Audi Case Study
Evaluate The Intensity Of The Competition
Determine the phase of the life cycle of the auto industry.
Most of the Western car market enters into saturation stage. In Europe and USA, specifically there is a high “motorization rate” (car per family and car per persons) and the demand is almost entirely constituted by replacement purchase. In reverse, China market just come to development stages with blooming in sale. In the year 2010, at the first time, China market reaches nearly the same ratio with Germany.
Competitive topology
In order to build competitive topology, we choose 2 most KSF of Audi in Chinese market: Market penetrative level and Brand Equity. Volkswagen Group, the owner of Audi, is one of the earliest automobile manufacturers has production in China. In 1991, FAW and the Volkswagen Group decided to set up a joint venture under the name ‘FAW-Volkswagen Automotive Company” to manufacture of the Audi 100 model. This early penetration in Chinese market help Audi get a big advantage of knowing exactly Chinese consumer, customize its designs to cater to Chinese tastes. The two main other competitors, BMW and Mercedes manufactured in China quite late (2004 and 2006) when Audi already had a strong position in China local market.
According to researcher IHS Automotive, the market share of Audi by 2010 is 31% while Mercedes and BMW is only 21% and 21. 6%. China already generates the fattest profit margins for German luxury carmakers because customers in China typically purchase higher-end models than buyers in the U. S. or Europe do. Slowing economy and rising fuel prices have led to a glut of cars in Chinese showrooms this year, forcing dealers to cut prices. Among luxury brands, Audi still keep the high price and prevent to joint into price war while other especially, Mercedes has been offering the steepest discounts, according to car pricing website cheshi. com.
With the high price level, Audi prove their strong position in China market which focuses on the level of product to show up their social position.
Entry barrier
a. High technology, costly to R. While German automotive industry already built up a high standard quality, high technology feature, it take a lot of effort for rising up competitors from Korea as Hyundai to catch up the high-tech race and R need to be invested a huge money
b. Strong brand recognition of German car “With anything in China, the first mover gets more,” Thomas Callarman, director of the Center for Automotive Research at the China Europe International Business School in Shanghai said that.
This is true to automotive industry; people are just more familiar with Audi. It will take a lot of time for another competitors to build up the brand recognition to China market especially the one not come from Germany. That make Audi have a unique advantage that make any other competitors very difficult to follow, that is the time. It has a strong position brand name in China market in a very long time for premium car.
c. Bottleneck in the production and distribution. By 2015, Mercedes plans to double its annual production capacity in the world’s biggest automobile market to 200,000 vehicles annually, though that won’t be enough to keep up with its rivals.
BMW plans to quadruple potential output to 400,000 and Audi is seeking to more than triple capacity to 700,000 by the middle of the decade. This will make Audi keep the advantage in distribution car to customer in the shortest time if compare with other.
Evaluate competitive intensive
As China market is booming, the distance between each strategy group is not so closed. The strategic freedom is medium; there is always chance for other to join into higher group. However, the entry barrier at this period 2010-2015 seem difficult for other groups to move to higher, we can conclude that the Competitive Intensive is medium mean each strategy group is chasing each other aggressively but the chance for all to get market share is the same in this blooming market. C.
Make Recommendation For Company Development A. Propose A Generic Strategy
Diffentiation or Cost Leadership? As Audi has chosen “to target a clientele which can be characterized by its high incomeLevel”, the best strategy to adapt in the generic strategy is Differentiation Strategy: – “Audi seeks to differentiate itself from its competitors through the technological superiority of the models it sells and by the quality of the service offered, which applies to all dealerships, everywhere in the world”.
Product Quality
Audi wants to apply the same standards at the international level in order to build a uniform brand image and respond to the demand of a mobile clientele.
Industry wide or Particular Segment? The target customer segment is not really price-sensitive. In China, the purchasing power is low but a fragment of the population is able to buy an Audi Car. However, it is not a particular segment like Rolls Royce or Ferrari. Audi’s target is the rich Chinese class, and so we chose Industry wide.
Audi was the first “premium segment” manufacturer to produce vehicles in China, in 1988. It gives an advantage on the Chinese Market, and a leadership position compared to its competitors.
Transnational Strategy Audi “Premium” Brand
Principle Market: Germany, Europe (not including Germany), Emerging Markets (China, Russia), United States.
Reference norm: Global Developmental logic: Standardization and Adaptation (Apply the same standards at the international level)
Principal modes of internationalization: Exporting, International Joint ventures and Owned Subsidiaries.
Audi 2015: keeping and improving the same strategy With transnational strategy, it will help Audi create competences of global relevance, responsiveness to local condition and innovation and learning on an organization –wide scale. It responds specifically to the challenges of globalization and tends to have a high proportion of fixed responsibilities in the horizontal lines of management.
If it is to work, the transnational structure must have very clearly defined managerial roles, relationship and boundaries. That means, Audi should adopt the geocentric orientation. The employees are recruited from all over the world, so that the best people are recruited to solve global problems. Audi will have to try to develop both global differentiation and global integration between headquarter and foreign subsidiaries. The focus is therefore to gain the potential advantages of an integrated company, and to gain the advantages of differentiation in product offerings.
Recommendation for Audi AG’s symbiotic marketing development
Currently, Audi does not have any kind of alliance with other partner outside Germany (except for a joint venture FAW-Volkswagen Group set up in China).
Audi AG is a strong and well recognized brand name for premium high-end car, so in this time it is important o maintain the high homogeneity of their standard and image by ‘standing alone’ and not with an alliance with other automobile makers.
Outsourcing cooperation
Besides outsourcing engine parts and car interior parts, Audi should outsource their customer service to the local service providers. Outsoaring such services such as customer care and/or car maintenance-repairing service is not only provide Audi owners the standardization quality of Audi services worldwide; but also provide the customized local values, especially in important foreign markets such as U. S, China, or Great Britain. Correlation cooperation:
By co-branding with leading names in other industries, Audi will continue to confirm its premium quality of the automobiles, for example, high-quality sounding system from BOSE, or Audi’s Google-based map and navigation. This collaboration will provide a convenient and interesting driving experience to the Audi owners. An Audi-Bose sound system & speaker inside an Audi A4 (Source: internet) Electric cooperation: For Audi, electric cooperation such as sponsoring for social activities, especially in their important market such as China or U. S, is very important not only for marketing strategy but also for showing their commitments to the development of the society.
Audi should involve more in many kinds of social activities as recommended below:
- Blockbuster movies production (Hollywood movies)
- Sport games / sport tournaments (such as Olympic Games, FIFA World Cup, UEFA Euro Cup)
- Charity donation & fund raising event (such as UNICEF fund for children, or poverty relief funds)
- Music event (such as Beijing Music Festival, Audi Summer Concerts )
- Environmental activities (such as forest research program)
- Safe driving campaign (together with the local government)
- Participating in such above activities will prove the commitment of Audi AG about corporate social responsibility (CSR) towards the society.
Those activities would also bring back the good result to Audi: supporting to penetrate Audi image to the market, increase the goodwill of people towards the company, and bring them the potential customers in the future.
Present A Marketing Process
Target marketing strategy
From the market segmentation and information, China is most attractive market (consist of 13. 5% of global market) in front of Central Eastern Europe (9. % of global market) and South America (7% of global market), Western Europe (market maturity, decreasing demand), NAFTA (market maturity, decreasing demand), Japan (market maturity, decreasing demand). Therefore, Audi should target to maximize their volume of products, new products and profit in China Market and Central Eastern Europe (including Hungary market) and South America. On the other hand, Audi should also maintain their position, products in the other markets to control their traditional competitors. Audi should adopt the selective specification strategy while the several marketing mixes are implemented in different segments. The same product is marketed differently in different segments.
