Strategic Brand Management: Do the Major Automobile Manufacturers Make an Effective use of It in Gaining their Global Market Share?
The global automobile market is highly competitive. The US auto market is the largest and perhaps the most important, but most auto manufacturers compete in the markets around the world. Both GM and Ford are headquartered in the United States but they sell their products globally. Likewise BMW is headquartered in Germany, but considers the United States a critically important market. In fact many of the new BMW autos are designed for the US market. Most major companies thus need to know the performance of their brands in different markets to plan and implement an appropriate marketing strategy to boost up the sales in the desired market. It is to be understood that the purchasing process of automobiles involves different parameters that like awareness, consideration, intention, ownership experience and repurchase.
It is crucially important for the automobile manufactures to know the performance of their brands in all these key areas to compete globally with the other manufacturers. For this purpose they use several market tracking tools to collect the sales data relating to their brands as well as those of the competitors operating in the particular markets. Such data collected is used by the auto manufacturers to get a clear picture of where their brands stand in the total purchasing process of the customer. The data also helps the car makers to direct their effort in the development of a proper brand management strategy to focus on the areas that are considered weak. The concept is to always maximize the marketing efforts through effective brand management strategies. With this background I intend to present this research based paper on the strategic brand management adopted by major automobile manufacturers in the global scenario.
Brands can be considered as the direct consequence of the strategic segmentation of the relevant markets and a strategic product differentiation for enhancing the sales volume. As companies seek to better fulfill the expectations of specific customers, they concentrate on providing the latter, consistently and repeatedly with the ideal combination of attributes both tangible and intangible, functional and hedonistic, visible and invisible under viable economic conditions for their business (Jean Noel Kapferer)
The companies want to imprint their mark on their products, the level of excellence achieved by them in meeting customer standards. This desire to make their presence felt for ever in the minds of the customers takes the form of branding. As Ken Roberts observes The impact of brands can be powerful, signaling positive or negative value to customers and other constituencies. All else being equal, a strong brand enables a company to command a premium price for a product or have higher market share when charging the same price as a competitor. In other words, brands have the power to shift demand
Under brand management it is necessary to obtain a detailed knowledge about the attributes that can influence the ability of the brand to shift the demand. This knowledge enables the organization to evolve strategies to address each market segment and each competitor separately so that attention is focused on maximizing and sustaining the brand equity. According to Ken Roberts there is a wide range of actions companies can take to implement these strategies. For example, perceptions of the company can be influenced by the portfolio of products and services associated with it as well as by corporate communications.
This is especially so in the case of automobiles where it is very difficult to meet the customer satisfaction levels because of the complexity in assessing the precise expectations of the customer. The assessment of customer satisfaction is made complex in the case of automobiles because there are different criteria like speed, fuel efficiency, driving comfort and also the look of the vehicle that have to be mixed in a proper proportion to be able to satisfy the customer. However the links between the brand and the product configuration in the context of automobile manufacturing is particularly important. Considering an example of two different manufacturers with established brands concentrating on safety aspects and sporty aspects individually would be able to command different price ranges for any new developments.
The brand specializing in the safety aspects may command a better price by the introduction of an improved safety feature than the other manufacturer specialized in sporty aspects. On the other hand the sporty car manufacturer may well get an enhanced price for a new car with a sophisticated faster engine even without any additional safety device. Thus the brand equity of each of the automobile manufacturer determines the market share and sales volumes. Strategic brand management aims at meeting the challenges in managing the brand and maximizing the value of brand to improve the competitive strength of the firm in the global market and at the same time managing the variety of brand investments that are necessary and appropriate for the given market. Once established it is also vitally important that the brand integrity is maintained. For this the firms need an absolute control on the performance of the brand which also becomes a part of the strategic brand management. This is achieved by the collection of various basic data relating to the sales performance of the brand in the different markets. I intend to present in this paper a detailed account of how global automobile majors maintain their brand equity, what are the strategic inputs they apply in their brand management, the problems and challenges being faced by them in effectively managing their brands and what are the measures they take to meet these challenges and practice an effective strategic brand management in the global scenario.
By conducting a detailed study in the area of strategic brand management by major automobile manufacturers this research aims to achieve the following objectives among other things:
To make a detailed study of the various strategic aspects in the brand management employed by leading global automobile manufacturers to identify the salient features of the strategic brand management in the global automobile market.
To make an in-depth study in to the challenges being faced by the global auto majors in maximizing and sustaining their brand equity. This would involve a detailed study of the key issues of the global auto market.
To make a detailed analysis of the measures which are being taken by the automobile manufacturers to make their strategic brand management effective. In other words the research aims to analyse the marketing tools being used by the major automobile manufacturers in the strategic brand management.
After the conclusion of the study this research intends to find plausible answers to the questions outlined below in connection with the strategic brand management in the global automobile market.
What are the significant elements in the strategic brand management of the global auto majors in maintaining their brand equity?
What are the key issues that need to be addressed by the auto majors in making their strategic brand management effective to achieve the desired market share?
What are the ways in which the car makers meet the key challenges in managing their brands effectively in a strategic manner?
What is the effectiveness of the marketing tools which are being employed by the automobile manufacturers in the strategic brand management?
Structure of the dissertation
In order to present a comprehensive paper I intend to divide the paper into the different chapters. While chapter 1 introduces the subject matter of the study to the readers along with stating the research objectives and questions, chapter 2 makes a detailed review of the available literature on the subject of the strategic brand management by auto majors. Chapter 3 makes a detailed presentation of the research methodology adopted by this study for conducting the research. In chapter 4 I have included the findings of the research and a detailed discussion on the analysis of the findings. Concluding remarks recapitulating the issues discussed in the paper and few suggestions which may have the effect of improving the effectiveness of the strategic brand management of the auto majors are included in the chapter 5.
This chapter presents a detailed review of the available literature on the strategic brand management of the major automobile manufacturers in the world.
Branding and Its Impact on Marketing of Products
The sum of all information about a company or product communicated by a name and its related visual symbols, a brand concisely conveys complex messages to investors, and current and potential employees.(Ken Roberts) Thus the brand conveys different messages to different constituencies depending of the perception of the audience. Normally the brand image comprises of these complex messages and their associations. As already observed a brand may have a positive as well as negative impact on the customers and other constituencies associated with the business. It is also observed that a strong brand will have the power to shift the demand for the product to fetch a higher price in the market. For instance a Harley Davidson motorcycle because of its strong brand image might be able to command a considerably higher price in the market than that of a cheap imitation with the same engineering capabilities and performance. Applying this analogy for a majority of automobile manufacturers their corporate brand is single largest asset they are holding. Hence in all the cases it requires an effective management of the brand to sustain the market share. However in most instances, especially in the automobile industry the customer opinions undermine the actual effectiveness of the brand in changing the market dynamics of demand. It makes the effective brand management based on real metrics with utmost strategic clarity coupled with well aligned processes vitally important for the automobile industry to surge ahead in their marketing efforts.
What is Brand Management?
Brand management is consciously providing a product with an identity that is understood on all levels.(Techdivas) This understanding of the identity extends to all constituencies connected with the business both internally and externally also. Internally it covers the employees and leaders of the organization and externally the customers, suppliers and other stakeholders of the firm. A relevant differentiated benefit is created by a clear understanding of the niche in which the product stays and this is getting translated into the purchase of that product in preference over to that of the competitor. Good branding begins with knowing what makes the product special and exploiting its advantages. Branding may be attempted for an exclusive product or in some cases it extends to the whole of the corporate image. Taking the example in the automobile industry Bavarian Motor Works (BMW) is signified by the expression ultimate driving machine which is the brand image created by the company which applies all of its products including motorcycles, automobiles and the sports utility vehicles.
At General Motors (GM), products do not merely have a single brand identity. GM has multiple products and uses multiple venues for their individual products. Its automobile selection ranges from Corvettes to Cadillacs. As an example, Cadillac’s branding message extols the virtues of art and science. Cadillac showcases proactive safety features precision all weather controls and infotainment luxuries such as Onstar, the in-vehicle safety, security and information service that uses Global Positioning System (GPS) satellite technology and wireless communication to link the driver and vehicle to 24-hour real-time, person-to-person help. However, GM stands for one thing and has an identifiable rallying cry.
Branding essentially has got three elements in its effective creation and management. They are:
The first element is the brand reality denoting the identity of the product, the niche at which it stays and the special features that distinguishes the product from others in the market.
The next element is the exposure the brand reality gets by means of an effective communication of the brand. This is being achieved by the use of various media through advertising. Public relations and training also help to improve the communication process. However it is to be ensured that all the communication outlets convey the same message concerning the product.
The third element in the cyclic process of branding is the development of the products that takes into account the perception of the public about the brand image of the product. The product development is a futuristic affair and the image is built into the product year after year and the development is guided by the brand identity. Any change in image can be expected only incrementally over a period of time and that too by means of effective communication.
Components of Strategic Brand Management
Different organizations have the normal tendency to focus on the brand building process alone in the in the area of strategic brand management. Though brand building is a critically important phase strategic brand management involves other key components and processes to make it effective. The major components of strategic brand management can be identified in
Brand measuring and
Protecting the Brands (Deborah Roedder John)
Brand Building represents the idea of the manufacturers or the sellers perception of the brand identity of their products. Brand identity encompasses the definition of what the seller wants the brand to represent. Thus brand building consists of creation of a brand identity also known as a brand image. According to About.com the brand image creates expectations. It defines who you are, how you operate, and how you’re different from your competitors. In essence, your brand image is a promise – a promise that must be kept. If the brand is a promise you make, then the customer experience is the fulfillment of that promise. The customer experience can’t be left to chance. It should be actively designed and controlled in a manner that enhances your brand image.
Once the seller or the manufacturer is clear about the brand identity, it is possible to build the brand by using effective marketing tools. One of the popular tools that are being employed in the brand building exercise is the 4 Ps frameworks product, price, place and promotion that adopt a strategic promotional measure. This framework uses both the traditional methods of advertising the products and new innovative approaches to marketing.
Marketers want to achieve a return on their investment, and one vital decision is how to best utilize their brand assets. Marketers may choose to leverage some of the brands established equity to create line extensions, brand extensions, or co-branded products. (Deborah Roedder John) While line extensions imply addition of new products or service to the existing product lines with chances of incremental revenues, brand extensions include the extension of the product or service in to a new category. Though brand extension provides opportunity for real growth in business it also has a potential danger of leading to committing mistakes that may prove expensive. Co-branding aims at improving the strategic brand management performance by looking at the chances of any possible alliance of brands which are complementary to the main brand.
Though there exist a general appreciation of the power of the different brands, there is no prescription of any defined formulae which can be used to measure the value of the brands. Also there are no ways to guide the companies to maximize the value of their brands to ensure a profitable growth of the organization. Ken Roberts has identified that traditionally, brand value has been estimated by identifying profit streams associated with a brand, applying a discount rate, and making a judgment about the amount of the discounted income stream coming from the brand rather than other things. This approach to valuation is widely accepted by the investment community. However such an approach just lets the company have a numeric value for the brand but they do not have the potential to advise on ways of either adding the brand value or protecting the value already created.
In order to successfully leverage the brands it is crucially important that the brand value is measured and how it changes over the time according to customer perceptions. According to Ken Roberts A more meaningful approach to measuring brand value and customer perceptions begins with an understanding of “”brand equity,”” the total value of company or product attributes that affect consumer decisions. Thus measuring brand equity is regarded as one of the important phase in the strategic brand management process. There are qualitative and quantitative research methods that can be used to understand the brands meaning and value to consumers. Qualitative techniques include brand collages, which allow us to understand how consumers see the brand using pictures and words. Quantitative techniques include financial asset value calculations, such as those produced by InterBrand.
Protecting the Brand
This is one area which is usually forgotten by the traditional strategic management teams to consider. But now this is being increasingly recognized as an important part of the total strategic brand management exercise. Simply registering the brands under trade marks legislation and give them legal recognition does not amount to real protection of the brands. The term encompasses more scope in that it is important to ensure that any brand extensions do not dilute the brand. Protection from dilution to the brands is the core of this phase of the strategic management process. It is important for the management to monitor and minimize the cost of dilution from the line extensions, brand extensions and co-branding extension. It is also vitally important that the management does not even consider those extensions which dilute the brand rather than adding benefits.
Global Automobile Industry – an Overview
In order to undertake a study in to the strategic brand management in the global automobile industry it is important to present a brief overview of the industry and the market. The global automobile industry is constantly on the move with continuous advancement in the technology and the number of new models rolling out of the factories. The American car manufacturers once were regarded as world leaders have lost most of their market share to two Japanese auto manufacturers and several other European makers. Especially the auto manufacturers in the US are facing a stiff competition from Toyota and Honda. Recently Ford lost most of its market share to Honda. In the words of Bernard M. Wolf and David Adams
The web of ownership and strategic alliances in the industry is dense and global. The Big Three of North America have large stakes in some of the smaller Japanese firms (Mazda, Izusu and Suzuki) and GM now controls Koreas Daewoo. GM has bought Saab while Ford now has Jaguar and Volvo in its stable. Renault calls the shots at Nissan. All three German manufacturers produce in North America, with Daimler-Benz, in fact, taking over one of the Big Three, Chrysler. Aside from equity ownership, the companies often share technology and buy parts from each other. Even arch-rivals, Toyota and Nissan share technology. Moreover, in recent years some of the assemblers have sold off their own parts divisions to increase the efficiency of these former subsidiaries and to make it easier for them to sell to competitors. (Bernard M. Wolf and David Adams)
Strategic Brand Management in the Global Automobile Market
The issues relating to the various components of strategic brand management in the global automobile manufacturing are discussed in this section. The measures taken by various global auto majors are also discussed in this section. It may be noted that while the Japanese auto makers could easily adapt themselves to the needs of the emerging markets by producing the kind of vehicles that will suit the markets concerned, the auto manufacturers of United States had to face various issues in strategically managing their brands and products. Even the European auto majors could adapt to the changing needs to a large extent except very few issues that they had to manage with the help of strategic alliances with their Japanese counterparts.
Brand Building in the Global Auto Market
The power of brand building in the auto market is so explicit that the auto manufacturers can not neglect this process. By the reaction of the complex auto market in the US during the start of the 21st century, the sellers and car makers understood that sheer price-promotion schemes and the 0 percent financing gimmicks do not work in the selling of the cars. They have also been made to understand that the customer considers the value quotient as one of the important part of the purchase process. This is precisely the reason that
Japanese and European auto makers have spent the last generation basically letting the quality and appeal of the products speaks for itself in the US marketplace thus Honda has come to stand for zip and thrift, Toyota for top-notch dependability, BMW for excitement and Mercedes-Benz for style. Over the same period, US-based automakers managed to improve product quality and then to dominate the truck and SUV segments that exploded in the nineties.
As long as the market boom existed all the car makers found it easy to get along in the market. However the car manufacturers of the US started thinking in the direction of flexible manufacturing and establishment of brand identities with the idea of creating a long term consumer loyalties.
In the wake of the new idea GM inducted a new CEO who layered a new brand-management structure on top of the companys traditional product-driven hierarchy. He tried to create brands out of individual models, removing GMs traditional emphasis on the brand equity resident in Chevrolet, Cadillac and its other vehicle lines.
In Ford the advancement in the brand building took the direction of making the company a consumer-driven organization putting the brand DNA concept throughout the organization. This led to more concentration on brands like Jaguar and Land rover.
In Europe as a part of the brand building exercise Daimler-Benz acquired Chrysler in large part because of the distinctive strength of its Jeep and Dodge brands.
But things took a sharp turn in late 2001 with the introduction of a new CEO in GM who abandoned the earlier CEOs brand management structure. The company also discontinued its efforts in the direction of brand building by eliminating the brand-specific vehicle design studios.
In Ford the brand building was put to abeyance with the exit of the CEO on some quality issues and along with his exit the concept of brand DNA was also abandoned.
At DaimlerChrysler the pricing of the vehicle had become an issue with competition from Hondas Odyssey taking major share of the market from Chryslers dominant minivan segment.
Japanese and European makes continued to knock of the market shares of the major American auto brands market share in truck and SUV segments.
Despite the stunning success witnessed in the auto sales by the offer of zero percent financing and other promotional incentives, the industry leaders are convinced that the value of brand building in the automobile business which is image conscious is of vital importance.
This is evident from the fact that:
Chrysler Group CEO Dieter Zetsche noted that Chrysler already had backed off the levels of late-fall incentives and was trying to lure buyers with “”real value”” and by emphasizing “”aspirational and inspirational breakthrough products in every segment in which we choose to compete.”” At the same time, GM executives are going out of their way to emphasize that they havent killed brand management outright theyre just redefining it and restoring more power over the overall treatment of vehicle lines to executives who are in charge of developing and manufacturing them. Theyre also re-emphasizing traditional vehicle-line brand umbrellas and not individual vehicles.(Dale Buss)
Another example in the direction of brand building exercise being taken by the auto majors can be witnessed from the fact that many auto brands are in the midst of huge new efforts to help dealers construct new outlets or refurbish old ones along the lines of consistent new architectural designs that are laden with cues and icons meant to reinforce the brand to consumers (Dale Buss)
Major auto makers like Cadillac, Volkswagen, Honda, Ford and many others are making large investments in establishing and refurbishing the retail facilities of the individual dealers to make their retail network commit more solidly than ever before to the importance and promotion of their respective brands.
According to James Sanfilippo executive vice president of Automotive Marketing Consultants Inc., in Warren, Michigan, “”The ultimate brand message is the one delivered on the showroom floor. Manufacturers that invest so heavily in product expect dealers essentially to provide the ambience that the brand promises, and to have a facility that isnt just clean but extremely modern, updated and appropriate to the product.””
Leveraging Brands in the Automobile Market
The industrially advanced countries are saturated with vehicles and these markets have virtually been reduced to replacement purchase markets by aging population. As competition increases in traditional markets, there will be greater pressure on established players to retain their current market share, as sales demand growth will be insufficient to absorb added capacity (Bernard M. Wolf and David Adams).
According to Connelly (2002) Ford estimates that there were 31 brands fielding 56 sport-utility nameplates in the United States in 2001, resulting in an accelerated erosion of market share for its mainstay products by new entrants into this high-margin segment.
It is worth noting that the market share and the margins on the products are enhanced by adopting a proper combination of lean manufacturing techniques. The lean manufacturing in this context implies an overall approach of lean thinking coupled with the brand leveraging and the concept of new product offering. Thus brand leveraging in the form of line extension is considered as an important aspect for the growth and success of the global automobile market. With such an approach encompassing the brand leveraging the lean manufacturers are able to gain more flexibility and are able to get themselves attuned to the new trends faster as well as in a cost effective manner. The absence of the brand leveraging will have its own impact on the traditional manufacturers ending up with lower market share and higher costs. This was clearly the case with the losing of major market share by Ford to their competitors mainly the Japanese manufacturers.
Another example of the brand leveraging by the major auto makers can be seen from the action of the General Motors (GM) in India. GMs Indian operations were inaugurated with the introduction of Opel brand cars. The company was expecting to establish a perfect image of quality in the minds of the Indian customers with the introduction of this car. However, while the Opel Astra managed to help GM make an impression amongst discerning customers, it could not bring into India more relevant (read lower-priced, fuel-efficient) vehicles because it simply did not have that kind of an offering. This position was changed when the company went in to the acquisition of Korean chaebol Daewoo Motors’ passenger car operations worldwide. The new company after the acquisition was named as General Motors Daewoo Automotive Technology (GMDAT). The new set up was expected to make an impact in the emerging markets of China and India. After the acquisition of the Daewoo facilities
GM redesigned and reengineered many of the erstwhile Daewoo cars such as the Nubira, the Kalos and the Matiz, before relaunching them as the Optra, the Aveo and the Spark under its own Chevrolet brand. GM’s long-term strategy seems to clearly indicate its intention to leverage the entrenched image of the Chevrolet brand, which is also well recognised in the market here, with its history of presence in pre- and post-independent India.
Brand Measuring in Automobile Industry
`It is observed in the global auto market that products alone do not determine the demand and the resultant sales and distribution. Establishment of a strong brand and its effective management are also crucially important to push the customer demand up. Especially in the large US market, the purchase of car is traditionally an emotional decision mostly brand driven. Research study undertaken by Deloitte, one of the famous consultant firms has proved the dependence of the customers on the brand strength for their car purchasing decisions. Based on the competitive strength of an automotive brand the pricing power of a product is often determined. The competitive strength of the brand also has the effect of driving the interests of the customers and emotions in the matter of purchase of automobiles. The emotions of the customers, their perception of the products and the product economics can form the basis for measuring the brand strength.
Emotions of the Customers and Brand Measuring
The customer emotions and brand recognition are easily reflected in the sales growth of automobiles. The purchasing process for an automobile of the customer runs several weeks and the process starts with the brand awareness of the customer. In the US automobile market Japanese manufactures Toyota and Honda have created strong brand awareness among the American customers. According to Deloitte They leverage their strong brand emotion across the sales funnel by using a balanced media mix and messaging featuring national branding, regional and local product advertising and direct marketing through print and interactive (e.g., e-mail). In addition, over half of their marketing spending goes to fixed marketing (brand building) versus variable marketing (incentives). (Deloitte)
Product and Brand Measuring
Another measure of Brand power is the product appeal which is evidenced by the customer perception of the product performance. The product appeal is often maximized by the competitive strength of the product as well as the effectiveness of the marketing efforts of the auto manufacturers. It may be observed that Honda and Nissan have the ability to integrate the factors of product strength and product marketing effectively to boost up their sales in the market. Toyota is found to be relatively weak in this respect. This can be explained by the mass appeal of Toyotas designs versus the more sporty appeal of Hondas and Nissans.
Product Economics and Brand Measuring
The brand power can be evidenced by the customer perception of the product economics. The value for money of the product as perceived by the customer can be construed as the economics for the product. It can be used for measuring the brand power. Perceived value is driven by a mixture of the OEMs competitive price/value positioning, life cycle content management, and their marketing messaging. Not surprisingly, Toyota and Honda top the list.
Issues Faced by Auto Makers in Strategic Brand Management
The auto market today with its exposure to globalization is struggling with too many factors affecting its adaptation. This virtually makes the strategic brand management of the automobile manufacturers difficult and the following section discusses some of the issues being faced by the automobile manufacturers in their strategic brand management. It is observed that some of the issues though generally affect the growth of the industry also affect the brand management of the companies concerned.
Issues in Geographical Reach
The key to attaining diversification across markets on a global level is the ability to offer appropriate products to appropriate regions The US auto manufacturers have been facing this issue as traditionally a majority of their production was meant to serve the huge local market. This made them react indifferently to the tastes and needs of the customers and markers external to the domestic market of the US. Even their divisions in the continental European destinations were highly independent of their US operations. Establishing and distribution and marketing channels are often found to be difficult as the firms had little or no experience in the different regions.
Manufacturing Presence in Other Locations
The types of investments being made in the emerging markets are being construed as necessary investments to remain competitive. Of late there has been an increasing trend to move the production facilities to the low cost less developed manufacturing locations from high salary countries like Japan. In 2001, assembly plants in Japan produced 57 percent of all vehicles made in Asia. But in 2003, vehicle production in Asian countries outside Japan will surpass Japan for the first time (Automotive News, June 10, 2002)
At the same time the disposition to such different manufacturing locations should provide distinct advantages to the manufacturers. According to one PWC analyst there is about a $1,500 cost advantage per vehicle in small cars in the Asia-Pacific region when compared with the North American Market (Harrison, 2002). According to Bernard Wolf and David Adams Small car expertise is necessary to truly take advantage of such potential savings, which demonstrates once more the advantages of having appropriate allies for successful emerging market penetration. However the US automobile manufacturers have taken considerable time in aligning themselves to this scenario while the Japanese manufacturers were able to swiftly change their production strategies to cater to the market where the production facilities are located.
Aligning the product portfolios to meet the specific needs of the various international markets has traditionally been a critical task for the automobile manufacturers in the US. As already observed this is due to their large exposure in meeting the comparatively large US domestic market. However this shortcoming has definitely hit the American manufacturers in their strategic brand management for gaining the competitive advantages in the different markets where they had established their production facilities. This has also affected their ability to adjust their product portfolios.
Having a broad product range is critical to maintaining market share, both within individual markets and globally. Across markets it is essential to have a product mix that reflects growth opportunities, therefore making a small car product an essential component of any emerging market strategy. Sometimes, however, it is difficult to develop a competitive product for segments in which a company has no previous experience.
Maintaining a broad product range may help the manufacturer to enhance the sales growth in the traditional markets where prestigious brands can be used to capture business from high end customers. But such brands may not make volume sales in the emerging markets for which the manufacturers have to use brand leveraging to produce other models which can sell in the newer markets. But development of such models and competing with the Japanese manufacturers in those segments have deterred the efforts of the US auto manufacturers in exercising an effective brand management. The example for the failure to provide the required strategic advantage can be found in the merger of DaimlerChrysler which did not give the manufacturer Chrysler a global small car that would meet the requirement of the markets in India, China or Brazil.
Learning Curve affecting Manufacturing Expertise
As American manufacturers attempt to get lean, their greatest source of inspiration and information come from their partners. Acquisitions, joint ventures and alliances accelerate the absorption of manufacturing techniques such as lean manufacturing (Culpan, 2002). When considerable time is being sent in this process the Japanese counterparts who have mastered this technique learning from the Americans had already established a consistent and reliable practice of lean manufacturing to take advantage of the local markets by suitably leveraging their various brands.
Reliance on Single Market or Product Segment
Usually in a manufacturers product portfolio for a particular region an element of safety is always present to take care of the risks of diversification. Just in the same way the investors will make large short term gains by making the investment in a single security, the automobile manufacturers also can make large amounts of profit in the short run when investments are made in a single product or single region. But however the manufacturing operations would be subjected to volatility of earnings in the long run. In the absence of specific plans for a multi product multi location production the manufacturer would find it difficult to strategically manage their brands. Building a new brand or product in the same brand meeting the needs of the market will take considerably longer time in the automobile manufacturing industry. Sufficient lead time for research and development of new products to implement a line extension or to plan a brand extension by adopting brand leveraging is required for the manufacturer to take advantage of the market potential. The time lost in the development of new product range is definitely an issue in the strategic management of automobile brands.
Measures for Mitigating the Issues in Strategic Brand Management
Being a highly capital intensive industry the automobile manufacturers should adopt well planned strategies to take advantage of the new manufacturing locations in terms of cost and scale economies apart from deriving the benefits of catering to the local markets. This is especially an issue for the major automobile manufacturers who have set up manufacturing plants in emerging markets like China and India where there is a huge potential local market. In order that the manufacturers could take advantage of production in different geographical locations they have adopted several measures to meet the different issues and challenges they face in the strategic brand management. These measures take the form of mergers, acquisitions and other strategic alliances. Some of the measures are discussed hereunder:
In order to mitigate the issues being faced by the automobile manufacturers they resort to certain types of acquisitions or partnership arrangements. Such acquisitions or other partnership arrangements with the firms that have the capabilities to serve the markets abroad have helped the auto manufacturers to overcome the hurdles faced by them because of the issues in geographical reach.
For instance, DaimlerChrysler, despite their strength in Western markets, have little presence in developing markets without their equity partners, Mitsubishi Motors and Hyundai. Their equity stake in Mitsubishi provides DaimlerChrysler access to Asia/Pacific, the world’s fastest-growing market, in addition to well-placed manufacturing facilities across the continent, while Hyundai is a dominant player in the fast growing Korean market
`Miller and Zaun (2002) have commented that In its goal of enhancing sales in Asia, DaimlerChrysler is expected to take a greater stake in Mitsubishi Motors truck division. GM recognizes that its (own) brands dont attract much attention in many Eastern markets, fueling GMs strategy of forming alliances (Wards Auto World, January 1, 2002).
GM and Toyota will soon be selling Toyota-badged vehicles in Japan originating from the NUMMI joint venture with GM in California. Recently, GM injected more cash into Isuzu in return for a controlling interest of the firms truck division, where it is expanding production (Yamaguchi, 2002).
Similarly, through the Renault-Nissan alliance, Renault, traditionally strong in Europe but lacking any market share in North America, can now use Nissans established channels of distribution to reintroduce its vehicles, which it plans to do under the Nissan marque (Hiroka, 2001). All these strategic actions enable the auto manufactures to practice an effective and strategic brand management in those markets which are beyond the geographical reach of the manufacturers.
In the matter of creating distribution and marketing channels manufacturers can form alliances that fill geographic gaps with the facility to share a common platform so that the partners would be able to share the resources and strengths of the other. This would also facilitate the entry of one partner in the others market and with the combined marketing forces they would be able to garner a larger share of the market.
For example, In Mexico, Nissan gains in its ability to utilize greater plant capacity and to obtain financing from Renault, while Renault benefits with an effective method of re-entering the Mexican market by utilizing Nissan production facilities in Aguascalientes and Cuernavaca (Economist Intelligence Unit, 2000)
In cases where there are no apparent monetary advantages resulting from green field FDI the manufacturers can think of outsourcing the assembly function only in China instead of completely transplanting the entire factories. (The Economist, April 13, 2002) This would help the manufacturers to plan their brand strategies without the financial pressure of the costs involved.
Mazda has followed this tactic, outsourcing production of its Mazda 6 model to FCC to start production in March 2003, using knocked down assembly sets supplied by Mazda. This approach is expected to strengthen Mazdas brand presence further, which will support sales and market share growth, while providing it with an export base for the region. The move doesnt involve any capital tie-up in the form of foreign plant investments, but does give Mazda access to the strong local sales network of First Auto Works Group, Chinas largest automaker (The Globe and Mail, August 6, 2002)
For the purpose of gaining the production expertise to meet the needs of the local market the major automobile manufacturers form alliances with strategic partners having manufacturing bases in the countries where cost economies can be achieved. According to Zachary (1999) Thailand is particularly well positioned to serve as a manufacturing base because unlike many Asian nations that want to protect domestic manufacturers, there are few manufacturing restrictions such as high local-content mandates, providing foreign manufacturers with flexibility in sourcing of parts and supplies (Zachary, 1999).
Similarly through its alliance with Isuzu, GM is strengthening its manufacturing presence in Asia with the production of 40,000 to 50,000 Isuzu one-ton pickups moving from Japan to Isuzus Thai plant in mid-2003, intended for Asian export (Wards Auto World, January 1, 2002) Thus forming strategic alliances with partners who would be able to provide manufacturing expertise to meet the needs of the local market will go a long way in making the auto manufacturers to strategically manage their brands. With this view only all major auto manufacturers have chosen Thailand as production as well as an export hub and formed strategic alliances with various other partners there to plan their overseas production there. Due to all this activity, Thailand is known as The Detroit of the East, with Toyota, Mitsubishi, Isuzu, Ford, Mazda, Honda, GM and BMW, all manufacturing vehicles there (Zachary,1999).
For gaining strategic advantage in the matter of devising a product portfolio comprising of a suitable product that will sell in the emerging markets, again the need for forming strategic partnerships with other manufacturers was increasingly felt as one of the ways of overcoming this issue.
According to Hiroka (2001)Robert Eaton, former CEO of Chrysler, reflecting upon the new DaimlerChrysler entity acknowledged the need for a small global car needed for emerging markets, and understood that in order to reduce development time and costs, the global car would have to be developed in partnership with another firm or through acquisition of outside expertise (Hiroka, 2001) DaimlerChrysler could obtain the manufacturing expertise by obtaining a 34 percent holding in Mitsubishi which was subsequently raised to 37.3 percent in the year 2002. Similarly Ford got the helping hand from Mazda for developing and marketing small cars suitable for the emerging markets. Otherwise Ford would have continued to market high-end cars which would not have resulted in a higher sales growth for the company.
5.In order to overcome the delay in reaching the market due to the learning curve in the manufacturing of different line of production in a different manufacturing location? the major auto manufacturers resort to acquisitions, joint ventures and alliances to accelerate the understanding and adaptation of the manufacturing techniques like lean manufacturing. A classic example may be found in NUMMI production facility in California where a joint venture operation between GM and Toyota was set up in the year 1984. Although GM was slow to take advantage of the information gathered at this plant, they nevertheless have begun to implement many of techniques employed by Toyota. (Bernard M. Wolf and David Adams)
According to Guilford (2002) The concept of “running common” – using the GM Global Manufacturing System and common processes, is a system adopted from knowledge gained about Toyota’s manufacturing system at the New United Motor Manufacturing Inc. plant in Fremont, California (Guilford, 2002).
Another example for the provision of manufacturing expertise is witnessed in the CAMI plant near Windsor Ontario. The CAMI plant near Windsor Ontario was intended to give Suzuki greater access to the North American marketplace while giving GM knowledge and experience of Japanese small-car manufacturing methods (English, 2002).
The objects of this study are proposed to be achieved by a thorough research into the available literature on the strategic brand management of major global automobile manufacturers. Being a subject of international ramification, there are a number of articles and research studies available about the major automobile manufacturers, their mergers, acquisitions and alliances. However there are only a few resources that are available pertaining to the strategic moves of the automobile manufacturers to manage their brands effectively. Research in to various professional journals, magazines and technical literature has provided a deep insight in to the topic undertaken by the researcher. There are quite a number of websites available in the internet which had also provided the basic information required to complete the study. However I decided to adopt other extensive research methods to complete the research on the strategic brand management of major global automobile manufacturers.
I considered several methods of collection of data for this research. It was necessary to arrive at a specific method that will be appropriate to attain the objectives of the research which depended on the subject under study. For that, I collected the available information about research methods and carefully analysed the difference between the two major data collection approaches (i.e. the qualitative and quantitative research methods). On an analysis of the relative merits and demerits of both the techniques I decided to use both qualitative and quantitative methods to collect the required information and data for the purposes of this research. A brief description of both the techniques is presented below for the information of the readers.
The qualitative method is one of the two major approaches to research methodology in social science, which involves investigating participants opinions, behaviours and experiences from the informants’ points of view.
In contrast with the quantitative research method, the qualitative research method does not rely on quantitative measurement and mathematical models, but instead uses logical deductions to decipher gathered data dealing with the human element. This research method is often regarded as expensive and also it has smaller sample sizes which are difficult to measure. In qualitative research method non-quantitative methods of data collection and analysis are being used (Lofland & Lofland 1984). Qualitative research method been defined as focuses on “”quality”” rather than quantity. While some other researchers say Qualitative method involves a subjective methodology and making the researcher as the research instrument (Adler and Adler 1987)
Quantitative method is a research method which depends less on subjective methods but is more focused on the collection and analysis of numerical data. Quantitative research involves analysis of numerical data. According to Burns and Grove, quantitative research is: “”a formal, objective, systematic process in which numerical data is utilized to obtain information about the research question”” (Burns and Grove cited in Cormack 1991 p 140). Quantitative research uses methods which are designed to ensure objectivity and reliability. In quantitative research the researcher is considered external to the actual research, and results are expected to be the same, no matter who conducts the research. The strength of the quantitative method is that, it produces quantifiable and reliable data. William Trochim (2001)
Surveys are one of the most popular methods to collect primary data from the informed sources of data. As Denscombe (1998) stated, the purpose of a survey is to get a detailed and comprehensive view about the data obtained, which will be used for mapping. There are three main characteristics in survey method which are pointed out by Denscombe (1998) as follows:
Wide and inclusive coverage
At a specific point in time
The popularity of the surveys method is established due to the fact that it provides a quantitative or numeric description of some fraction of the population, that is, the sample, by asking question (Cresewell, 1994 Neuman, 2000 Fink, 1995). Under surveys it is possible to make a generalisation of the results obtained as the surveys allow a large number of respondents to participate in the survey (Davis, 1996). However, there is a low-response bias because many people do not wish to participate in the survey (Aaker, Kumer & Day, 1995). In order to get a clear indication of the customer preferences and the effectiveness of the marketing efforts of Red Bull, the survey method had been chosen for the collection of more information with the object of describing, comparing or explaining the knowledge, attitude or behavior of the subjects and thereby to arrive at some definite conclusion for the research question.
In order to pursue this research study it was necessary to select a target population. For the current research the population covers major dealers of global automobile manufacturers spread throughout the various countries in Europe. The samples were selected from the data available on the websites of different automobile manufacturers found from internet. Once this was set up, I stratified the potential target samples by the geographical locations and the brands they deal in etc. The target population was then randomly chosen to reduce the sample size down to 50 dealers. This approach was necessary for brevity as well as to have an effective follow up with the samples for collection of information on the strategic moves of the major automobile manufacturers.
The primary data was collected by a self-administered questionnaire distributed to the selected sample population in this research. A questionnaire is a document containing questions and other types of items designed to solicit information appropriate for analysis. This involved drawing on existing research in the area of strategic brand management of major global automobile manufacturers.
Questionnaires are the instrument of choice for many researchers working in various fields, theoretical traditions and research designs (Creswell 2003, Bryman 2004), no doubt because they are seen as the most appropriate tool to obtain systematic and comparable data from a large number of individuals and analyze it economically (De Witte and van Muijen 1999, Fogelman 2002). The following section will describe and explain the format, structure and content of the questionnaire.
Construction of the Questionnaire
Based on the observations gathered from the literature available in respect of strategic brand management of major global automobile manufacturers the questionnaire was constructed to collect the information and data from different sample population belonging to various geographical locations.(Appendix I exhibits the Questionnaire) The purpose of the questionnaire was to find out the barriers in managing the different brands strategically, experiences of the dealers with respect to choices and preferences of the customers in the purchase of automobiles, features that the customers feel important in a car to recognize a brand, brand awareness and the criteria for the selection of a particular brand by the customers. The other purpose of the questionnaire is to evaluate the effectiveness of the strategic brand management of the major automobile manufacturers in respect of creating a brand image in the minds of the customers. The questions have been constructed as closed end questions giving different options to the respondents to express their opinion about particular reasons or attributes on different issues concerning the brand image of the automobiles and their brand loyalty. The first section of the questionnaire is devoted to the demographic information about the individual participants. The demographic information are collected and tabulated to be presented. This gives the reader an idea about the homogeneity of the sample to represent a large cross section of the informants.
The second part of the questionnaire is devoted to find out the level of brand identity created by different manufacturers, awareness of different global brands, criteria for the selection of any particular brand and awareness of the global automobile market. Here again the questions were framed as closed ones to make the job of the respondents easier. A blank table containing various attributes that invariably function as the drivers for inducing the consumers to make their choices for selecting a particular brand of an automobile has been enclosed to the questionnaire and the respondents are asked to rank the different attributes according to the intensity of each one influencing the desire of the customers to go in for any brand. The results obtained were tabulated and analysed and the findings and analysis are presented in a separate chapter. This section of the questionnaire also contains questions relating to the personal experiences of the samples in respect of the barriers for developing automobile industry in different countries and the competition between different manufacturers. The information gathered also is tabulated and presented for the information of the readers.
Findings and Analysis
This chapter details the responses for the questionnaire received from the selected samples for the purposes of analyzing them and the analysis of the information gathered is also presented as a part of this chapter.
Out of the 50 questionnaires distributed 12 of the samples who received the questionnaire did not send back the questionnaire with their responses. Hence the analysis had to be restricted to the 38 responses received in total.
Part A of the questionnaire was constructed to get the information on the demographic details of the samples to assess the distribution of the samples. With this information it is possible to decide whether the samples selected represent the majority of the population about which the study is being made.
Although most of the respondents were dealing in all kinds of vehicles, the statistics for the nature of vehicles being dealt with by the firms is arrived at by the proportion of the vehicles on the total number of vehicles dealt with by the respondents.
Part B of the questionnaire deals with specific aspects of brand loyalty and the criteria for the selection of a particular brand by the customers. Questions have also been framed to assess the respondents opinion about the factors responsible for the success of a particular brand, competitive strength of the manufacturers and the obstacles for the growth of automobile industry in any country.
An analysis of the findings from the opinions received from the respondents to the questionnaire is produced below for the information of the readers:
Out of the 50 questionnaire posted for response only 38 were received back with the responses for the questionnaire. Hence it was proposed to take into account the responses from the 38 samples only for analysis. Out of the 38 respondents majority of them had partnership form of business organization. While 24 of the respondents were partnerships 10 of them were limited liability companies and 4 were proprietary concerns.
More than half of the respondents were having 21 to 50 employees showing the size of the organization. This implies 52.64 percent of the respondents were middle size firms with only 2 firms (5.26 percent of the population) were having more than 51 employees
Although most of the respondents were dealing in all kinds of vehicles, like passenger cars, SUVs and some of them dealing in two or three kinds of vehicles, the statistics for the nature of vehicles being dealt with by the firms was calculated on the basis of the proportion of the vehicles on the total number of vehicles dealt with by the respondents. If the firm handled more number of passenger cars then it is taken as one dealing in cars. In the same way for other vehicles also the number of firms was determined. On this basis 18 firms out of the total 38 respondents representing 47.38 percent were dealing in passenger cars. This gives the survey more strength as the passenger car segment among other vehicles is the most brand conscious one. The SUVs take the second position with 7 firms (18.42 percent)
It is usual for the authorized dealers to deal with only one brand of the vehicle. However in respect of different kinds of vehicles like trucks, pickups the firms may be dealing with more than one brand. Based on this the total sample was stratified to arrive at the number of firms handling 2 brands and more. The results are 34 firms (89.47 percent) represent less than 2 brands (mostly single brand) and 4 of the respondents were dealing with more than 2 brands. It is interesting to note that almost all the samples selected could be able to comment on the customers of specific brands based on their experience.
On the question of the number of automobiles per month being handled by the firms, it is observed out of the findings that a majority of 60.52 percent of the firms were handling 51 to 100 vehicles per month. This is another interesting representation of the total population by the samples selected as handling a size of 51 to 100 vehicles per month would have given the firms a reasonable insight into the preferences of the customers.
14 respondents (36.86 percent) have identified brand as the most important criterion being considered by their customers in selecting a particular automobile. This result more or less agrees with the outcome of the literature review. Price range is the next important criterion as per the opinion of 15.78 percent of the respondents. The look of the car and the driving comfort also matter for some of the customers as per 13.15 percent of the respondents.
In the matter of selection of a particular brand the driving comfort is the most considered reason for selection of a particular brand by the customers. This opinion is being posted by 11 out of the 38 respondents being the maximum number of people representing 28.96 percent of the sample population. Though the study did not cover the aspects of the criteria for selection of brands by individual customers, this information prove the fact that the brand loyalty depends largely on the quality of the product like driving comfort and look of the car. Price range of any particular brand also plays a vital role in the selection of a brand by the customers as identified by 21.05 percent of the people. Hence it becomes imperative for the manufacturers to remain price competitive also to build their brand image.
According to 42.10 percent of the respondents, the success of a brand in automobiles is determined by the price range it offers. However 31.58 percent of the respondents opined that brand image of the automobile is important to determine the success or otherwise of a particular brand.
The brand image of the automobile determines the competitive strength of any particular brand of automobile. This is the opinion given by 52.63 percent of the selected samples. This corroborates the point that the customer preference for an automobile largely depends on its brand image followed by the price. However the quality of the product is identified as the factor for improving the competitive strength of the automobile manufacturer, according to 18.42 percent of the respondents.
31.57 percent of the respondents identified lack of technology as the important reason for slow development of automobile industry in any country. The government regulations also play an important role according to 21.05 percent of the population. This result also corresponds to the research made for the study.
When asked to rank the different attributes responsible for the selection of a particular automobile, the samples have ranked brand image of the automobile as the most important criterion for the selection of an automobile. While the driving comfort was identified as the second important criteria, the price range was ranked third important criteria.
The survey thus answers the research questions to a maximum extent. On the question of the significant elements the global manufacturers have to take into account, the literature reviewed by the paper identified the brand building, leveraging brands, brand measuring and protecting the Brands as the important elements. It may be noted that brand building the survey identified the driving comfort implying the quality of the product and the price range as the important criteria for brand building as these were the criteria identified by most of the samples.
The review of the literature also addressed the key issues that the auto majors should consider for the strategic brand management effective. The survey also corroborates that the most of the customers of automobiles identify themselves with a particular brand for various reasons. A majority of the customers place the brand image on priority for their decisions on purchase of automobiles. Hence it is crucially important for the manufacturers to concentrate on strengthening their brand management.
The product quality and the price range in which the manufacturers offer their automobiles are the key challenges that the manufactures have to address to improve the effectiveness of the strategic brand management. In this connection it becomes important for them to have a stricter control on these essential attributes that help the firms building up their brand image.
The various marketing tools that are being employed by the manufacturers still have to center around the customer satisfaction which basically depends on the price and quality as identified by the survey.
Conclusion and Recommendation
This chapter presents a recap on the main issues dealt with by the paper in the area of strategic brand management by the automobile manufacturers and also this chapter offers a few suggestions which can be adopted by the manufacturers for the improvement in their strategic brand management.
Brand building, leveraging the brands, brand measuring and protecting the brand were identified as the major elements of strategic brand management by the major automobiles. In the purchase funnel of the customers for automobiles brand awareness precedes all the other logical steps. This implies that the manufactures should strive to maintain the quality of the products so that they can make a long lasting impression in the minds of the customers. Unless the brand is recognized and increased interest shown by the customer on the selection of the brand there can be no improvement in the competitive strength of the manufacturers. The important criteria for the selection of a particular brand identified by the survey also point out to the quality of the product and the price range of the products as the important issues that the manufacturers need to concentrate for the improvement of the brand image and thereby increase the competitive strength and the resultant market share. There are important issues being faced by the automobile manufacturers like geographical reach, manufacturing in foreign locations, product portfolios, learning curve in the manufacturing of the products in the locations other than the domestic locations and reliance on a single market. All these issues need to be taken into account by the manufacturers for an effective strategic brand management.
The following suggestions may to some extent mitigate the issued being faced by the automobile manufacturers in improving their strategic brand management.
The manufactures are using tailor made information technology software developed for the particular circumstances prevailing in their organizations. A thorough review of this software to improve the brand measurements by reaching a wide spectrum of customers in different countries of the world. A wide range of customer preferences and selection criteria obtained from the different markets will enable the manufacturers to look into an effective brand management.
While making their advertisement budgets the manufacturers should consider the geographical locations where their markets are located to make the content of the advertisement and the effectiveness of the media reach a larger cross section of the customers so that brand management made is effective.
Product portfolio is another important area where the manufacturers may do well to design and market those products which will suit the particular market and the kinds of customers. It was proved time and again a wrong choice of products will always lead to failures. It is virally important that the manufacturers should consider.