The B segment, object of our analysis, represents the 42% percents of the car market in Italy. It is the biggest segment, as showed below in the chart 14.
Obviously such a big market segment, attracted several companies. Today some of the most important car producer of the world compete in Italian B segment: Renault, Ford, Citroen, Peugeot, Volkswagen, Opel and others (see chart 15 below) In a market characterized by low growth rate, this means an extremely hard competition within market members: to maintain the business profitable in this scenery, the only chance is to try to gain competitors’ market share, increasing the competition in terms of prices, warranty extensions, financial and other services outputs available for buyers.
Strategic Marketing Project
Giorgio Guarnieri, Sara Zerbinati 35 -High exit barriers from the business, oblige companies to do their best for surviving in the
market. Thus, their strategic choices have big impact on the company’s future and are consequentially risky. Indeed, we rate the competition among existing firms high.
All the factors above analyzed, make of the Italian car market, and in particular the B segment, an extremely competitive market in which the strong position of Fiat can be source of different competitive advantages. Thus our rating for the market profitability, to complete the Porter’s five factors analysis, is medium-high.
Market structure breakdown by segment 2006
Chart 14 “Market structure breakdown by segment, 2006” Own elaboration on UNRAE data
B SEGMENT BREAKDOWN
Chart 15 “B segment breakdown”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered
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Giorgio Guarnieri, Sara Zerbinati 36
-2.3.2 BUYERS ANALYSIS, BUYING BEHAVIOUR
The buyers behaviour in car purchasing is characterized as follows:
PROBLEM AND/OR NEED RECOGNITION
The car is broken, it is too expensive to be repaired. The car is too old, inefficient, non conform to anti pollution regulations; it cannot be used for going in the city centres due to traffic restrictions to non-ecological cars. Last, the simple will to change the old car for buying a new one.
Price and financial considerations remain the main reason for customers to purchase, although its important in the last three years has substantially decreased. The second reason, for importance, is the car size. The third is the design always more people pay attention to it and it represents a strong appeal to buy a new car. The forth are the driving characteristics. The last, are the technical aspects: only for about 15% of buyers they represents a reason to purchase, considered also the knowledge background difficulty (it is a clear demonstration of the asymmetrical theory). (see chart 16)
REASON FOR PURCHASE
Chart 16 “Reason for purchase” Own elaboration on Fiat Audit data
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Giorgio Guarnieri, Sara Zerbinati 37 -INFORMATION SEARCH
The potential buyer seek for information about the car. It is an high value product, no often purchased, thus it requires a careful evaluation through information analysis. Information are usually obtained from retailers, car magazines, TV car magazines, Motorshow, websites, online forums and word of mouth.
EVALUATION OF DIFFERENT PURCHASE OPTIONS
The information obtained are compared one with the other. Consumers allocate attribute factors to certain products, almost like a point scoring system which they work out in their mind over which brand to purchase. This means that consumers know what features from the rivals will benefit them and they attach different degrees of importance to each attribute. Consumers usually have some sort of brand preference with companies as they may have had a good history with a particular brand or their friends may have had a reliable history with one.3 Moreover different quotations are compared in order to recognize the best offer.
PURCHASE DECISION
Through the evaluation process discussed above consumers will reach their final purchase decision about brand, product, dealer and purchasing time. They reach the final process of going through the purchase action. The process of going to the shop to buy the product, which for some consumers can be as just as rewarding as actually purchasing the product.
POST-PURHCASE BEHAVIOUR
It is a common trait among customers to have doubt about the product they bought. It is at this stage that companies need to support the sale, through marketing activities, to make the consumer proud and sure of the product.
Several factors influence the buyer’s decision: culture, personality, lifestyle, social position, marketing, advertisement and the decision center. Culture is defined as our attitudes and beliefs. It is developed during the life by the family, school, friends and other influences.
3 Source www.learnmaketing.net
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Giorgio Guarnieri, Sara Zerbinati 38 -Personality influences the customer’s lifestyle. The Fiat customers should be a person of
young spirit, who pay attention to design and has a taste for classic but at the same time innovative.
For social position we mean all the factors that determine how a person is located into the society. It is influenced by culture, job and family. Some people look up to may influence their choices of purchasing a particular product or service. Reference groups are particular groups of people that indirectly have influence on other buyers’ decisions (followers).
Marketing and advertisement make big effort in trying to gain customers’ preferences and trust. They are studied and implemented to influence the customers’ buying decision.
Moreover Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs, where the priority lay with job security and the knowing that an income will be available to them regularly. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognised or the need to wear branded clothes as a symbol of status. Self-actualisation is the realisation that an individual has reached its potential in life.
Fig. 5 “Maslow’s hierarchy-influences on car buyers”. Own elaboration
Strategic Marketing Project
Giorgio Guarnieri, Sara Zerbinati 39 -As showed in the figure 6 above in the text, when a consumer decides to buy a car, is
influenced by some factor of the hierarchy pyramid of Maslow. The improvement of the car safety system offer a more efficient protection to drivers against car accident: usually people are aware of the probability to have an accident and of its possible consequences, indeed they see new car safety systems as an improvement of their own safety.
Moreover car is nowadays a status-symbol: it is used, like other objects, as a symbolic sign of social power, representing an index of the social position achieved by a person.
Finally it could allow a person to meet part of its esteem needs.
2.3.2.1 Fiat Purchase Behaviour
Group Sectors are organized according to integrated, worldwide purchasing processes that satisfy the different needs of specific regional markets. The macrostructure of Fiat Group purchasing processes can be summarized as follows:
Definition of purchasing strategies and policies;
Definition of approved Group suppliers;
Assessment and approval of suppliers;
Codifications of materials, identifications of needs, and system of purchasing request;
Market studies and identification of potential suppliers;
Technical/commercial analysis of bids and choice of suppliers;
Order issuance and approval system;
Supplier performance evaluation system and updating of suppliers’ ranking.
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Giorgio Guarnieri, Sara Zerbinati 40
-2.3.3 COMPETITORS ANALYSIS
In the Italian B-segment car market, Fiat, faces the competition of some of the world biggest car producers: Ford, Opel, Volkswagen (VW), Toyota, Renault and Citroen.
Our analysis has been restricted to the three closest Fiat’s competitors, with their respective car for the B segment: Ford “Fiesta”, Toyota “Yaris” and Renault “Clio” (Chart 17). We did not consider the Lancia Ypsilon as a direct competitor because it is a car produced by a company, Lancia, that is member of the same group of Fiat Auto, Fiat Group. The marketing strategy and especially target and segmentation for this car, are definitely different from Fiat’s one. For these reasons we excluded it from our analysis, being a product that complete the range offered by the group.
Fiat
Chart 17 “B segment top 10 breakdown”. Own elaboration on the Transportation Ministry Centre of Data Elaboration (CED) information. Percentage on registered
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Giorgio Guarnieri, Sara Zerbinati 41
-2.3.3.1 Ford
Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan USA manufactures and distributes automobiles in 200 markets across six continents. With approximately 300,000 employees and 108 plants worldwide, the company’s core and affiliated brands include Ford, Lincoln, Mercury, Mazda, Volvo, Jaguar, Land Rover and Aston Martin. Its automotive financing business is Ford Motor Credit Company.
Vision
“Our vision is to become the world’s leading consumer company for automotive products and services”
Mission
“We are a global family with proud heritage, passionately committed to providing personal mobility for people around the world. We anticipate consumer needs and deliver outstanding products and services that improve people’s lives.”
Values
“The customer is Job 1. We do the right things for our customers, our people, our environment and our society. By improving everything we do, we provide superior returns to our shareholders”
Ford provides financial service through its own financing company: Ford Credit. It is considered the biggest automotive financing company in the world. It offers such a wide range of services that each customer can find the best solution to his needs. It is present in 40 countries serving 10 millions customers. In 2000 it financed sales and leasing of more than 4 millions cars.
Ford provides assistance to its Italian customers through a network of 1,200 Ford Service assistance centres: maintenances, reparations are performed by specialized workers formed by the own Ford’s training programs. The warranty on the cars sold is a two years lasting one; if any problem would occur, the customer can get its car repaired for free all around the Europe in the Ford Assistance Centers. The warranty on the substituted components is of three years.
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Giorgio Guarnieri, Sara Zerbinati 42 -THE FORD FIESTA
The new Fiesta, offer a wide variety of colours (fourteen) and motors divided into five fitting-outs: Fiesta, Titanium, Ghia, S, ST. The Fiesta is the basic offer, while the others provide to the consumer a wider choice of technologic accessories, more powerful motors and higher quality of interiors. For the Fiesta fitting-out, prices range from € 10,700 to € 13,500; Titanium from €11,050 and €13,850; Ghia from € 12,950 to €15,750; S from € 14,200 to € 15,650; ST standard price € 16,500. Prices are variable in function of the motor power (Hp and capacity), feed system (fuel, diesel) and car body (3/5 doors).
Ford’s presence in the European market appears stable at 8.3% of market share. In Italian B-segment, instead, it showed an increase of 9.2% compared to the 2005 result.
The strategy adopted by Ford with the Fiesta is a product diversification with low prices, good quality, wide variety of colours and motors, and special warranty conditions sustained by a well known brand with a strong heritage in its background.
2.3.3.2 Toyota
Established in 1937, Toyota Motor Corporation is one of the world’s representative automobile manufacturers, producing vehicles in 26 countries (in each of the five continents) and marketing vehicles in more than 170 countries. The group produced in 2005 8 millions vehicles around the world. The workforce at the end of 2005 was of 280,000 employees.
Vision
“By manufacturing cars that reflect the needs of customers and society, Toyota will target sustainable growth and contribute to the development of the automobile industry.”
Fig. 6 “The Ford Fiesta” Source: www.ford.it
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Giorgio Guarnieri, Sara Zerbinati 43 -Mission
“We want to be a company that continue to grow in any era and in any conditions. Bearing that in mind, Toyota in reinforcing the foundations of an unshakable growth platform while taking decisive management measures to grow earnings. Always welcoming change and eager to take on challenges, we are transforming the quality of our management and operations in preparation for making our next stride forward.”
Toyota aims to sell 1.20 million vehicles in the European market by 2010; in 2005 they sold 995,200 cars, registering an incredible growth, equally distributed, since 2001 of 48%.4 To achieve that target, their strategy is to increase product appeal, sales capabilities and localization. Moreover, responding to the strong interest in environmental issues in the region, they will add to their offerings of diesel vehicles and hybrid models while actively advertising their merits and performance to grow vehicle sales. To advance localization, they will continue staged expansion of production capacity for vehicles and such major components as engines.
The Italian subsidiary contribute to the corporate growth in Europe, considered that its sales grew of 30.23% since 20015. If we consider as index base the 1996, the growth of Toyota in the Italian market appears simply incredible: +759%. It grew from 15,192 sales to 130,507 in 2005. This growth was sustained by the development of a careful commercial network along the whole peninsula. Today Toyota dealers and assistance points are more than 200.
One of Toyota’s strength is its philosophy summarized in this motto: “In the world men and autos need to coexist in harmony”. This result in the extreme quality of car produced. The two famous principles, base of the philosophy are the “Just in Time” (JIT) and the “Auto-activation”. The JIT represents the search of the optimization and the synchronization of all production phases in order to manage in the best way, in other world, efficiently and effectively, the assets, ensuring the best quality of products. The Auto-activation created a revolutionary relation between man and assembly line, in which the man influences the machine rhythms, eventually correcting possible errors, and not the opposite, in order the ensure an always higher product quality.
4 Data source Toyota Shareholders Information: 2005 review.
5 Data source www.toyota.it
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Giorgio Guarnieri, Sara Zerbinati 44 -THE TOYOTA YARIS
It revolutionized the small car market offering an innovative product based on four theorems:
1. Small length (3,75m), wide inside, for the best habitability for five passengers and an easy system for improving charge capability.
2. Small capacity motors, with high power and low consumptions (two fuel fed: 1.0 69 Hp, 1.3 87 Hp; one diesel fed 1.4, 90 Hp)
3. High safety standards certificated with the 5 stars NCAP (safety standards classification). Nine airbags, including the exclusive one for driver’s knee, ABS (Anti
Blockage System), EBD (Electronic Breakforce Distribution) and EBA (Emergency Break Assistance) represents the standard safety equipment on all the Yaris. Other electronic control as TRC (traction control) and VSC (vehicle stability control) are available upon request.
4. High technology in all components.
Available on all Yaris the new digital 3D instruments, onboard computer, CD reader and air-conditioner.
Prices range from € 11,151 to € 14,801. Only five colours and three motors (1.0 fuel fed, 1.3 fuel fed, 1.4 diesel) are available.
The strategy adopted is a product differentiation in terms of quality, prices, services and warranty extension (three years or 100,000 Km). Although the variety of fitting-outs, motors and colour is restricted.
The services provided by Toyota includes: assistance points open 12 hours per day, 6 days a week, including August, provided by qualified technicians; clear prices available for customers as well as a statement of their rights.
Fig. 7 “The new Yaris”
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Giorgio Guarnieri, Sara Zerbinati 45
-2.3.3.3 Renault
The Renault group is composed by Renault, Dacia and Samsung Motors. More than the 60% of the shareholders equity is in the hands of privates, the 15.7% of the French State, 15% of Nissan and the remaining part is hold by the company itself or by employees. It has more than 350 commercial and industrial sites in 36 countries all around the world. The entire group employs 129,912 people while Renault 43,788. In 2004 it sold 2.5 millions cars in the world. The group has fixed the goal of 4 millions cars to be sold until 2010. Renault confirms its global attitude with the alliance made with Nissan in 1999. The Alliance develops and implements a strategy of profitable growth and sets itself the following three objectives:
• To be recognized by customers as being among the best three automotive groups in the quality and value of its products and services in each region and market segment.
• To be among the best three automotive groups in key technologies, each partner being a leader in specific domains of excellence.
• To consistently generate a total operating profit among the top three automotive groups in the world, by maintaining a high operating profit margin and pursuing growth.
On the strength of the numerous synergies generated by the Alliance over the past five years in engineering, manufacturing, sales, IT and purchasing and the performance of both companies, Renault and Nissan are actively present on most of the major international markets.
Renault has defined and published its goals into the "Renault Commitment 2009" :
• Quality : position next models among the top three of their respective segements.
• Profitability : achieve an operating profit margin of 6% in 2009.
• Growth : sell addition 800,000 units, the strongest growth in Renault’s history.
The plan to reach those goals includes the launch of 13 new models and 13 "face-lifting" of existing ones. The resources to achieve the commitment will be $obtained by reducing :
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Giorgio Guarnieri, Sara Zerbinati 46
-• Purchasing costs : -14% in three years
• Manufacturing costs : -12% in four years
• Logistics costs : -9% in four years
• General and administrative costs : less than 4% of revenues in 2009
• Total distribution costs per unit in Europe : -8%
• Optimize cost of investment : -50% target.
Renault’s market share in Europe is 10.3% while in the italian B segment it reaches the 5%. 6
RENAULT CLIO
It is characterized by a sophisticated design both for the exterior and the interior.
Tries to put emphasis on the driving pleasure, ensuring a surefooted roadholding in every weather conditions, thanks also to its good balance that gives to the driver a better impression of control.
Ergomonics driving position contributes to the driving pleasure. It is roomy being confortable for five passengers. It is certificated for safety standars by the NCAP with 5 stars, being also awared as the most safety car of the segment for children. The car is available with up to 8 airbags ; it is equipped with ABS and EBA. Optional incledes ESP, understeer control, additional cornering lights and tire pressure monitoring system.
A considerable work went into aerodynamics and reducing friction and vehicle weight. As a result, fuel consumption is low and CO2 emissions have been reduced. A full 95% of vehicle weight is recyclable, putting great emphasis on the use of recycable plastics and renewable materials.
Prices ranges from € 11,101 to € 22,951. Severals fitting-outs are available, as well motors (1.2, 1.4, 1.5, 1.6, 2.0 capacity, ranging from 65 Hp to 200 Hp) and feed system (fuel, diesel). In total are provided 50 different combinations of fitting-outs, motors, capacity, body (3/5 doors) and feed system.
6 All data about Renault are taken from the Renault Annual Report 2005 available on www.renault.com
6 All data about Renault are taken from the Renault Annual Report 2005 available on www.renault.com