of mass media in promoting products, and hence GM Holden will use mass media tools such as billboard advertisement, TV, radio, and magazines as the main promotional tools. In Australia, the products will be promoted as the authentic Australian cars that have factored in the Australian lifestyles, the need for fuel-efficient cars, and the need for comfortable cars in their design. In the export markets, the cars will be promoted as fuel efficient, comfortable, and environment-friendly. Distribution In Australia, GM Holden will use its existing dealer network; while in the international market, it will use existing General Motors dealers. ACTION PROGRAMMES Several market programmes will be undertaken by GM Holden’s marketing department for purpose of attaining the marketing objectives identified earlier. The action programmes will include designing and placing advertisements in different media channels; creating a website where customers can view the different Holden car models, place orders and pay for the same; and establishing a marketing department that will specifically handle the export markets. The timeframe for the above mentioned programmes will be within the next six months, and is expected to cost approximately $5.072 million based on estimates shown below. Marketing Item Estimated Budget Create a website where customers can view the different Holden car models $15,000 A paid newspaper feature of GM Holden and the different car models $4,000 Billboard advertisement (Design and artwork) $3,000 Billboard Advertisement placement 50 cities in Australia and abroad ($25,000/ month) Exposure period = 4 months. $5,000,000 Advertisements motoring magazines in Australia and abroad $50,000 Total $5, 072,000 Profit and loss statement This profit and loss statement is based on GM Holden’s $89.7 million profits for the year 2011 (Pineda, 2012b). With the new marketing initiatives, it is expected that the profits will increase. Controls Benchmarks will be put in place to ensure that the promotional activities detailed in this plan will take place within the stipulated 6 months period. For starters, the marketing department will seek management approval for the same, and seek financing for the action programmes. The right skills and expertise will be charged with ensuring that time limits are put in place and adhered to. In the end, and as has been indicated by Luther (2001), the effort put into marketing should be seen to pay off through increased sales and profitability. REFERENCES Australian Government 2012, ‘How the GM Holden investment will benefit Australia: factsheet’, pp. 1-4, viewed August 28, 2012 Bracks Report 2008, ‘Review of Australia’s automotive industry’, Final Report, pp. 1-200. Deloitte 2011, ‘Australian industry overview 2011’, Deloitte Motor Industry Services, pp. 1-60, viewed 28 August 2012, GM Holden Ltd 2004, ‘GM Holden community and workplace’, Port Melbourne, pp. 1-20. Harman, A 2012, ‘GM Holden develops all-new LPG system for Commodore’, Wards Auto, viewed August 28, 2012, Holden 2011, ‘New Holden export program bound for Daytona’, General Motors Inc., viewed 29 August 2012, Holden Lion 2012a, ‘Introducing the Holden Volt’, Holden Lion eMagazine, viewed 28 August 2012, Holden Lion 2012b, ‘Rethink commodore we did’, Holden Lion eMagazine, viewed 29 August 2012, Holden.com 2012, ‘Corporate profile’, viewed 28 August 2012, Johnston, E., & Yeates, C 2011, ‘Holden’s ‘near-death’ fright’, The Sydney Morning Herald, viewed August 28, 2012, Luther, W 2001, The Marketing plan: How to prepare and implement it, American Management Association, New York. Macdonald, E., & Sharp, B 2003, Management perceptions of the importance of brand awareness as an indication of advertising effectiveness, Marketing Bulletin 14(2), 1-11. Mercer, P 2012, ‘Australia car industry seeks revival amid slowing sales’, BBC News, Sydney, viewed August 28, 2012, Nuguid, A 2012, ‘Motor vehicle manufacturing in Australia’, IBIS World Industry Report C2811, pp. 1-40. Pineda, E 2012a, ‘GM Holden commences weeks of Australian test drives for hybrid volt’, International Business Times, viewed August 28, 2012, Pineda, E 2012b, ‘Cruze powers up GM Holden’s 2011 $89.7m profits’, International Business Times, viewed 29 August 2012, The Motor Report 2012, ‘2012 Holden Cruze Sri-V Hatch review’, viewed August 29, 2012, Thornton, G 2010, ‘Regular research papers and articles providing sector specific insights and issue analysis- automotive sector’, Industry Intelligence Unit, June, 1-10. Yeshin, T 2003, ‘The integration of marketing communications’, In Michael, M J (Ed). The Marketing Book, 5th edn, Butterworth Heinemann, Boston, MA. Read More