British Car Market

8/13/2019 British Car Market

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KARBON Green Luxury Cars

Foundations of Marketing Page 1

The KARBON Green Luxury Car

Table of Contents

Executive Summary 21.0 Introduction 32.0 Segmentation 4

2.1 Current 42.2 Emerging Trends 6

3.0 Market Segment Identification 74.0 Market Strategy 9

4.1 The Company 104.2 Product 104.3 Promotion 114.4 Price 134.5 Place 13

5.0 Conclusion 14References 15


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Executive Summary

Competitive advantage lies in variety in the product lines and product

differentiati0n. Additionally, positioning of the product against an identified

market segment is vital to differentiation.

This report considers the British car market that marketers segment deploying

several generic variables and factors and emerging trends in the market to

identify a niche market, that appears unexplored and unexploited so far by the

industry that of green luxury cars. Luxury car manufacturers continue to

produce large cars with no discernible concern for ecological impact of their

products.

Orion will design, test, and market a new line of cars that will be light, fast, and

have very low CO2 emissions well within the Euro-IV norms. It will also place

emphasis on the use of composites, biodegradable, and materials that can be

recycled in every conceivable and innovative area in the chassis, engine, and

coachwork.

The promotion of the cars will revolve around the brand name KARBON. The

chosen name suggests CAR and BON (French for good). The model numbers

(LO1; LO2) will further emphasise low emissions and low environmental impact.

Promotion and marketing strategies will look to create an iconic image for the

car and address the successful individual customers regardless of gender. The

KARBON cars, priced at 20-25% higher than rival products, will rely on an image

of exclusivity and responsible purchasing behaviour. We propose to launch the

KARBON in the UK and in Western Europe and later spread distribution to some

of the emerging economies like the BRIC nations and the Americas.


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The KARBON Green Luxury Car

1.0 Introduction

An important basis for competitive advantage is the provision of a large variety in the

product lines and differentiating these against those of the competitors. Inclusion of a

large variety stimulates sales as more customers find a product within the basket offered

that suits their requirement; however, this also has an underside as a large spectrum of

products also brings the challenges of controlling inventory costs, maintaining quality,

and meeting delivery performance expectations of customers (Hofer & Halman, 2005).

High diversity of variety also increases the variety in the manufacturing processes that

lead to inefficiencies (Child et al, 1991). Thevenot and Simpson (2006) find in their

research that product varieties built around a common platform, some product variants

find more favour with customers than others do despite both being equally sound

technically. Therefore, it is necessary for companied to make a trade-off between the

diversity of customer needs and the cost involved in attempting to meet these needs.

The second strategy in product differentiation is positioning. Realising that it is difficult

for any company to provide a marketing mix that satisfies all potential customers,

companies use market segmentation as a part of their strategic planning. A large volume

of marketing literature discusses the benefits of market segmentation. For Beane and

Ennis (1987), the underlying logic is that segmentation improves marketing efficiencies

and enhances the companys ability to capitalise on marketing opportunities; and

improve organisational performance (Kotler, 2000). The theory, according to these

writers, is that dividing the entire customer population into groups with similar needs

and purchasing behaviour results in homogeneous groups that display similar response


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to products and marketing efforts that target these specific groups. McDonald and

Dunbar (1995) caution against too narrow a division particularly where the business

success relies on economies of scale.

In this report, we examine the automobile (car) industry in Britain, its present

segmentation from different aspects, and emerging trends that have the likelihood to

influence future segmentation of this very important market.

2.0 Segmentation

2.1 Current

Considering the present segmentation of the British car market, we see that these

deploy a whole range of generic variables and factors. In this section of the report,

we examine the factors that apparently inform the segmentation choices. Appendix

1 provides a graphical view of the market and its different segments.

The first segmentation that occurs is whether the car marketed sold is new, or it is

a used one. Because this report specifically looks at manufacturing business, we do

no further exploration of the used car market and its structures. For the sake of

maintaining focus, we also ignore the fact that some car dealers may offer both new

and used cars to their customers because we make a primary distinction between

the customers looking for used and new cars. For new cars alone, it is possible that

independent dealers offering a variety of car models from the stables of different

manufacturers or company owned or franchised businesses that offer the products

of a single company and perhaps its strategic partners will offer the cars to


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customers. Therefore, we can see that the type and size of dealer offering the car

becomes important to marketing strategy.

The next division in the market segments is whether the car is produced within

Britain, or imported from another country. Consumer preferences and perceptions

differ quite widely on the source of the car. However, with reducing

competitiveness of British manufacture in this industry the shift towards imports

has made a perceptible difference in how cars are manufactured and serviced here.

In addition, some imported cars have built considerable reputation for quality and

some have acquired an almost iconic status. Consider the examples of the Toyota

car or the special status attached to owning a Mercedes, a BMW, or some of the

Italian cars like the Ferrari.

Segmentation of the market also depends on the type of customer such as fleet

owners, business and government departmental buyers, and private individuals

who purchase the cars.

Finally, we can divide the market demographic along the size and final use of the

car. In Appendix 1, we have listed the broadly recognised categories such as the

mini, super-mini, executive, luxury, etc. Within these categories, further

bifurcation based on fuel consumed (petrol or diesel), mileage delivery per litre,

accessories fitted as part of the package, etc may also exist as different car

manufacturers attempt to find niches in the market that they can exploit.

Appendix 2 provides examples of car types in terms of the manufacturers and their

models.


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Traditionally, marketers have also used various other indicators to segment their

markets. Those relevant to the British car market would include demographic

divides along levels of income, marital status, gender, size of family, and

employment status (self employed/ employee) etc.

A critical issue in determining market segments is the selection of the variable. As

seen above, a large number of variables can attend the segmentation of the car

market and can include demographic, geographic, and psychographic

characteristics of the customer. While it is relatively easy to segment markets on

these variables and easy to use (Hammond et al, 1996), there are a several

downsides to such segmentation. Within each group, customer tastes may vary

depending on their personality. Even more important is the reliance on personal

and private information that is at once:

Difficult to obtain with any acceptable level of certainty, and

Can change rapidly over time

For example, the marital status, income, occupation etc may change rapidly and

data collected now may be completely invalid a couple of years later (Drozdenko &

Drake, 2002).

2.2 Emerging Trends

The proliferation of information technology that allows the customers to access

and appraise information from a host of sources before making a purchase decision

has also raised the need for a further segmentation of the market along access and

use of the internet for making purchase decisions.


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Manufacture of cars contributes significantly to the regional economies through

creation of jobs and creation of opportunities in infrastructure provision. In

addition, the companies contribute significantly to value creation for the country

through exports (SMMT, 2009). However, there exists a strong association

between manufacture, distribution, use, and end-of-life disposal of cars and

negative environmental impacts (Vergrat & Brown, 2007). The concerns for the

environment, need to conserve non-renewable sources of energy, and global

climate are making rapid changes in how customers view cars, how their travel

habits are changing more towards public transport and pooling to reduce their

carbon footprint. These have already affected the car markets and will continue to

do so increasingly in the near future.

3.0 Market Segment Identification

The existing scenario and the emerging trends help us identify a niche market, that

appears unexplored and unexploited so far by the industry that of green luxury cars.

Indeed, the term green luxury car appears to be somewhat of an oxymoron in the

current British car market. We proceed to develop a marketing plan on this basis.

Cars, in addition to the contribution to the economy discussed above, provide several

other benefits for the consumer, such as convenience in access to necessities and

employment, pleasure and social status. Nevertheless, they also add to air pollution,

traffic congestion, noise, life-threatening accidents, and urban sprawl (Vergat & Brown,

2007). Several researchers have addressed the environmental burden and the

sustainability of the car industry in recent years. Examples are, Vergrat and Brown


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(2007); Rothenberg, Schenck, and Maxwell (2005); Zhu, Sarkis, and Lai (2007).

However, extensive research using Google Scholar and different combinations of key

words such as Cars, Manufacturing, Sustainability, Luxury, Environment, etc do not

yield any results that show research focused on the sustainability of luxury car

manufacture. Similar searches on EBSCO, Science Direct, and Academic Search Premier

yielded the same negative result. This leads us to the conviction that research has indeed

ignored this important (to us) area. The next stage of our research was to explore the

websites of luxury car manufacturers such as BMW, Mercedes, Toyota Lexus, Jaguar,

Aston Martin etc. All these companies make positive statements about their attention to

corporate social responsibility and concerns for the environment. However, none of the

promotional materials for cars costing above 40,000 contained any mention of what

existing and new features of the cars specifically address issues of environment

conservation in the choice of materials used, production processes, distribution

networks, and use of the car during its useful life. It appears that the common

perception of the companies that manufacturers of such cars, and here we make an

assumption based on practical observations that the segment Luxury Cars are those

priced at above 40,000, do not consider concern for the environment as an important

factor in the purchasing behaviour of their potential customer. Lack of significant

research in this area leads us to make certain assumptions in our study, which may be

vulnerable to lack of informed support. However, we make these assumptions after

careful consideration of the alternatives.

Search of literature on other manufacturing strategies reveal an emerging strong focus

on environmental issues. For example, Van Hoek (2002) carries forward Hills (1993)


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exhortation to industry to integrate green issues with corporate objectives, marketing,

and operations strategies. This thinking has also affected the car market in Britain as

increasing numbers of small car manufacturers use environment concerns as a vital part

of their marketing strategy to benefit from the populist movement away from the big

cars.

We believe that a market exists, and will continue to exist, for luxury cars and that in

this sector, a major gain towards product differentiation lies in taking advantage of the

concerns for the environment.

4.0 Market Strategy

Luxury cars, by their very nature are low volume, high value products. Traditionally,

these have also been the nurseries for innovative technologies later passed on to the

smaller cars (Catry, 2003). Examples of such innovation, which are now standard

features of all cars, are airbags, ABS braking systems, GPS device integration etc. This is

because the high cost of cars allows testing out new technologies. Therefore, it follows

that luxury car manufacturers also take the lead in production and product innovations

that aim to reduce the environmental impact of their cars. Indeed some evidence exists

that some companies have taken up work along these lines in recent years. For example,

Axon produces a car using Formula 1 technology to produce lighter, safer, and more

fuel-efficient cars (Axon, 2009). Tesla Motors in the US have developed electric powered

roadsters (Newman, 2009 (a)). The Toyota Prius Hybrid is another example. However,

none of these examples applies to the luxury car segment. An article in the Financial

Times (2009) quotes research that shows that an average Bentley emits twice as much


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CO2 as a medium sized saloon, and such characteristics have made the luxury car

manufacturers to lobby for an exemption from the EU legislation on CO2 emissions.

4.1 The Company

Looking at the high cost and the legal barriers to entry we chose to use an existing

company located in the Midlands already into manufacture of high-end cars. This

company, Orion Limited (name changed) produces cars in the executive and luxury

segments and is currently facing financial problems due to poor sales resulting

from competition and loss of brand value because of its inability to introduce

innovative cars into the market. However, it has a strong manufacturing

infrastructure and a highly skilled workforce with near complete facilities to

manufacture the proposed product.

4.2 Product

Orion will design, test, and market a new line of cars that will be light, fast, and

have very low CO2 emissions well within the Euro-IV norms. It will also place

emphasis on the use of composites, biodegradable, and materials that can be

recycled in every conceivable and innovative area in the chassis, engine, and

coachwork. While the stress will lie on making the cars state of the art in terms of

being environment friendly, there will be no compromise on luxury features.

Electronic mobile connectivity, GPS, on-board entertainment for the passengers

and advanced safety features will be standard features. Special attention on driver

comfort, ease of handling, and sports car like performance will add to the cars

appeal.


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Additionally, the company will place high importance on deploying greener

technologies at the workplace to reduce environment damage during the

manufacturing process.

The most exciting cars with the green appeal that appeared in 2009 are the Honda

Insight, Toyota Prius, Ford Fusion Hybrid, Chevrolet Equinox, Mazda5, Ford

Taurus, Mercedes GLK, Honda Fit, Ford Flex, Hyundai Genesis, and the

Volkswagen Jetta TDI (Newman, 2009 (b)). Of these, only the Mercedes GLK and

the Hyundai Genesis can qualify as entry-level luxury cars, the others ranging

prices of $15,000 to $27,000 in the US markets can only qualify as executive

saloons. Essentially, these do not classify as competition for the KARBON yet it

would be necessary to keep an eye on the marketing strategies and product features

to ensure high degree of differentiation and focus on the luxury aspects of our cars.

None of the luxury car manufacturers has come up with a product comparable to

the KARBON.

4.3 Promotion

The promotion of the cars will revolve around the brand name KARBON. The

chosen name suggests CAR and BON (French for good). With no such word in the

dictionary, we see little difficulty in the registration of this name as a trademark.

The series will be assigned specific model numbers with the designation LO. For

example, KARBON-LO1; KARBON-LO2 etc to connote an impression of low

carbon emissions, which will be the central theme of the promotion campaigns.

The luxury theme will only support the central drive to promote the eco-friendly

nature of the product.


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The overall strategy for promotion of the cars will seek to expand the total market

for premium luxury cars through a flank attack (Kotler, 2000) that will seek to

challenge market leaders by addressing a segment that remains unattended by

them. While the cars will not compete heavily on cost, they will benefit from

differentiation and focus, two vital elements of marketing strategy according to

Michael Porter (1980). The KARBON line of cars will operate outside the ambit of

current operations of Orion as a separate strategic business unit and profit centre

and aim to be technology leaders in the field of green premium luxury cars so that

the threat of substitution (Porter, 1980) is kept at very low levels.

In terms of the gender demographic of the target audience, the promotion will not

distinguish between the sexes through images projected by words like macho,

male, rough. Instead, it will favour use of word like svelte responsible

performance and luxury. The aim of the promotion exercise is to create an iconic

status for the KARBON with a strong emphasis on the social status imparted to the

owner of this car as a person who has arrived but shares the concern for

responsible and sustainable consumption.

Promotion strategy will consist of advertisements in the elite media such as in-

flight magazines, leisure promotion magazines, and hoardings along important

routes and at airports. In addition, all promotional events will centre on a

personality, a brand ambassador, associated with environmental consciousness,

perhaps someone like Angelina Jolie. It is important not to follow the traditional

promotion avenues and not to overdo advertisement. This will be essential to

retain the aura of exclusiveness and mystery that draws the target customer to


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explore further. Direct mailers, accompanied by a choice gift, could be explored as

a promotional strategy.

4.4 Price

Before discussing the price of the car on the dealers floor, we need to highlight that

production of the KARBON will require substantial investment in research, re-

tooling, and establishment of new facilities to produce cars that are radically

different from the all-steel body and power-train production facilities that exist at

the works of Orion. This investment, despite being amortised over a period, will

add a substantial amount to the price of the car.

Therefore, as a natural corollary, the KARBON will cost much higher than the

offerings of competitors who compete in the same segment. However, it is the

differentiation of the car, along lines of responsible consumption combined with

luxury, which will allow a higher price. In addition, the target customer is a rich

individual unmindful of extra expense as long as the product holds a special appeal

and confers a special status.

In view of the foregoing, we propose to price the KARBON cars 20-25% higher than

the rival products that offer similar power delivery and luxury elements depending

on the cost of development and production start-up.

4.5 Place

Luxury car manufacturers have a clear commitment to status beyond personal

mobility, which is the same for other products sold in premium markets such as

watches, food, clothes etc. We propose to launch the KARBON in the UK and in


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Western Europe. Our decision to do so relies on the important factors of logistical

convenience and the tradition of luxury cars that exists in this area. With

consolidation of market and manufacturing, we propose to launch the cars in the

BRIC (Brazil, Russia, India, and China) and the middle-eastern countries. These

countries are the fast emerging economies of the world and contain some of the

richest people. In addition, these countries have jointly been at the forefront of

discussions on environmental issues, especially at the last summit in Copenhagen

where they undertook voluntary cuts in CO2 emissions, while the western world

balked. The next stage would obviously come from taking the product to the North

American markets, which will probably supply the largest volumes once the

present economic crisis is over.

5.0 Conclusion

This report has looked at the British car market, present competition, and market

segmentation to conclude that Orion should design, test, and market a green

luxury car. We have also outlined strategies for marketing these cars, including a

launch and promotion activity beyond Britains borders. However, this report has

not considered the market dynamics that exist there and this represents the major

drawback of this study. In addition, we have made a major assumption in assuming

that Orion has the capacity and the ability to design and innovate to produce a car

that combines the features of eco-friendly manufacture and products with all

luxury features.


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References

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Catry, B (2003): The great pretenders: the magic of luxury goods.Business StrategyReview, Vol. 14(3).

Child, P.; Diederichs, R.; Sanders, F.H.; and Wisniowski, S. (1991): SMR forum Themanagement of complexity,Sloan Management Review, Vol. 33(1): 73-80.

Drozdenko, R.G. and Drake, P.D. (2002): Optimal database marketing: strategy,development, and data mining, Sage Publications, London.

Financial Times (2009) Aston Martin chief attacks EU emissions law.Financial Times,2nd May 2008.http://search.ft.com/search?queryText=%22Ulrich+Bez%22 .Accessed on 20th March 2010.

Hammond, K.; Enrenberg, A.S.; and Goodhardt, G.J. (1996): Market Segmentation forcompetitive brand,European Journal of Marketing, Vol. 30(12): 39-49.

Hill, T. (1993),Manufacturing Strategy : Text and Cases, Second Edition, MacMillanPress, London.

Hofer, A.P. and Halman, J.I.M. (2005): The potential of layout platforms for modularcomplex products and systems,Journal of Engineering Design, Vol. 16(2): 237-

255.

Kotler, P. (2000):Marketing Management, Prentice Hall, New Jersey.

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Newman, R. (2009) (b): The 12 Most Important Cars of 2009,http://www.usnews.com/money/blogs/flowchart/2009/1/8/the-12-most-important-cars-of-2009.html accessed on March 15, 2010.

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Rothenberg, S., Schenck, B. and Maxwell, J. (2005): Lessons from benchmarkingenvironmental performance at automobile assembly plants.Benchmarking: AnInternational Journal, Vol. 12 (1): 5-15.
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Appendix 1

Existing Segmentation of the British Car Market

British CarMarket

New orUsed

New

IndependentSeller

Franchisee

Large

MediumUsed

Source

HomeManufacture

Import

TargetMarket

Fleet

Business

Private

Car Type

Mini

Supermini

Executive

Luxury

Sports

Other


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Appendix 2

Classification Examples Manufacturers/Models

Mini Rover Mini, Fiat Cinquencento

Supermini Ford Fiesta, VW Polo

lower medium Alfa 33, Renault 19

upper medium Peugeot 405, Nissan Primera

Executive Mercedes 190, Honda Legend

Luxury BMW 7 Series, Lexus LS400

Sports Porsche 911, GM Calibra

utility & other Renault Espace, Mitsubishi Shogun

Source: http://duncanwil.co.uk/segment.htm
http://duncanwil.co.uk/segment.htmhttp://duncanwil.co.uk/segment.htmhttp://duncanwil.co.uk/segment.htm

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British Car Market