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Car Factory

by

Jude Purcell

on 11 May 2015

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Transcript of Car Factory

Kinto Kar
K-Klassic
K-Lux
Overall
Plan Of Action
Text
+
-
Zoom
Combine
$500
$300
Change colors
Rearrange
Introduction
Porter's 5 Forces
Threat of New Entrants:

• market saturated
• high overhead costs
• over capacity of the market
• high exit barriers (e.g. high overhead costs when leaving the market)
• high costs for developments
• government regulations through taxes and subsidy policy
• low margins

Threat of New Entrants: high


Bargaining Power of Buyers:

• supply higher then demand
• consumers motivation: time, money, location
• no conversion costs
• high brand loyalty
• decrease of oil prices

Bargaining Power of Buyers: high
Competitive Rivalry:

Selected passenger car manufacturers' European market share in 2014, based on new registrations
Bargaining Power of Suppliers:

• high interdependence of suppliers and manufacturer
• OEM → handing down own cost pressure to suppliers
• 75% of value chain are outsourced to suppliers

Bargaining Power of Suppliers: low
Threat of Substitution:

• many means of transportation (buses, trains, planes, ships, bike)
• easy to change
• cars rapidly losing value

Threat of Substitution: High


Bargaining Power of Suppliers:

• high interdependence of suppliers and manufacturer
• OEM → handing down own cost pressure to suppliers
• 75% of value chain are outsourced to suppliers

Bargaining Power of Suppliers: low

Overview...

consumers over 55 years old (Sector 13) who are looking for a city/compact car
'the baby boomers', a growing market due to the high levels of disposable income available
a predicted increase in spending on cars, kitchens and holidays (Hope, 2014)
seeking new stylish and compact cars for their city lifestyle
Product
By focusing on style and comfort this differentiates Kinto from its competitors, thus creating their USP.
Options (refer to handout)

Extended warranty
Electric/Memory front seats
Sensors and Park Assist
Heated Front Seats
Leather Upholstery
Metallic Paint
Blind Spot Info

KintoKar is differentiated amongst our competitor Pavara due to the level of options we offer to our consumers

The market research indicated that consumers are less concerned with safety, green and hi-tech and are more concerned with style and comfort. Therefore we chose options which fulfilled this demand
Price
Competitors, inflation rates and the shrinking demand in the market had an impact on the pricing
Our main competitor Pavara had a low pricing strategy being perceived as a cheaper, basic model, over the four years they kept the same options with the same pricing strategy. The result of our pricing did see our level of sales increase
Perception
Place

Problems which Kinto may face in Europe is the already established competition in the city car market and the needs and tastes of consumers. Due to Kinto only having one factory and a limited workforce this means that geographic spread would be small as the company can only produce so much.

Promotion

It was outlined that the over 55 market are difficult to market too, with little or no impact from marketing communications. Therefore for marketing tools we decided to use, television, radio, magazines/ newspapers and promotional tools.


Promotion
Television, radio, magazines/ newspapers and promotional tools were used
The Future
difficulties in the first four years have caused problems for Kinto to establish themselves in the market and to regain market share.
Kinto aims to launch the car with a new facelift and build quality, thus with the aim to change the perception in which consumers view the car.
Overview...
Medium car for over 55’s
Have seen an opportunity in this age group because of:
Failing interest in car ownership among younger
Changes in demographics
Most likely to buy a car
Medium cars still very popular
Medium segment estimated to be 33%

Product

Body Style:
• 2/4 Door Saloon/Estate
• SUV/ MPV

Engine:
• Small Petrol Engine
• Diesel

Options (refer to handout):
• Extended Warranty/ Servicing
• Anti-Theft System
• Sensors/Park Assist
• Heated Front Seats
• Blind Spot Information System
• Metallic Paint
• Leather Upholstery/ Finish
• Tyre Pressure Monitoring
• Luxury Styling Pack

Promotion:

First Pull Strategy with TV & Magazine

Now both (Push & Pull) through adding Dealer Incentives




Aim was to raise our sales & getting a better dealer-seller relation

Pricing

Changes in Price over the years because of inflation and new options/ higher material costs

Year 1: 16,000 Year 3: 17,500
Year 2: 16,550 Year 4: 16,250

Perception

Through including options & allocate the Perception Factors we are trying to provide our customers with the experience of a stylish and comfortable but still fast car
Future Positioning...

Mature consumers buy 43% of all new domestic cars and 48% of all luxury cars. (Schulz, 2006)
In year 2 there was only one competitor in market sector 16 - “Pavara”. We examined their car, its strength and weaknesses and decided to enter the market with the product which would differentiate our car from the competitors.
Product

After analysing the luxury “Pavara” model, already released, which was low in price and low in features we decided to create a model which would go for higher price and would contain more features such as style, comfort and speed
Price
Place

VW, Europe's biggest automaker, and PSA Peugeot Citroen rose 6.9 percent and 1.1 percent respectively while luxury nameplates BMW and Daimler were up 9.4 percent and 2.2 percent. (Reuters, 2014)

Promotion

Decisions in advertising were backed up according to the basis of the promotional effect sheet
The Future
The company will be re – launching product
Despite falling sales, K-Lux is still selling out
Company has suffered turbulent time...
Vast under-production in year one
Bought out at end of year 3
Product recall (increase in training)
Productivity and workers
Peak at Year 3 - 102 cars per worker
Productivity is falling again
Promotion

Despite large investment in promotion in year 4, sales have not increased - perhaps due to failing life cycle of car
Strengths
• Kinto is still only company occupying the over 55s medium car market
• Luxury car is still selling out
• Despite trouble, Kinto Kar still outsells direct competitor

Weaknesses

• Massive amounts of debt (refer to handout) – not selling enough cars
• Company is struggling to grow and achieve scale – therefore cannot occupy large market share



References
Archick, K. (2015) 'The European Union: Questions and Answers' [Online] available at: http://fas.org/sgp/crs/row/RS21372.pdf 03/03/2015
Automotive Council UK. (2013) Government drives forward plug-in car revolution, [Online] available at: http://www.automotivecouncil.co.uk/2013/09/government-drives-forward-plug-in-car-revolution/ accessed: 26/02/2015
Bahrampour, T. (2014) The kids gone, aging Baby Boomers opt for city life, [Online] The Washington Post, available at: http://www.washingtonpost.com/local/2013/08/05/1a21c1b2-fba7-11e2-a369-d1954abcb7e3_story.html accessed: 22/02/2015
Bloomberg, (2014) In Car Buying, Baby Boomers Surpass the Young, [Online] Available at: http://www.bloomberg.com/news/videos/b/86578e6e-87f6-4631-b2ef-7f359d5163d4 accessed: 22/02/2015
Clarke, W. (2014). Top 10 Vehicles for Seniors for 2014. Available: http://www.edmunds.com/car-reviews/top-10/top-10-vehicles-for-seniors-for-2014.html. Last accessed 2nd Mar 2015.
Doole, I. and Lowe, R. (2012) International Marketing Strategy: Analysis, development and implementation, sixth edition, Cengage learning, Hampshire
Fuhrman, V. (2014). German Auto makers to Shake up Luxury Market. Available: http://www.wsj.com/articles/SB10001424127887324235104578241481012862470. Last accessed 2nd mar 2015.
Harwell, D. (2014). Tesla and luxury car makers' surprising strategy to hook new buyers: Lower prices. Available: http://www.washingtonpost.com/news/business/wp/2014/10/09/tesla-and-luxury-carmakers-surprising-strategy-to-hook-new-buyers-lower-prices/. Last accessed 2nd Mar 2015.
Hirsh, E. et all. (2003). Reality Is Perception: The Truth about Car Brands. Available: http://www.strategy-business.com/article/03302?pg=all. Last accessed 2nd Mar 2015.
Hope, C. (2014) Over-55s to fuel spending boom on kitchens and cars from spending reforms, [Online] The Telegraph, available at: http://www.telegraph.co.uk/finance/personalfinance/pensions/11095589/Over-55s-to-fuel-spending-boom-on-kitchens-and-cars-from-pension-reforms.html accessed: 30/01/2015
Jones, M. (2014) Electric city car buying guide, [Online] available at: http://www.gq-magazine.co.uk/entertainment/articles/2014-11/24/electric-cars-best-models accessed: 01/03/2015
Magloff, L. (2015). What is Premium Pricing Strategy. Available: http://smallbusiness.chron.com/premium-pricing-strategy-1107.html. Last accessed 2nd March 2015.
Popescu, A. (2015) UK lead Europe’s electric car surge in 2014, [Online] The Guardian, available: http://www.theguardian.com/environment/2015/feb/06/uk-led-europes-electric-car-surge-in-2014 accessed: 01/03/2015
Reuters. (2014). Europe's car recovery persists as volume, luxury brands gain. Available: http://economictimes.indiatimes.com/industry/auto/news/passenger-vehicle/cars/europes-car-recovery-persists-as-volume-luxury-brands-gain/articleshow/45189438.cms. Last accessed 2nd Mar 2015.
Rosemain, M. (2015) European Car Sales Rise 6.2% With Economy Helping Renault, VW, [Online]
Bloomberg News, available at: http://www.bloomberg.com/news/articles/2015-02-17/european-car-sales-rise-6-2-as-economy-helps-renault-vw-demand accessed: 22/02/2015
Schulz, R (2006). The Encyclopaedia of Ageing. New York: Spring Publishing Company, Inc. 263.
Vincent, J. (2015) UK leads Europe in electric car growth, [Online] available at: http://www.theverge.com/2015/2/6/7991927/electric-car-growth-europe-2014 accessed: 22/02/2015






• European new car sales rose 6.2 percent in October
• Europe's auto market has grown for 14 straight months after a six-year slump but remains well short of its peak before the financial crisis.

"Pensioners can keep Britain’s new car sales driving ahead"
The Times, 2014
• strong oligopoly → the 8 biggest companies are sharing a market strength of nearly 80 %
• many merges (GM & OPEL; Daimler & Crysler)











• direct competitors like Pavara; True Auto; VW
• many companies are manufacturing outside the EU → cheaper
• other competitors are selling cars as well outside the EU → higher market growth and can therefore backup their losses in the EU

Competitive Rivalry: very high
By this ROI analysis we can see that our increased expenditure in advertising was not justified by sales, we aim to be more conservative in future.
SWOT analysis will summarise our current position and outlook for future
Market Share %
Year
Opportunities
Research showed our target market were not demanding electric/hybrid engines, however after four years, uptake is rising in certain European countries such as Germany, the UK and the Netherlands and we may consider offering it as an option for certain countries
Increase in pension pay-outs in the UK could be lucrative for Kinto
Good understanding of what our target market want
Threats
Due to new government safety regulations Kinto faces a 5% increase in material prices
Current Eurozone crisis could threaten a 'common trade policy' and economy in general (Archick, 2015)
Europe should remain 'cautious' about recent growth in car market as many incentives created to give a boost (such as 'Scrappage' and 'PIVE') are being ended this year
Direct competitors are still outselling Kinto in their luxury car model
Kinto may find themselves with a new entrant in the over 55s medium car market
Short term...
Dramatically cut down on costs, including promotion and labour, and increase production
Stay small and focus on product relaunch
Long term
Stabilize current model sales by using market research to understand consumer needs
Aim to release a new hybrid city car model in 3 years
Need to achieve bigger scale...aim to open new factory in 4 years
Direct Competitor Perception Map
Bargaining Power of Buyers:

• supply higher then demand
• consumers motivation: time, money, location
• no conversion costs
• high brand loyalty
• decrease of oil prices

Bargaining Power of Buyers: high
Competitive Rivalry:


Selected passenger car manufacturers' European market share in 2014, based on new registrations

• strong oligopoly → the 8 biggest companies are sharing a market strength of nearly 80 %
• many merges (GM & OPEL; Daimler & Crysler)
• direct competitors like Pavara; True Auto; VW
• many companies are manufacturing outside the EU → cheaper
• other competitors are selling cars as well outside the EU → higher market growth and can therefore backup their losses in the EU

Competitive Rivalry: very high
Bargaining Power of Suppliers:

• high interdependence of suppliers and manufacturer
• OEM → handing down own cost pressure to suppliers
• 75% of value chain are outsourced to suppliers

Bargaining Power of Suppliers: low - moderate
Threat of Substitution:

• many means of transportation (buses, trains, planes, ships, bike)
• easy to change
• cars losing rapidly value

Threat of Substitution: high
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