Chinese Motor Vehicles Assignment

Industrial analysis
A1)
Political
Since the early 2000’s the government has been gradually reducing
restrictions on the automobile industry in an attempt to strength the production of
Chinese motor vehicles and boost the Chinese economy. While the initial relaxation was
of more benefit to foreign car manufactures, the increase in market demand did open the
market to domestic independent manufacturers and as a result greatly improved the
economy. The ensuing boom in the industry allowed for a lot of manufacturers to grow
rapidly, and establish the Chinese car industry. However, in 2013 the political agenda had
shifted focus. Restrictions were introduced to limit the number of cars owned
domestically, and car manufacturers were encouraged to export to foreign markets. In
addition, the introduction of tax’s on cars which were not eco-friendly meant that many
entry-level manufactures were experiencing heavy losses. These political regulations
were forcing small independent manufactures to compete with much larger, well-
established companies on the world stage.
Economical
As a result of the governments ‘five-year plan’ the economy in china was
on the rise. This economical strength translated into a healthy automobile industry,
which had grown to a size and strength where exporting cars was not only a possibility
but also a great addition to economies portfolio of income. However, the boom in the
automotive industry, coupled with the higher household earnings meant that there was a
much higher barrier to entry than ever before. Domestically the economies strength
worked against Chinese manufacturers as there were no longer the demands of a lower
economy, such as entry-level vehicles.
Social
The perception of the automotive industry drastically changed over the
time period from early 2000 to 2013-2014. Cars went from a luxury which many could not
afford, and those who could were not able to justify the expense, to a common
household asset. While in many ways still lagging behind the west in automotive
dependents, the Chinese market had not only developed in demand, but also matured in
requirements. At the start of the automobile boom the average consumer had little
interest in features beyond price, which meant that manufactures of entry level vehicles
held the largest market share. Although, by the end of 2013 the average consumer was
far more interested in features such as performance, safety and fuel economy. Much like
with the political regulations, these shift in demand gave an advantage to larger
international manufactures and put the pressure on small independents to lift the quality
of their product.
Technological
Technology in the automobile industry is by far one of the largest barriers
to entry in the market. With some companies investing as much as 6% of gross earnings
into R&D to stay ahead of the competition, and to keep up with the ever-changing
consumer demand. With safety and eco-friendliness being high on the list of priorities
from consumers, the age of the entry-level vehicle was coming to an end.

A2)
The clear and most major threat to Chery and other IAMs is the immense
power and presence of JVCs. In 2012 alone, JVCs giants, Volkswagen and Shanghai
General Motors held a 25.83% market share. Due to their size and age they have
developed a brand strength which IAMs will struggle to compete with. In addition, larger
JVC use greater pricing policies, which means that from a price point they are not
releasing competition against themselves. IAMs, on the other hand, have more chaotic
pricing policies, producing cars of a similar price range, resulting in competition between
the same brand of car.
A major threat which should also be considered in the limitations being put
in place by the government. While originally the government is responsible for the
growth in the automotive industry and continues to push the export of cars, domestically
they have begun to place restriction on car ownership. These restrictions come in the
form of reduced tax rates for low emission vehicles and a cap on the licenses in major
cities. These regulations over a long time period will ultimately reduce car sales in their
current form. Eco-friendly cars will have a much more sustainable future, but in their
current form these government restrictions are a major threat to sustainability.
A3)
Key success factors
- Consumer behavior – The buying behavior of the average Chinese consumer has
rapidly changed since early 2000, with a considerable shift away from a solely cost based
approach. As the economy grows and the market matures, there will be an increased
demand for premium-level cars. This will be a great advantage to much larger and older
companies, and will make it harder for IAMs to compete
- R&D – Walking hand-in-hand with the change in consumer behavior is the issue of
advancing technology. Selling points such as fuel economy, low emissions, and
performance, will be in great demand, as the government introduces lower tax rates on
low emission car sales. Being able to offer the latest in technology will offer a great
advantage.
- Export – With the rising restrictions put in place by the government to help control
issues due to pollution the Chinese market will begin to cap. With cities such as
Shanghai limiting the car licenses, the only demographic able to purchase cars are
spending more on getting a license than most entry level cars cost. This will result in
only very wealthy consumers owning cars in Shanghai, who will obviously not be
purchasing entry level vehicles. With this in mind it is important to continue to export
vehicles to countries which are in demand of entry-level vehicles. Doing so will ensure
company growth, strength and sustainability.
A4) Develop a Competitive Strength Grid

Company Branding Promotion Sustainability Price Environmentall
y friendly Warranty Exporting
Market Share Quaility Total
Toyota 5 4 4 5 5 4 5 5 37
Mazda 5 4 4 5 4 4 5 4 35
Honda 4 4 4 5 4 4 5 4 34
Great Wall Motors Company
Limited (Haval) 4 4 4 5 4 4 3 5 33
BYD Auto Co 3 3 4 4 5 5 3 5 32
Volkswagen 3 4 3 5 4 4 5 4 32
Chery 3 4 4 5 4 3 4 3 30
Hyundai 4 4 4 3 4 4 4 3 30
Ford 4 4 3 4 2 4 4 3 28
Nissan 4 3 3 2 3 4 4 3 26
Geely Auto Group 3 3 4 3 4 3 2 3 25
Tianjin 2 3 3 3 3 3 2 2 21
Hafei 2 3 3 2 3 2 2 2 19
Competitive Strength Grid of direct competiors
1=Poor 2=need improvement 3=Average 4=Good
Company's Performance for Dimension
This competitive strength grid takes main succeeding factors measuring them against Chery to its 14
main competitors, showing a clear understanding of the market advantage of Chery and where its
weaknesses are. The Grid shows Chery has competitive advantages in 2 main areas, firstly is pricings,
Chery uses ________ to manage their pricing for all products ensuring it stays competitive yet does not
affect its other product’s sale. Secondly, Chery’s
Out of the 14 competitors, Chery falls right in the center overall with more well known brands such as
Toyota (1st place), Mazda (2nd place),and Honda, these brands shown to have superior branding and price
strategies, as well as better quality control and higher exporting market share. Furthermor, Chery also has
a 3 years warranty only which other competitors has 5 years or 100000 kms, for example
B1) Identification of strategic segments, possible target markets and positioning
Chery is an Automobile trading company and it was founded through government of
China in year 1997. This company is state- owned corporation. It is a famous Chinese car
manufacture and its main aim is to developing “independent Chinese brand”. Chery firm has
capability to manufacture 650 thousand automobiles, 400 thousand gear- boxed and 650
thousand engines annually. Battling crisis of reducing sales as well as chaotic self- identity ,
Chery organization unrelieved new brand related strategy that axes RIICH and RELY divisions
and then re- focus on Chery brand, it develops new logo of Chery and dropping one that has
been used at the time of foundation. The principle products of Chery company are cars, SUVs
and minivans. It sells the passengers cars in commercial vehicles and Chery marque under
Karry brand. This company is 10th largest China- based automaker that is measured through
2012 output. Chery company has many vehicle assembly and I also facilitating its
manufacturing in China . The vehicles of this firm are assembled in almost 15 countries. Its
factories are not owned through fir that use semi complete or complete knock down kits. This
firm has two domestic Research & Development centers and also make investment of almost

7% of total revenues in development of its new products. The QQ city car of Chery is
considered as best known the Chery model, QQ6 and QQme are two other cars which
manufactured through this firm.
In the segmentation, market is divided in to small groups. In strategic segmentation, firm
divide the homogeneous group of consumers which can respond similarly to specific marketing
mix. The Chery has four different sub- brands and each brand has more than 10 kinds of
automobiles. Know about the product line of each and every brand of Chery company, it has
been found that they share the description about car in detailed manner. In context to this, they
are about age, location, lifestyles and also cost of cars, the family size of consumers many
function energy are to be saving in some of the cars. Chery company launched the two high
end and middle end cat branch such as RELY and RIICH which undertook various market
segments. The target segment of this company is based on demographic segmentation. On the
other hand, targeting is selection of the potential customers to whom business wishes to sell its
services and products. Target strategy consists segmentation of market, selecting appropriate
market and identifying goods which will be provided in every segment. In this, premium level
market and value- level has become main car target because of high household income. The
positioning refers to place that brand occupies in mind of consumers and how it is different from
products from other rivals. The Chery firm launch its new car by target Europe with the new
brand.
Segmentation It has four different sub- brands and each
brand has more than 10 kinds of automobiles.
It segment its marlet on the demographic
basis.
Targeting Value level and Premium level customers are
the targets.
B2) Setting Mission and Vision, including Marketing Goals and Objectives

It is necessary for an organization to set the vision, mission and objectives in a better
manner, it will help in conducting the business operations as well as activities in a significant
manner.
Vision is an ability to plan or think about future with proper imagination. It is an inspirational
description of what company would like to attain the short term and long term objectives with in
a given period of time, it is intended to serve as clear guidance for selecting present as well as
future course of action. The Vision of Chery is to “Make the Chinese Own Cars”. On the other
hand, mission is written declaration of core purpose of company and also focus that remains
unchanged normally over a period of time. It is necessary for firm to accomplished the mission
of organization in an effective manner. The Mission of this company is to “Make innovation and
fulfil needs of customers”. The goal of Chery company is to develop “International Brand”. This
firm has paid an attention to develop domestic and also overseas market by developing
effective strategy. Its also develop an independent brand by independent innovation.
Marketing objectives (extending market, market lead, what Chery wants to provide or
make) then leading to what results? (% of market share):
1. Providing affordably priced automobiles with quality to improve the living stand of
all consumers around the world.
2. Expending to international market, aiming to stay as the Number 1 exporting
company in the Chinese Automobile industry.
3. Increase market share through focusing in the development of QQ series which
covered more than half of Chery’s sales in 2013. Aiming to increase Market Share
by 15% by 2020
Illustration 1: Values, Vision and
Mission, 2019

Promotion objectives (branding, image, PR) then leading to how to do it
The promotional objectives is main part of over reaching market strategy. It is necessary
for the marketing team of Chery to develop the better promotions to attract large number of
people at large scale. It is essential that objectives should be consistent with an objective of
marketing.
1. Build up an environmentally friendly focused brand image
Since there has been an increasing trend in environmental related factors for
consumer purchasing influence factors, this could bring great competitive
advantage for Chery.
2. The better promotion is helpful in enhance brand image of company. To keep name in
front of customers and also reinforce its image. The attractive promotional aids in
increasing reputation of company in a better manner. It can be attained part through
being consistent in all marketing messaged along with using an inexpensive promotional
goods.
3. The promotion helps in develop or make improvement in reputation and image of
company. By using better promotional techniques, Chery can reach at large number of
consumers at each corner of world. On the other hand, brand image is purely outcome
of the promotional efforts.
4. Market promotion aids firm to realize different objectives. The organisation can enhance
sales, maintain strong contacts and improvement in its brand image with market through
promotional efforts. Development, survival and growth of firm are depend on how
effectively it interact with market.
5. The promotion is designed to help consumers in search stage of process of purchasing.
It is essential for Chery company to provide the whole information regarding the products
and services. It is helpful for customers to search the information about product or
service and then take the purchasing decisions in a better manner.
B3) Creating value through marketing mix i.e., what is your overall strategy in terms of product,
price, promotion and placement. IF and ONLY relevant to your case study, you may include
other elements of the marketing mix (people, process, and physical evidence). You may wish to
describe this entire section through creating a detailed table, however you may also use a
different approach.
First, Chery will become an industrial leader within three years by 2017;
Second, Chery will be a competitive car manufacturer in the international market and be the
most premium automotive company in China by 2020
Third, Chery will be a global automotive group by 2010.”
PRODUCT

A/A+/B-class when looking at the value-level market, and B/C-class when looking at the
premium-level market. The reason for selecting these vehicles in these particular levels is
because according to the China AUtomotive Industry Association there will be a high demand
for these levels. And therefore, they will ultimately be the mainstream markets.
PRICE
For the above cars in particular, the price individuals would be looking at to purchase would be
RMB100,000 to RMB180,000.
PROMOTION
Product should be promoted to the premium-level and value-levell markets. The reason being is
that particular level continues to be the largest in comparison to entry-level and luxury-level. It is
also the market which JVC dominates,
PLACEMENT
B4) Resource Allocation: In this section, you need to breakdown the resources you plan to
allocate to implement your marketing mix strategies (section B3) in order to achieve your
marketing objectives (section B2). You will also need to show what will be the company’s
expected expenditure over the next 3-4 years to support your strategy. You may think abouct
using a table or figure for this purpose. Please provide rationale for your resource allocation as
you craft the table or figure to address this section (B4). You may also discuss how the
company expects the resources to be generated in the next 3-4 years. You will need to derive
information given in the case and also use your judgement and critical thinking and assumptions
for forecasting the required resources.
WHAT RESOURCES DO YOU PLAN TO ALLOCATE TO IMPLEMENT YOUR MARKETING
MIX STRATEGY
The car industry is still booming, therefore, it is important to look at why Cherry is not moving
along with the other brands.
WHAT IS YOUR MARKETING OBJECTIVE?
DOES THE RESOURCES YOU ALLOCATED HELP MEET THOSE OBJECTIVES?
Cherry AUtomotives should look into implementing JVC into their organisation. This is
implemented by all the “6+3” multinational automobile groups in China.
WHAT IS THE COMPANY'S EXPECTED EXPENDITURE OVER THE NEXT 3-4 YEARS?
HOW WILL THE COMPANY BE EXPECTED TO GENERATE RESOURCES IN THE NEXT 3-4
YEARS

B5) Monitoring and Control – How would you monitor your strategy? (i.e., for example setting
KPIs, objectives) and what sort of control mechanism will you have in place? (You may show
this through a detailed table or Figure with short explanation). You are required to use graphics,
charts and tables to present your solution clearly. Tables and graphs should add value to the
assignment, and should not repeat information. Assignments without graphs, flowcharts and
tables will be awarded substantially lower marks. Look at the “General Assignment Standards”
section of this document for formatting guidelines. All work MUST be your own. Answers will be
assessed for appropriateness and persuasiveness. Application of strategic marketing concepts
is expected. You are expected to use only the information given in the case study. Do NOT
research outside of the case content and lecture material. The aim is to analyse and make
deductions from the evidence available in the case study, and not to conduct unnecessary
research.
HOW WILL YOU MONITOR YOUR STRATEGY?
There are many ways in which the strategy is able to be monitored, three of which are listed
below.
1. AFTERSALES ABSORPTION RATIO
This ratio indicates to the dealership how much fixed cost the company is able to be covered by
the revenue of sales. This is able to be done through
Aftersale profit includes labour and parts. Costs they cover include fixed and semi-fixed
expenses (rent, IT expenses and salaries).
A percentage higher than 80% is what is considered to be reasonable, the reason is because
that is what is necessary to survive a possible poor sale period if ever once arises. If the
percentage is below 80% this is an indication that aftersale revenue needs to increase. This can
be done through campaign promotion or including features https://www.incadea.com/blog/top-3-
key-performance-indicators-for-car-dealer-aftersales-departments/
2. UTILIZATION
This is a reference to the amount of time a mechanic spends on working on the car as well as
the amount of time they spend in the workshop.
The range which should be aimed to achieve is between 85% - 95%.
This ratio will allow for the ability to see how well company standards are able to be followed by
mechanics, as a range between 855 - 95% indicates an organised workshop, team and an
overall indication of how effectively all relevant departments (such as the workshop and parts
departments) are able to collaborate and effectively in completing their tasks.
3. PRODUCTIVITY

Productivity is the relationship between the mechanics time which they spend on a particular job
and the manufacturers standard time/the invoice time of the customer.
The range between 110% to 150% is an indication of whether the specific mechanic is
performing as productively as they should be.
This allows Cherry to look into the skill and quality which the team possesses. If productivity
level is of a high standard, this is an indication that the mechanics on the job are those who are
equip with the skill, knowledge, training and experience required for the job which they are
doing.
4. SOCIAL MEDIA AND ONLINE WORD-OF-MOUTH
This is able to benefit Cherry with interstate customers but also international customers as well.
As technology is increasing there is an increase in companies social media presence. Cherry is
able to implement various social media platforms such as as business instagram and facebook
page which will allow them to view the number of customers they have in which country
https://www.jazelauto.com/are-you-measuring-your-dealerships-success-with-the-right-kpis/.
The reason why this is beneficial is because they are able to allocate feedback given to them by
those individuals through those platforms and then see where they are going right and where
they are not.
In some cases, there might be situations where a specific strategy or technology feature works
well in one country, but looks to not be an intersting in another. This will allow Cherry to
increase quickly look into possible changes which are able to be made.
WHAT CONTROL MECHANISMS WILL YOU HAVE IN PLACE?
If standards are not being met, there is a high chance that individuals are not putting in the
required man-power necessary for each task. In order to certify if this is in fact the case, it may
be necessary to look into the individuals who are under performing, and have a conversation
regarding the reason for their underperformance.
Therefore Cherry is able to find out whether extra training needs to be had, whether there is a
more effective way for their workshop to be set up to allow for a smoother process within the
workshop. It may also be important to look a more simplistic way of communicating between
departments.
GRAPHS
FLOWCHARTS
TABLES