Marketing Strategies in the Automobile Sector

This report discusses the consumer decision making process in the automobile sector, Porter's five forces analysis, and the brand segmentation, targeting, and positioning strategies used by Volkswagen. It also includes an analysis of the GE Matrix and BCG Matrix for Volkswagen's product portfolio.

Introduction to
Marketing
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1. Consumer decision making process applicable to automobile sector.....................................3
2. Porter five force.......................................................................................................................4
3 Two brand.................................................................................................................................5
4. Range of different segmentation, targeting and positioning strategies that are used by firm
in automobile sector.....................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
Marketing department of organisation is responsible for promotion of products and
services, brand image of enterprise in order to attract new and new customers within firm.
Marketing manager conduct market research, survey in order to identify existing needs and
preferences of people or current and future trends so that better strategies can be formulate for
growth and expansion of enterprise. This report is about Volkswagen is largest automobile
company in terms of sales volume in 2016 and 2017 and it have started its operation in 1937,
Germany. So, it contain information related to consumer decision making process, porter five
forces and range of different segmentation, targeting and positioning strategies are used by firm
to enhance its sales volume.
1. Consumer decision making process applicable to automobile sector
Customers are more crucial for each and every organisation as they helps in increasing
sales volume and profitability of firm by making purchase of products or services as per their
requirements. With increase in competition level or availability of alternative options or number
of competitors in automobile sectors, customers have get more choice to select best brand cars
for fulfilment of their needs (Houdek and et.al., 2018). Recently, consumer decision process
have become too long so marketer needs to spend lot of time, money and efforts to connect with
them. Five stages of consumer decision making process are discussed below:
Need recognition: It is first stage at which consumer finds something missing in its life or they
feel that some wants are unsatisfied thus it drive them to search several products or services that
could be used to meet their expectancy. People by finding problem related to transportation or
travelling from one place to another are influence to search alternative method that could use to
satisfy their needs.
Information search: So, in this stage customers due to unsatisfied wants are motivated to
search information through several medium either offline or online. Advertisement in newspaper,
social media are some sources of information from which customers are able to get information
about different cars.
Evaluation of alternative: At this stage customers find alternative method that they can use to
satisfy their needs like they company cars of different companies like Volkswagen, Ford, Nissan,
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Toyota and BMW group. They evaluate and compare cars of different brand and company in
terms of facilities, prices offered by each firms (Guliyev, 2017).
Purchase decision: After evaluation of numerous alternative options customers are motivated to
make purchase from specific firm like Volkswagen to satisfy their respective requirements. Thus,
at this stage customers make final decision to make purchase of particular brand car in order to
fulfil their transportation wants.
Post purchase behaviour: It is last stage or post purchase evaluation in which customers after
buying products that is cars evaluate and analyse that whether it have gained benefits as per
value or not. Cars of Volkswagen matches with customer’s expectation thus they serve as brand
ambassador of company as they promote or influence other people to make purchase it for
satisfaction of their requirements. So, all this are stages related to consumer decision making
process in context of automobile industry (Antunes, 2019).
2. Porter five force
Porter five forces is a model that is used to identify competitive level within automobile
industry and helps in understanding five forces that shape it. Marketing manager of Volkswagen
uses porter five forces in order to formulate effective strategies that could be used in gaining
competitive advantages in automobile sectors. Five forces like competition level, power of
suppliers, power of consumers, threat of substitute and threat of new entrances shape particular
industry that can be explained as:
Existing competition: It can be stated that there is high competition level in automobile sectors
due to large number of company operating with numerous products and services to meet
expectancy of customers. Volkswagen have to find difficulty in its operation due to increasing
competitors in automobile sectors so company by adding new and new features has planned to
gain competitive advantages (Five Forces Analysis of Volkswagen, 2018).
Power of consumers: Globalisation and number of large organisation in automobile sectors have
cause low switching cost thus customers have varieties of options to select particular brand car
that can fulfil their needs. In 21st century, people have become more educate and informed thus
they want to prefer organisation that provide maximum value at minimum prices. They consider
each aspects of products before making decision to purchase like fuel efficiency, environment
friendliness and safety. Thus, power of consumers is high in automobile industry (Kotabe and
Helsen, 2020).
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Bargaining power of suppliers: There are numerous suppliers across different region that are
ready to provide raw material that are used to manufacture finished good or car so that needs of
customers can be fulfilled. Volkswagen is large, strong brand image, financial sound company
that have effective network and global supply chain thus it is able to get material at low prices
and within limited time frame.
Threat of entrance: There are numerous barriers in automobile sectors for examples large
amount of capital is required by business to start and operate and build infrastructure to deliver
services to customers. At the same time there are number of competitors with huge market share
and legal laws that hinder new entrances to enter into sectors of automobile where Volkswagen
operates so threat of entrance is low.
Threat of substitute products: In automobile industry, there are several large and medium
enterprise that tries to imitate products design, facilities of Volkswagen to attract more number
of customers (Cateora and et.al., 2020). Public travel also act as substitute of company so it can
be stated that threat of substitute product is high so management needs to frame effective
strategies or plan that could contribute in growth and survival of business for longer time frame.
3 Two brand
A) The GE Matrix
It is matrix that is used for product management by assisting company to invest in
particular brand or not so that company can gain competitive advantages or maximum return. It a
matrix that contributes in evaluation of strength of business so that effective strategies can be
formulated to attract maximum number of customers within organisation (De Bruyn and et.al.,
2020). Company through analysing this two parameter is able to take right decision to invest in
different business unit so that it can earn more profit margin.
1. Industry attractiveness: There are four elements that help in assessing the way automobile
sector of industry is attractive which are illustrated below:
 Growth: Automobile sectors is developing at fast stage due to innovation in technology
and increasing demand of customers. It has been estimated that automobile industry has
become US$ 67 billion in 2016-17 so industry is attracting maximum number of
customers to be parts of organisation.
 Number of competitors: There are large numbers of competitors in automobile with
different brands such as Honda, Hyundai, ford, Nissan and Renault.
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 Enter barrier: It can be stated that there are more barriers for new firm to enter as lot of
investment and capital is needed to start and operate business in automobile industry.
2. Competitive advantages: Volkswagen has 10.71% market share in world with strong brand
image in minds and hearts of customers and earning large amount of profitability.
GE MATRIX OF VOLKSWAGEN
Invest for growth (Cell 1): It is first cell that illustrate that attractive market or industry and
company have make best utilisation of its strength. Such as Skoda, AUDI are strength or popular
brand of Volkswagen that have helped in increasing market share of firm. So, company needs to
further invest in it to get more return.
Manage selectively (Cell 2,3,4,5,7): This cell illustrate that either company have strong strength
or industry attractiveness so company needs to invest in them like Audi, Skoda and VW.
Company needs to find new segment where it can further expand brand so that requirements of
wide range of people can be fulfilled.
Harvest (6,8): In this either market attractiveness or business strength is low like Scania is a
leading brand manufacture of truck and bus that has low market share thus company needs to
protect it for sustainability of enterprise (GE Matrix for Product Portfolio analysis, 2018).
Divest ( cell 9): This cell means that unattractive market and firm has no strength VV Beetle is
one such brand that have less market share and organisation have no strength so it need not to
invest in market or exist form it.
Figure 1: GE MATRIX
(Source: GE Matrix for Product Portfolio analysis, 2018)
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B) The BCG Matrix
It is product or brand portfolio matrix that is designed in order to effectively plan long
term strategies of business so that it can earn maximum profit by investing in particular segment
or discontinue it. BCG matrix is classified into 4 quadrants on basis of market share and market
growth therefore, Volkswagen BCG matrix can be explained below:
Cash cow: There are some products or services of company that helps in earning higher return as
market for these products are well established so less amount of capital needs to be invested.
Like Porsche and Audi are two brand of Volkswagen that come under cash cows as they have
high market share but low growth rates (BCG Matrix of Volkswagen Group, 2018).
Stars: Products or services that are highly demand by customers for satisfaction of their needs in
best possible manners so they have strong financial position and growth potential in near future
circumstances. Market of such products is growing at rapid stage so company needs to invest in
such brands to generate more revenue and sales volume. SKODA and SEAT are two star brand
of Volkswagen that has contributed in increasing sales ratio as compared to other brand i.e,
AUDI.
Question Mark: There are some business units or products that have higher level of uncertainty
as compared to stable products i.e., stars and cash cow. Thus, brand have significant high growth
rate but market share is decreasing so it is question mark regarding decision to invest in
particular unit or not for growth and benefit of organisation Like Bentley have gained positive
response in international market but financial position of brand is decreasing since 2016. E- golf
also come in category of question mark as it is assume that electric car demand will increase in
near future as people have become concerned about preservation of resources and environment.
So, there is potential growth but uncertainty regarding market share of brand in future.
Dogs: It can be stated that all products that are manufactured by company can be successful that
means some brand or business units or products may not result in better outcome. So, they have
low market share and low growth potential thus it make difficult for particular brand or product
to exist in particular industry (HE VOLKSWAGEN GROUP CRITICAL STRATEGIC
ANALYSIS, 2020). For example: VV Beetle of Volkswagen is unprofitability while it was
success in initial stages. Thus, management have to take decision to discount the brand to save
financial expense and contribute smooth operation of business.
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Figure 2: The BCG Matrix
(Source: BCG Matrix of Volkswagen Group, 2018)
4. Range of different segmentation, targeting and positioning strategies that are used by
firm in automobile sector
Large number of organisation in automobile sectors have make use of segmentation,
targeting and positioning strategies to attain their respective objectives. So, Marketing manager
of one of the successful enterprise named as Volkswagen have also make use of segmented or
classified, targeted and positioning strategies in order to attract maximum number of customers
in the organisation. The way marketer have make use of all this strategy is discussed as follows:
Segmentation: It is method that is used to classified or segment large number of population into
groups so that appropriate strategies can be used to motivate and influence them to be part of
firm. Volkswagen has classified customers or wide range of people that belong to different
social, culture, region and gender into particular groups. Company have segmented customers on
basis of demographical, geographical, psychological and income basis that helps in deciding
right strategies that attract more and more individuals within firm. Such as It have classify on
basis of Demographical factors that i.e., age , sex and gender of individuals (Kolhede and
Gomez-Arias, 2017). Then, manager have consider place or location at which customers live
and it have also classified on basis of interest level, belief, attitude and lifestyle of individuals.
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Income is another basis which have also been consider by marketing manager of Volkswagen
while planning effective strategies to attract large number of individuals.
Targeting: It is second strategy that is related to segment of people that company have targeted
in order to increase sales volume and profitability of firm. Company have tried to target all
segmented of people by offering them varieties of products and services to choose for
satisfaction of their respective requirements. It has target medium and higher income group
people, younger generation that are interested to drive luxury cars. Volkswagen has its operation
in different parts of world thus it has target people from various countries to select specific cars
or vehicles for fulfilment of their needs. It have target businessman, sport celebrities to purchase
its all varieties of cars or vehicle. Therefore, effective targeting strategies of Volkswagen have
contributed in selecting best promotional method or marketing strategies that could influenced
millions of people to try its products rather than other competitors in automobile industry. For
example: There are several small cars manufactured by Volkswagen like Polo, golf and Beetle
that aims in fulfilling needs of people that simply wants to travel or move from one place to
another. Thus, cars are simpler in design, cheaper in rates so that medium income group can
be motivated to select it for fulfilment of needs.
Positioning: It is a term that means creating an identify or image in minds of customers so that
they can easily differentiate particular brand from others and make correct choice to prefer
specific brand. In context of positioning, Volkswagen marketing manager have highly contribute
in positioning company as leading firm in automobile industry. People across worldwide are
aware of better qualitative cars that company manufacture thus it has contributed in increasing
sales volume and brand image (Dibb, 2017). It stores are located in high street where people can
easily approach, take test drive to feel comfort and make correct decision to purchase specific
brand car. So, strong brand image and physical presence of company have contributed in creating
more and more awareness among existing and new customers base of firm.
CONCLUSION
It can be concluded from above report that consumer decision making process have
become complex therefore marketer of Volkswagen have to spend more time, money and efforts
to meet expectancy of people and contribute in achievements of objectives. Competition level,
threat of substitute products and consumer power are high but company through making use of
different and effective strategies is able to sustain and grow in automobile industry for longer
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time frame. It can also be concluded from above analysis that marketing manager have make use
of segmentation, targeting and positioning to gain competitive advantages. At last it can be stated
that both, GE matrix and BCG matrix helps in understanding the way company needs to invest
its financial resources to get maximum outcome and minimise amount of associated risk.
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REFERENCES
Book and journals
Antunes, A. C., The Role of Social Media Influencers on the Consumer Decision-Making
Process. In Analyzing Global Social Media Consumption (pp. 138-154). IGI Global.
Armstrong, G. M and et.al., 2018. Marketing: an introduction. Pearson UK.
Cateora, P. R. and et.al., 2020. International marketing. McGraw-Hill Education.
De Bruyn, A and et.al., 2020. Artificial intelligence and marketing: Pitfalls and
opportunities. Journal of Interactive Marketing, 51. pp.91-105.
Dibb, S., 2017. Changing times for social marketing segmentation. In Segmentation in social
marketing (pp. 41-59). Springer, Singapore.
Guliyev, S., 2017. Impact of a Brand on Consumer Decision Making Process. Available at SSRN
2972590.
Houdek, P and et.al., 2018. Consumer Decision Making in the Information Age. Society, 55(5).
pp.422-429.
Kolhede, E. and Gomez-Arias, J. T., 2017. Distinctions between frequent performing arts
consumers: Implications for segmentation and positioning. International Journal of Arts
Management, 20(1). pp.31-53.
Kotabe, M. M. and Helsen, K., 2020. Global marketing management. John Wiley & Sons.
Online
BCG Matrix of Volkswagen Group, 2018. [Online]. Available Through:
<https://bcgmatrixanalysis.com/bcg-matrix-of-volkswagen-group/>.
Five Forces Analysis of Volkswagen, 2018. [Online]. Available Through:
<https://notesmatic.com/five-forces-analysis-of-volkswagen/>.
GE Matrix for Product Portfolio analysis, 2018. [Online]. Available Through:
<superheuristics.com/ge-matrix/>
THE VOLKSWAGEN GROUP CRITICAL STRATEGIC ANALYSIS, 2020, [Online].
Available Through: < https://studyresearchpapers.com/the-volkswagen-group-critical-
strategic-analysis/>.
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