Marketing Plan for Holden Cruze Hatchback - Case Study Example

Marketing Plan: Holden Cruze Hatchback Student’s Name: Course: Tutor’s Name: Date Executive Summary Like other car manufacturers in developed countries, GM Holden has had its fair of financial uncertainties in the recent past. Such uncertainties were especially compounded by the global financial crises that hit most markets in the 2008-2009 periods. As a result of the crisis, car sales fell considerably as consumers avoided making non-essential purchases. To complicate matters further for Holden and other car makers, the appreciating price of crude oil means that consumers are now shifting from fuel-guzzling vehicles to fuel-efficient vehicles. Such shift in consumer preference had a significant effect on Holden since one of its best performing brand, the Holden Commodore, cannot be categorised as a fuel efficient car. Competition from other car makers such as Toyota Australia has also had an impact on Holden. Notably, Toyota responded earlier than Holden to the shift in consumer interest in small cars. In addition to this, the reduction of import tariffs on cars from 10 percent to 5 percent has led to an influx of cheap fuel efficient car models to Australia. Combined, such factors pose a major operational challenge to Holden. Fortunately, the company has been working in Australia for more than 60 years and during this time, it has gained a considerable number of loyal customers. Additionally, Holden has joined the ‘small’ car manufacturing bandwagon using its Cruze range of cars. Already, the Cruze sedans have registered an impressive performance in Australia. In mid or late November 2011, Holden will release the Cruze Hatchback, and although the latter will retail at a higher cost than the former, its projected fuel efficiency, environment-friendliness and modern features justify the extra cost. The Cruze Hatchback is the subject of this marketing plan. Table of contents Table of contents 3 1.0 Situation analysis Car maker Holden is a fully-fledge automotive maker based in Port Melbourne Australia. The company started its Australian operations in 1951, meaning that it has been in operation for the last 60 years. The company has an engine manufacturing plant in Melbourne and vehicle manufacturing operations based in Adelaide. Additionally, the car maker is represented in different parts of the country by 300 dealers. Information posted on the car maker’s website (holden.com) reveals that to date, the company has been able to produce 42 car models based on four body designs. The 42 models have been sold in and outside Australia, meaning that the company has a domestic as well as export market. Among the most popular Holden makes in Australia include the Commodore sedans, Ute, the Caprice and the Sport wagon. Recently, the company is trying to make an entrance into the ‘small’ car market using its Cruze model. Brand Over the years, Holden has been able to cement its brand name as an enduring Australian car maker that does research on the needs of the consumer market before designing and releasing a car into the market. In November 1948, Holden (then General Motors Holden) was the first car maker to produce a car manufactured entirely in Australia. The FX was a four door sedan that was a run-away success and according to Campbell (2011), the Australians took the new car straight to their hearts, thus commencing some sort of brand loyalty that continues to be observed over the years. The lion emblem that Holden uses on all its cars further cements its brand image. Customers Holden’s customers can be defined as any Australian who can afford a car. This is based on the assertion by Thornton that Holden is among the prominent manufacturers in Australia and therefore any person willing to purchase a car will undoubtedly consider the probability of purchasing a Holden-make. This however does not mean that all considerations always end up being converted into purchases; rather it means that Holden always a good chance of selling its cars in the Australian market despite the presence of aggressive competition. In addition to its customers who buy complete assembled vehicles, Holden has a customer base among other car makers. For example, it builds and supplies Ute bodies to Vauxhall, Bedford and Chevrolet. It also exports Family II engines and V6 engines to South Africa, Mexico, Sweden, Germany, Thailand, Korea and China (Holden Corporate Affairs, 2008). Its most prominent international corporate customers include Chevrolet, Opel, Vauxhall, Buick, Saab and Cadillac (holden.com, 2011). Considering that Holden manufactures components and parts in addition to the assembled vehicles and engines, there is no denying that the company has a wide consumer base in and out of Australia. Competitors Holden’s main competitors in the domestic market include Toyota and Ford. This is especially evident in the ‘big car’ market where Holden’s Commodore faces stiff competition from Ford’s falcon. In the recent past, Holden had to stop the manufacture of its luxury brand –Monaro, due to stiff competition from Toyota’s Lexus (Thornton, 2011). Employees Current statistics indicate that Holden has 9200 direct employees working in its Australian plants (MyCareer, 2011). Information obtained from the company indicates that the company is an equal opportunity employer and thus pays more attention to the skills possessed by employees during recruitment. The company has also invested in employee development in order to improve their capabilities in the workplace. The level of employee satisfaction at Holden is gauged using the global employee census conducted by its parent company, General Motors. Technological environment Like consumers elsewhere in the world, Australians are now considering how the technological innovations used in the development of the vehicles they purchase affect the environment (Derby, 2011). Hence, any car market has to consider the real or perceived effects of such technologies on the environment. Points in case include Nissan’s electric car, which is expected to sell impressively in Australia considering that people perceive it as an environment-friendly car, and the Mitsubishi iMiEv, which is also an electronic car selling in the Australian Market. Political environment Although the regulation levels in Australia are rated as being average, IBIS world (2010) notes that there is a likelihood that the trend of such regulations will increase in the future. A point in case which indicates that the level of government will increase in the future is the 2006 Australian Transport Council’s submission to the government, stating that all car manufacturers should be compelled to use computerized safety technology in order to detect and prevent skidding (Derby, 2011). The effects of the political climate are also likely to be felt in tariff rates imposed on imports. According to the Productivity Commission (2002 cited by Derby, 2011), the 10 percent vehicle tariff rates that Australia used was already considerably low compared to other countries. In 2010, the Australian Customs further lowered tariffs on vehicles by a 5 per cent margin (Australian Government, 2010). Local manufacturers voiced their concerns to the government arguing that the tariff reduction would make imports cheaper than the locally manufactured vehicles thus killing the domestic industry (Derby, 2011). Economical environment The global financial crises affected Holden in a major way if Johnston and Yeates’s (2011) report is anything to go by. Although the Australian economy remained majorly inflexed by the economic meltdown witnessed elsewhere in the western developed economies, Holden’s ties with its parent company General Motors Inc. affected it greatly. Citing leaked cables, Johnston and Yeates (2011) observe that General Motors had cut funding for Holden just weeks before it filed for bankruptcy. Luckily for Holden, the Australian government was at hand to help it raise funds locally. With a good business name, Johnston and Yeates (2011) also report that Holden was able to secure short-term loans from the General Motors finance facilities in the European Union and Mexico. The 2008-2009 events suggest that the economic environment at Holden is impacted by whether the parent company offers it financial support or not. This is especially true considering that prior to the 2009-2010 financial-year, Holden had been registering losses for more than five years. The rising cost of the materials used in vehicle manufacturing is also another economic factor that Holden has to contend with. According to Derby (2011), steel prices have been on a steady increase in the past five years. Industry players have however not been able to pass the cost burden to consumers, thus meaning that their profitability has fallen considerably. Steel is a major input in the manufacturing process of motor vehicles. Social/Culture Although Holden is largely perceived as a bona fide Australian company due to its prolonged stay in the country, there is no denying that the social cultural effects of its parent company are felt in the Australian subsidiary. For example, Blackburn (2010) states that the appointment of a new boss in Holden to replace someone who had just served the company for six months shows how much power the parent company has over the Australian company. Regardless of such changes however, the company has a strong employee policy, which underscores it as an equal-opportunity employer. Additionally, the company takes part in social and community services throughout Australia. Some examples of such services include its partnership with the Leukaemia Foundation, and the safe driving courses that the company offers to newly qualified drivers (GM Holden Ltd, 2004). Holden’s SWOT analysis Strengths i. Performance of the Holden models is impressive in Australia ii. Has the 2nd largest market share in Australia, something it can continue capitalising on iii. Overall, Holden has a good relationship with it dealers iv. Enjoys brand loyalty among Australians v. Patronage from the parent company GM ltd. vi. The prices of the Holden Models are considered favourable to most Aussies vii. Its diverse customer base in and outside Australia means that the company has multiple income earning avenues Weaknesses i. The perceived subjugation by the parent company especially in selecting and deciding on the retention of the chairman and director of the company ii. The company has been on a loss-making streak since 2005 to the 2009-2010 financial year when it recouped iii. Holden did not appreciate Aussie’s need for small cars in good time. Hence, the company continued marketing their big car models even when the demand had shifted Opportunities i. The Australian economy is still strong and this could mean that the company can still maintain or improve its market share ii. Revenues in the car manufacturing industry keeps growing hence meaning that Holden can rely on Australians car purchase habits. iii. The Tariff rate applicable on cars is low thus presenting an opportunity for increased exports iv. Entry barriers in to the car making industry are high thus meaning that competition is limited to a few players who have been able to overcome them. v. The company’s Holden Cruze will sell to the market segment interested in fuel-efficient cars. Threats i. The Australian government could increase the regulation levels hence posing operation challenges to the company ii. Stiff competition from Toyota and Ford car makers. Other ‘small’ competitors like Tata motors could also end up eating into Holden’s market share iii. Other companies have already started capitalizing on ‘green’ cars which are perceived as more environment-friendly iv. The ever-rising petrol prices may cause consumers to switch to smaller fuel-efficient cars v. Penetration of imported cars into the Australian market 1.1 Back ground GM Holden Ltd commands a 29.4 percent market share in Australia (Derby 2011). The company is rated second to Toyota Motor Corporation (Australia), which commands 35.1 percent market share. Holden is superior to Ford Motor Company (Australia), which commands a 17.0 percent market share (Derby, 2011). The company has been operating in Australia for 60 years now, and during this time, it has cemented its relationship with consumers, regulatory authorities and placed itself as a competitive force worth consideration. To enhance its position as a vehicle and component manufacturer, the company has divided its operations into six categories that include: vehicle manufacturing operations; engine manufacturing operations; service parts operations; automotive proving ground; Holden innovation; and the state sales office. The latter category is specifically important to this marketing plan since it provides the link between Holden and the network of dealers. In total, Holden has five state sales offices based in Western Australia, Queensland, South Australia, New South Wales, and Victoria (Holden.com, 2011). Apart from providing the much needed link between Holden and its dealers, the sales offices also support dealers in areas related to the sale of fleets, services and parts. 1.2 Environment analysis Internally, GM Holden has strengths that include a dedicated workforce as indicated in golden.com (2011). It also has the advantage of having a state of the art V6 engine production plant which was set up through capital injection from the parent company GM. The sentimental value that Australians attach to the brand also plays as an advantage to Holden, as does continued involvement in the society through its corporate social responsibility initiatives. Internal weaknesses evident in GM Holden include the decreased profitability thus meaning that the company could be forced to downsize. Additionally, the constant change of directors as witnessed in the past three years where there have been five new directors/chairpersons of the company could decrease employees’ confidence in the company. Another internal weakness is pegged on Holden’s decision to re-focus its sales and marketing efforts to the domestic market. In view of rising production costs, cheap vehicle imports, rising fuel costs, and stiff competition especially from Toyota and Ford, an apparent withdrawal from marketing its products and services on the international market does not seem to be a prudent undertaking at all. As Derby (2011) notes, “Holden exported 56,140 Holden Commodores in 2008, representing 47% of total Holden Commodore production” (p. 10). Ignoring the exports market as suggested by Johnston & Yeates (2011) in reference to the leaked intelligence would therefore deny the company access to a promising market segment. As Paliwoda (2003), clearly notes, companies which are facing stiff competition (from domestic and foreign firms) in the traditional domestic can find new market segments on the international market. It is however worth taking note of Derby’s (2011) point that the export markets (especially in countries like New Zealand and United States) have been rocked by their fair share of economic misfortunes especially during the 2008-2009-financial meltdown. This could mean that the export prospects into such markets are not as promising as was the case before the financial crisis. Fortunately, most economies have started recouping and this means that consumers could drop the cautious attitude they had adopted towards non-essential items such as cars. Externally, GM Holden has strengths which include the sizeable market share, its competitive position in the market, and the high entry barriers that keep potential new competitors away. However, there are weaknesses that include a reduction of the traditional market share since consumer preferences are shifting to smaller cars. The increased price of inputs such as steel and iron is also eating into Holden’s profits, while government’s reduction of import tariffs by a five percent margin gave leeway for cheap imported vehicles into the Australian market, hence posing additional challenges to the car maker. 1.3 Company analysis Today, GM Holden employs an estimated 9200 (MyCareer, 2011) to 9500 (Conceptcarz, 2011) people in its Australian plants. Holden’s major facilities are located in Elizabeth, Lang Lang, Dandenong, and Fishermans Bend. To date, the company has produced an excess of four million engines and six million cars (Conceptcarz, 2011). In an attempt to capture an even bigger market, the company has set its eyes on the international market. Specifically, the company exports cars, engines and even its automotive expertise to the international market. Traditionally, GM Holden manufactured ‘big’ cars such as Sports Utility Vehicles (SUVs) for the Australian market. This was in response to the demand for such vehicles. Among Holden’s best selling cars is the Commodore, which retains the position of the best selling car in Australia in 1996. Other models which have found a ready market in the country include the Barina, Astra, Zafira, Vectra, Berlina, Adventra, Monaro, Caprice, Statesman, and lately, the Cruze. In the light-commercial vehicle category, Holden has manufactured and marketed the Holden Ute, Combo, Rodeo, One-Tonner Cross 6, Crewman Cross 8, Crewman Cross 6, and the Crewman (Conceptcarz, 2011). The financial status of Holden is just starting to recoup from losses after the 2009-2010 financial statements indicated that the company had made $112 million in post-tax profits. This was a major improvement from the $211 million loss that the company had made in the 2008-2009 financial year (Johnston & Yeates, 2011). Having been bailed out by the US government at the height of the financial crisis, Holden’s parent company GM fenced off its Australian subsidiary in an attempt to prevent the flow of US tax-payer’s money from the United States (Johnston & Yeates, 2011). Consequently, Holden has had to scale back its production as well as seek short-term loans from elsewhere. Referring to leaked intelligence cables, Johnston and Yeates (2011) also observe that Holden has in the recent past closed down the four-cylinder engine plant, and resized its workforce by dismissing at least 2,000 employees. Additionally, the company, which had started making some roadway in the international market, had re-shifted its focus to the domestic market. 2.0 Problem identification While the launch of the Holden Cruze as documented by Martin (2011) was well received, consumers soon started to complain about the car’s lack of a Bluetooth (Campbell, 2011). In response to the complaints, Holden’s marketing director Simon Carr stated that the failure to fit the car with a Bluetooth feature was an oversight (Campbell, 2011). Still, consumers who wanted to fit their cars with the device could do so at extra charges from various Holden dealers (Jason, 2011). Regardless of this oversight, Holden is promising to remedy the situation in its subsequent Cruze releases starting with the Hatchback which will be released to the market towards the end of 2011. The upgraded version of the Holden Cruze will however retail at a slightly higher price compared to the earlier versions. According to Jason (2011), “the Cruze CD and CDX range’s recommended retail price will increase by just $250, while the SRi and SRi-V models will increase by $500 to take into account other new inclusions to be announced closer to the launch” (para.10). Considering the price difference between the earlier versions of the Holden Cruze and the forthcoming Versions, and considering that the company had admitted that failure to include the Bluetooth gadget was an oversight on their part, the marketing department in the company will need to justify the price difference. Such an action is especially necessary considering that competitors like Toyota have cheaper cars that promise the same performance as the Holden Cruze. 3.0 Objectives i. To position GM Holden as a competitive company in Australia’s ‘Small’ car market segment by aggressively marketing the Holden Cruze as a smooth, fuel-efficient and environment friendly car in both the Australian and international markets. ii. To sell cars and other Holden products at a profit hence ensuring long-term sustainability of the company. Profitability is essential if the company is to continue operating in Australia without closing down as some doomsayers had predicted in 2009 (example see Thomson, 2009). 4.0 Market segmentation The declining sales of Holden Commodore and other big cars such as the Ford Falcon is indicative of the fact that consumers are now more aware of the fuel-consumption capacity of any new car purchases they make. Current trends show that consumers are interested in smaller and fuel-efficient cars. This fact is made even more obvious by the competition posed by small, fuel-efficient cars imported to Australia by Holden’s competitors. The wave of environment consciousness prevailing in the country also indicates that consumers are willing to purchase environment-friendly cars. The main target for Holden with its Holden Cruze brand should ideally be the loyal customers who religiously buy Holden vehicles due to already identified or perceived brand benefits. Specifically, Holden needs to capture the attention of loyal customers who are seeking fuel-efficient cars. According to Macdonald and Sharp (2003), loyal consumers do not always spend a lot of time making purchase decisions as they always go for the brand they are already used to. Other market segments that the company ought to consider include the young people who are making their first ever car purchases. The company could also target environment-conscious consumers since the Holden Cruze has reduced emissions. Since crude oil prices are rising through Holden’s main export markets, the company should also consider marketing the Holden Cruze to the export market. Overall, market segments for the Holden Cruze are represented in the figure below: Figure 1: Target Market Segments 5.0 Recommendations 5.1 Product The Holden Cruze hatchback will be available either as a 2.0 litres turbo diesel engine or a 1.4 litre turbo petro engine. The car is a five-door design, which has sporty proportions (Pottinger, 2011). According to Duff (2011), the hatchback has striking similarities with the four-door Holden Cruze sedan, which was initially made in Korea, but was heavily modified for the Australian market. Like other Cruze models, the hatchback will have a combination of contemporary styling and traditional controls, which the buyers will have an easy time understanding and using (Hinchliffe, 2011). 5.2 Price The car is expected to sell at an average of $1250 premium over the current prices for the Holden Cruze sedan, meaning that the prices could range between $22,000 and $30,000 (Duff, 2011). 5.3 Promotion The main recommended promotional strategy is using the mass media such as radio, TV, magazines, billboard advertisement and placement of an advertisement in Google search in order to increase Holden Cruze’s exposure. According to Yeshin (2003), the use of mass media in promoting a product enhances its brand recognition, brand image and the brand’s reputation. As a public relations exercise, it is recommendable that Holden holds a product launch before releasing the car to dealers countrywide. The HR department should use this opportunity to invite existing Holden customers to the product launch. Additionally, the media should be invited. 5.4 Distribution The main distribution network will be based on existing Holden dealers. Hence, from Holden’s manufacturing plants, the Holden Cruze hatchback will be taken to the dealers, from where the customers can directly access them for purchase. A website will also be established where customers can conduct online purchases or order customised style combinations. However, all vehicles ordered and paid for using the website will be delivered to customers using the existing dealer networks. 6.0 Conclusion With the Holden Cruze hatchback, GM Holden can recapture some of the market share that it had lost to its competitors who had already realised consumer’s need for fuel-efficient cars. Already, the Holden Cruze sedan is performing impressively in the Australian market and in the international market where it is retailing as Chevrolet Cruze. Considering the stiff competition in Australia’s automotive industry, and the bombardment of customers with cheap alternatives from the import sector, Holden needs a fool-proof marketing strategy in order to position its ‘small’ car range including the Cruze hatchback as the car of choice for Australians. Luckily, the Holden brand is well recognised by consumers and this could work to enhance its chances of a successful marketing campaign. Some shortcomings such as the missing Bluetooth gadget in its earlier Cruze editions, and the subsequent charge for installing the same gadget at its dealer shops, could however work to paint it as a company that is working too hard to maximise profits at the expense of its loyal and new consumers. Overall, marketing the Holden Cruze Hatchback as proposed in this plan will set straight misconceptions that the consumer market has about Holden as a car manufacturer. 7.0 Budget Marketing Item Estimated Budget Create a dedicated website for the Holden Cruze Hatch where customers can log in to view, customise and pay for new purchases $15,000 A paid feature of the Holden Cruze Hatch in one of the leading newspapers $4,000 Design and artwork for a billboard advertisement $3,000 Print 50 billboard advertisements for placement in 50 cities across Australia 100,000 Bill Board Advertisement in 50 major cities across Australia at the rate of 25,000 per month in all 50 cities. Exposure period = 4 months. $5,000,000 Search Engine Advertisement for a 6 month duration at $500 per month $3,000 Advertisements in major motoring magazines in Australia $20,000 Advertisements in major radio stations $120,000 Three prime time TV commercials running for 30 days in major TV channels. Length- 30 seconds, estimated cost per commercial 10,000. $ 900,000 Official product launch $450,000 Total $6, 615,000 8.0 References Australian Government. (2010). ‘Australian customs notice no. 2009/49.’ Australian Customs and Border Protection Service. Available from: http://www.customs.gov.au/webdata/resources/files/ACN0949.pdf Blackburn, R. (2010). ‘Holden appoints new Boss’. Retrieved October 24, 2011 from http://news.drive.com.au/drive/motor-news/holden-appoints-new-boss-20100322-qpna.html Campbell, M. (2011). ‘Price jump for Holden Cruze.’ Drive. Retrieved October 26, 2011 from: http://news.drive.com.au/drive/motor-news/price-jump-for-holden-cruze-20110906-1jvl4.html Conceptcarz (2011). ‘Holden History.’ Retrieved October 24, 2011 from: http://www.conceptcarz.com/view/makehistory/62,0/Holden_History.aspx Derby, S. (2011). ‘Green pressure: operators meet consumer demand by developing fuel-efficient vehicles.’ IBISworld Industry Report C2811, 1-41. Duff, C. (2011). ‘Cruze hatch to dominate.’ Cars Guide. Retrieved October 26, 2011 from: http://www.carsguide.com.au/news-and-reviews/car-news/cruze_hatch_to_dominate GM Holden Ltd. (2004). ‘GM Holden community and workplace.’ 1-20. Hinchliffe, M. (2011). ‘Small car comparison.’ Cars Guide. Retrieved October 26, 2011 from: http://www.carsguide.com.au/news-and-reviews/car-reviews-road-tests/small_car_comparison Holden Corporate Affairs (2008). ‘Holden Facts.’ Pp. 1-45. Port Melbourne Victoria Australia Jason, O. (2011). ‘New features & prices for the Holden Cruze.’ Neutral Car Show. Retrieved October 24, 2011 from: http://www.neutralcarshow.com/blog/197-new-features-a-prices-for-holden-cruze Johnston, E., & Yeates, C. (2011). ‘Holden’s ‘near-death’ fright.’ The Sydney Morning Herald. Retrieved October 23, 2011 from: http://www.smh.com.au/business/holdens-neardeath-fright-20110901-1jo6h.html 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. Martin, S. (2011). ‘Holden Cruze comes home today.’ Adelaide Now. Retrieved October 26, 2011 from: http://www.adelaidenow.com.au/holden-cruze-comes-home-today/story-e6frea6u-1226013156491 MyCareer (2011). ‘General Motors Holden.’ Retrieved October 24, 2011 from: http://mycareer.com.au/holden-ltd/profile/ Paliwoda, S. J. (2003). ‘International Marketing – the issues’. In Baker, M.J. (Ed). The marketing book (5th ed.). Boston, MA: Butterworth Heinemann. Pottinger, P. (2011). ‘First look at the Holden Cruze hatch.’ Cars Guide. Retrieved October 26, 2011 from: http://www.carsguide.com.au/news-and-reviews/car-news/first_look_at_holden_cruze_hatch Thomson, J. (2009). ‘Australian car makers doomed, Holden first to go: Expert.’ Smart Company. Available from: http://www.smartcompany.com.au/manufacturing/20090414-australian-car-makers-doomed-holden-first-to-go-expert.html 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 Baker, M.J. (Ed). The marketing book (5th ed). Boston, MA: Butterworth Heinemann. Read More