I. Executive summary
Portal is a new company that is going to launch a hybrid vehicle in the US market by the name of Asteroid. The concept is relatively new in the market but companies are looking to produce hybrid vehicles in the modern days to counter the threat of pollution in the global environment. In addition to this, the US automobile industry is one of the biggest in the world and is projected to grow in the coming years. Therefore, it is apparent that this is the right time for a company like Portal to launch the product in the market.
However, the company will face stiff competition in the market in the form of traditional powerhouses and companies that are looking to enter the sector. For this, the company should look to establish itself as a premium brand in the hybrid car segment and should develop the pricing strategy, distribution strategy and promotional campaigns in relation to it. The paper has found out that if all these prerogatives are met then the company will be successful in the long run.
It has been found that the company will not be able to achieve break even sales in the first or second year of operations. However, this is the standard norm for the industry as the industry is highly competitive and a new firm will need ample time to gain recognition in the market. In addition to this, the company will also require time to drive the concept of hybrid cars in the minds of the customers. Thus, it can be stated that the company should focus on the quality of the product and the customer service to be successful in the long run.
II. Product Description
The product that will be analyzed in the paper is hybrid car. A new startup company called Portal will come up with the product in the market. The new product will be called Asteroid and will consist of all the latest features that are expected to be in a hybrid vehicle. The vehicle will be projected as a family car and will have good leg space for the comfort of the passengers. Asteroid will first be launched in the US market as the customers in the country are well versed with the concept of the hybrid vehicle. Later the management will look to make the product available in the other markets as well.
The main thrust for the launch of the product comes from the modern day environmental condition of the world. One of the inherent problems of the modern day has been the extent of pollution and the subsequent degradation of the environment. The traditional cars are run on petroleum that has been the biggest source of pollution in the modern world. Therefore, most of the automobile companies are looking to develop hybrid vehicles that will pressurize the environment less. Another important factor is the use of the traditional fuel. Petroleum and other traditional sources of the fuel are short in quantity and in the future it is expected to degrade gradually. Therefore, the onus of the companies is to develop cars that run on other sources of energy. The hybrid cars emit less pollution as it runs on alternative sources of fuel. There are other advantages too in these cars like savings on fuel and low cost of maintenance.
Many companies have been developing hybrid cars for the market in the modern days. The cars that are available in the market are “Series” or “Parallel” in nature. In the case of the Series cars, there are gasoline engines that provide power to the generators to run the electrical engines of the cars. There are both electrical engines and gasoline engines in the parallel cars. The engines can be used exclusively. The electrical engines can also be used for increasing the thrusts in the cars while driving. This is the reason why most of the customers in the modern world prefer the parallel cars. It can be seen that the automobile companies have been developing parallel cars in large numbers. (Bettridge, 27[th] March, 2006 Sen, n.d.).
One of the main components of the hybrid cars in the modern generation are the use of plug ins. The plugs are used to charge the cars at homes and are then run. The cost of the plug in vehicles is more than that of the conventional cars. However, the cost of maintenance of these vehicles is much lesser than that of the conventional cars. Therefore, Asteroid will be developed as a plug in vehicles that will be manufactured in house and will have all the facilities of a modern day family car. The new vehicles will be parallel in nature and will consist of a gasoline engine in addition to the electrical engine. The gasoline engine can be used in times of emergency. It has to be noted in this regard that the features of a car determines its acceptability in the market. The features of the cars are thus to be developed in a manner that will look into its attractiveness in the market. The features of the car are to be stated as follows:
* Hybrid engines consisting of one electrical and one gasoline engine
* 1500 cc engine
* Achieving a top speed of 160 km/hr
* Family car with ample leg space
* A special space to keep luggage at the back end of the car
* Running time of 8 hours with full charge
It is expected that these features of the car will be able to attract the market and will be able to succeed in the market. The unique value proposition of the product will be the value for money for the ownership of a modern day hybrid family car.
III. SWOT analysis
The SWOT analysis is an important prerogative for a new start up company as it lists the company`s strengths and weaknesses to take care of the opportunities and threats in the market. These can be stated as follows:
1. The needs and the preferences of the customers are to be given utmost priority.
2. The value system of the company will be adjusted to manufacture high quality hybrid vehicles.
3. Conveniently provides plug in hybrid cars of various models.
4. Produces family cars that are popular in the market.
5. The price of the products will be competitive.
6. Innovative modeling and designing will be used.
1. The concept of hybrid vehicles is quite new and has not been so popular in the market.
2. The company is a new entrant in the market and will thus have to compete with the hybrid vehicles of established companies.
1. The concept of hybrid cars is new but it is catching up with the modern generation.
2. The hybrid cars are more advantageous than that of the traditional vehicles.
3. The hybrid cars will help to protect the environment and will also protect the degrading quantity of traditional fuel.
1. There are many companies in the market that are producing or are looking to produce hybrid vehicles in the market. All these companies have an established brand name and will thus be affecting the operations of the new company.
The SWOT analysis underlines the fact that the new company will have to compete hard with the existing big names in the market to make itself visible in the industry. The hybrid vehicles have huge advantages that are to be stated to the customers. In addition to this, Asteroid has to push itself as a major force in the hybrid car segment in the industry. This can be done with the help of aggressive marketing activities.
IV. Target Market
The US market is one of the most developed in the case of the automobile industry. USA is regarded as one of the most developed economies of the world and this has resulted in the development of standard of living of the major part of population in the country. The Government of the country has also played a huge part in the development of the automobile industry. Companies have been encouraged to be set up for the overall development of the economy. The openness of the US market has led to the growth of foreign companies in the country too. This has directly affected the operations of the domestic companies. With the formation of NATO the trade relations of the country with its neighboring nations consolidated. This accentuated the growth of the companies in USA. During the Reagan regime, the Government imposed quotas on the Japanese automobile companies to lessen the pressures on the domestic companies. However, despite these factors the conditions of the domestic companies have worsened over the years. The trade deficits of the automobile industry have increased. This is the reason why the Government has been trying to lessen the exports of the Asian car companies in the US market. The Asian car companies have been able to manufacture cars that are highly innovative and less costly than that of the US companies. Therefore, they have found many takers in the US market which has directly affected the financial results of the domestic companies. (Cooney & Yacobucci, 25[th] April, 2005). General Motors, Ford and Chrysler have been worldwide names in the industry and are regarded as the “Big Three” in the US automobile industry. However, due to competitive forces plying in the industry, the Government of the country had to bail “The Big Three” in times of crisis. This has been done because “The Big Three” has been an integral part of the US economy for many years now.
The automobile industry in Europe has developed since the end of the 2[nd] World War. The open foreign policy of the US Government meant that these companies came to USA to ply their trade. The attractiveness of the US economy was one of the major factors for this. (Auto industry, n.d.). All these companies had certain value propositions which were used to attract the market. For example, Toyota was able to succeed in the market because they were able to produce low cost cars. The situation in the US automobile industry can be stated with the help of the following diagram:
It can be seen that General Motors, Ford and Toyota have been the biggest players in the US market. The car industry in US suffered during the recession of 2008-09. The industry hit a 30 year low in 2009 but has recovered since then and is again considered as one of the prosperous market of the world. The sales of new cars were to the amount of 11.5 million in 2010 and in 2011 it reached 12.7 million. In 2012 it is expected to reach a figure of 13.8 million close to the figure of 14 million which is considered as healthy. (Associated Press, 3[rd] January, 2012).
In the case of the hybrid vehicles segment not many companies have been operating in the industry. The engines of the hybrid vehicles are to be developed in the in house facilities of the company and thus the suppliers have a lesser role to play. The customers are not interested in the technical aspects of the product and will be mostly interested in the looks and features of the cars. This is the reason till now most of the companies are operating in the traditional sector. However, companies like Honda, Nissan etc are bringing hybrid vehicles in the market that is likely to increase competition for the new company.
Therefore, it can be stated that Portal will have huge competition in hand with the presence of big players in the market and relative ignorance of the customers. Therefore, it is important for the management of the company to know about the target segment of the company. One of the first steps in the case of determining the target segment of the market is segmentation. In the modern world, most of the companies tend to satisfy some core group of customers in the market. This is analyzed with the help of syncing activities of the behaviors of the customer segments and the features of the product. It is not possible for a company to target all group of customers. In some cases it is done and it is called standardization of the products. In the case of segmentation the groups of customers are analyzed that will be attracted to the product. (Market segmentation, n.d.). This helps the management of the companies to develop the product according to the behavior of the customers in that particular segment and thus is able to focus on a particular area. This helps the companies to maintain quality of the products which is important in the case of the competitive market. “Fragmented industry environments are usually ideal for focus on a well-defined market niche” (Thompson, Strickland, and Gamble, 2007, p. 247). Given the nature of the automobile industry therefore, it is essential for the new start up to perform segmentation function to better understand its target market.
The segmentation of the market is usually done according to the following criteria:
As per the features of Asteroid it is apparent that the product will attract specific groups of customers in the market. This can be stated as follows:
Benefits offered by the company
Car with low maintenance cost
Hybrid car with lower maintenance costs compared to that of the traditional cars.
Middle aged people
Environment friendly cars
Environment friendly hybrid cars
Middle income level people
Lower maintenance cost cars
Lower maintenance cost cars
The segmentation has been done according to the features of the product of the company. The product is a family car and has low maintenance. The underlining feature of the product is that it is a hybrid vehicle and thus will not pressurize the environment. Therefore, these features have been taken into account while segmenting the market.
As the segmentation has been done, the next job for the company will be to analyze the segments of the market that can be targeted with the help of the new product. It can be seen that Asteroid is a family car with low maintenance costs. Thus given its features, it can be stated that the new product will target all the segments of the market that have been analyzed above. The target segment is huge as it essentially consists of prime portions of the automobile market. Given the projections of the market in the years to come it can be stated that Asteroid will be able to succeed in the market if it is promoted well. However, the company will have tough competition in the market in the form of established brand names. Therefore, the customers will be attracted to the brand names and will look into the quality of the products. As Portal does not have any existing brand presence and brand value in the market, the management has to build it from scratch. The onus is on the company to make the customers aware of the product and its quality. The targeting activity of the company will be accentuated by the marketing activities that will underline the prominent features of the product. For this, the company will look to develop a positioning statement that will communicate with the target segment of the company.
V. Competitive analysis
In the earlier parts of the paper, it has been stated that the new company will face huge competition in the market. The competition will be in the form of companies that produce hybrid vehicles and those that are looking to produce these vehicles. In addition to this, there are huge brand names like Ford and General Motors that will look to produce hybrid vehicles in the future if the segment turns out to be attractive. In the context of the paper, two companies have been analyzed. One is a traditional powerhouse of the US automobile industry- Toyota (competitor A) and the other is a well known name in the global hybrid vehicle industry- Honda (competitor B). The traditional company has been considered as it has the necessary capability to develop hybrid vehicles in the future. Given its existing brand name it can be a major player in the hybrid vehicles market in the days to come. The competitive analysis can be done as follows:
Importance to Customer
Quality and diversification
New in market
Reputation and quality
Reputation and quality
Reputation and quality
Lesser than the competitors
Higher in some categories
The department selects the goods
Dedicated customer service
Unknown to customers
Can build brand value
New to the market
New to the market
Management is experienced in the field
No real expertise in the lower level
Can be build
Has a good locality
The reputation is nil
Direct, stores, franchisee
Stores and franchisee
Stores and franchisee
Attractive to customers
Will make the brand known
Customers can reject
Can be build
It can be seen that the competitors have a huge advantage over the new company in its primitive stage of operations. The brands are already known in the market and thus will appeal to the customers in the market in a better way than that of the new start up.
In addition to these there are other companies like Ford and General Motors that can affect the operations of the new start up. The customers will naturally research about these companies first if they are going to purchase a hybrid vehicle. Therefore, the onus of the management of the new start up will be to develop itself as a brand in the market. The main objective of the company will be to establish itself as the premium brand in the hybrid segment in the market. The brands have been popular in the US market because they have been able to deliver quality over the years. In addition to this, there have been good distribution and marketing strategies as well. Therefore, it is important for Asteroid to look into these factors before its launch in the market.
VI. Pricing strategies
Given the type of the product Portal is launching in the market, it can be stated that not all the customers will be attracted to it. Therefore, the pricing strategies of the company will be an important consideration in the case of attracting the customer segments. The pricing strategies of the product will be based on the skimming strategy that looks to attract customers who are genuinely interested in the product. This has been decided by the management of the company to make the brand well known among the target segments of the company. The skimming pricing strategy also helps the product to maintain high quality standards and project itself as an upscale brand in the market. This is essential in the case of the automobile industry. Most of the big brand names of the industry have not entered the segment and thus it is the right time for Portal to make itself visible as a brand. Companies that have entered the segment like Honda have kept the prices of the cars at a relatively higher level with features that are lesser in comparison to that of Asteroid. (The insight, 2012 New Honda hybrid cars, 2012). The company could have used penetrative pricing strategy in this regard that would have made the product available to a greater number of customers. However, this would have disrupted the quality of the product and would have sent a wrong impression to the customers of a low scale brand. This is not acceptable during the primitive stages of operations of the company and thus it would be advisable for the company to keep the starting range of the model at $18,000.
The variable cost of the company for each car will be $16,000 while the fixed costs for the first year of operations will be $4,000,000. The break even sales for the company will be as follows:
Break even sales = ($ 4,000,000)/ ($18,000-$ 16,000) = 2000 units
The company will look to sell 2000 units of the model to achieve break even in its operations. The cost structure of the competitors is lesser than that of the new company as they have the infrastructure needed for the development of the car. Therefore, where the new company will have to sell 2000 cars to achieve break even the competitors will be having higher margins for sales of the same number of cars. Thus the competition will be tough and the Portal should have proper financial management at its disposal to be successful in the long run.
It has to be noted that the pricing strategy of the company has been based on 3Cs- Company cost, competitor price and customer demand. The management of the company has kept the price competitive so that the quality of the products is not hampered. The prices of the competitors are higher than that of the product of the company. Therefore, the company is looking to provide more features to the customers in the market at a lesser price. This has been done to make the concept of hybrid cars popular among the target segment of the company. The management has also made it a point to push up- sales during the festive seasons with the help of discounts. It has been proposed that the company will be providing discounts at the range of 5%-7% during the festive season of Christmas to make the brand more popular in the market. This can be done with the help of aggressive promotional strategies.
VII. Channels of distribution
The channel of distribution is another factor for a start up like Portal. As the company is new it will be hard for Portal to develop individual showrooms for the company. However, the target of the management will be to develop one showroom under the brand name of the company. In addition to this, Portal will be looking to use indirect channels like the showrooms and stores of third parties. USA is a big country and it will not be possible for Portal to establish individual showrooms of the company in most of the parts. Therefore, the third party showrooms and stores will be a good method to reach the target audience. Thus, the company will be using both the direct and indirect channels to reach the target segment of the company.
However, the company will keep a tab on the selection of the direct and indirect channels of distribution. In the case of the direct channels, it is necessary for the company to recruit talented sales force in the industry so that they are able to state the features of the product to the target audience. For this, the role of the HRM is important. The HRM of the company will be involved with the recruitment of the employees according to the specifications of the management. (Wilson, 2005). They are to be trained in sync with the objectives of the company. It has to be noted that the training and development activities of the company will be important to develop quality of service among the employees. The customers get attracted by the quality of the services at the stores of the company and are in many ways influenced by them regarding the purchase decisions. Therefore, the employees are to be trained well. The HRM should understand the needs of the employees in various respects and after this should commence training. The communication skills, product knowledge etc of the employees is to be improved by the management and the HRM. (Cummings & Worley, 2009 Jackson, Schuler & Werner, 2009).
In the case of the indirect channels too, the management of the company should have some specifications that are to be fulfilled. The management of the company will have certain specifications regarding the number of dedicated employees, product knowledge etc for the products. The HRM of the company should develop training sessions with the employees of the third parties in this regard to improve the product knowledge of the personnel in this regard. The infrastructure of the third parties is another point in this regard. The infrastructure of the stores of the third parties should be well developed and should have sufficient space to display the products. The stores should also have spaces to display certain promotional activities of the company so that the customers are attracted by them. (Tyson and York, 2000 Edvardsson, 2003 Storey, 2007).
The direct sales force of the company will be managed by the HRM of the company and will be compensated according to the pay structure of the company. They will be able to avail the benefits of the company as well. However, regarding the indirect sales force, the company will only be accountable to the third party. The salary structure and the benefits of the indirect employees will be taken care of by the management of the third party in this regard.
VIII. Marketing communications
The earlier parts of the paper have underlined the fact that marketing and promotional activities will be inherent for the development of the company in the long run. This is because the company is new in the market and the people are unaware of the product or the company. In addition to this, there is huge competition in the market. Therefore, without the use of proper marketing activities the product may get dissolved in the market without a trace.
The marketing communications plan look to make the use of various media to make the product visible in the market. For this, the company must look to find the utility of the product or it`s USP. This in turn is then projected to the customers in the market so that the customers are attracted to it. This can be discussed with the help of the following diagram:
Source: Marketing and customer loyalty solutions, n.d.
It can be seen that marketing communications play an important role in the case of acquisition of the customers in the market. Being a new company this is important for Portal. If the customers are satisfied they will look to continue with the products of the company. This can also be accentuated with the help of promotional measures of the company. The company uses various marketing communication measures to provide the customers what they demand. Thus, it can be stated that this is necessary in the case of the development of the company. (Fifield, 1998, p. 42 Kaynak, 1993, pp. 46-48). The various marketing communication activities that will be used by Portal will be stated in the following paragraphs.
Positioning: Asteroid will be positioned as a new age stylish hybrid car that provides joy of driving and has minimum maintenance costs.
Advertisement: This is one of the most popular methods of marketing communications in the modern day. They are persuasive in nature and are done with the help of audio visual media. However, given the growth of the business environment the customers are bombarded with advertisements daily. Therefore, the advertisement of the company has to be unique and should strike a chord with the target segment of the company.
The advertisements of Asteroid should project the joy of driving and is maintenance costs as a point of difference in the case of advertisements. As a departing theme it should underline that it is a hybrid car and is one of its kind in the market. The television will be modus of campaign in this regard. In addition to this print advertisements will also be used stating the features of the car.
E marketing: With the development of the internet, it has become an important part of the marketing communication activities of the business houses all over the world. It is used to drive sales for the company and also communicate with the target segment of the company. The use of the social media networks has been prevalent in the modern world as it increases word of mouth publicity for the product. (Williamson1997:185-186)
For the new company, Asteroid will be looking to develop a website that will list all the features of the company. In addition to this, the social media communities like Facebook will be used to popularize the product. There will be options of online purchase for the product or to book a test drive with the company. The website will also consist of the commercials produced by the company. The number of hits in the website will help the company to judge the success of the campaign in this regard. The website will have a toll free number that can be accessed 24/7 by the customers for any queries related to product.
Trade shows: The trade shows will be used by the company to launch the product. The features of the product will help the company to gain attention and the management can expect quick response from the target segment.
Public relations: Public relations will be important for the company as this will enable the product to achieve a place in the minds of the customers with published news. The interviews of the CEO or an environmentalist will be attractive in this regard. This will help the company to drive home the point of the advantages of a hybrid vehicle and the necessity of it.
Banners and hoardings: The banners and hoardings will be placed strategically all over the country prior to the launch of the product. This will increase the attention of the customers and will also help the company to be popular in the market. The banners will also have the Toll Free number and the address of the website to make the product visible in the market.
The budgetary measures of the company are important as it indicates the sustainability of the company in the long run. The various parts of the financial analysis of the company have been given in the Appendix of the paper which points out the progress of the company to be expected in 3 years. It can be seen that the company will not be able to achieve breakeven point of sales in the first year or the second year of operations. This is normal because the automobile industry is highly competitive and a new company cannot expect to sale 2000 cars in its first year of operations. The company will need time to gain recognition in the market. In addition to this, the concept of the car is relatively new too. Therefore, the customers will take time to adjust to the new notion. This time should be utilized by the company to project itself as abrand in the market.
The financial projections show that if the company can establish itself as a brand in the market, then it will be able to succeed in the long run. But for this, the company will require to give special importance to the quality of the product and the service.
Fixed Cost (Rent, Wage, etc.)
Variable Cost (Advertising, Incentives, etc.)
Start-of-year Book value
Book Rate of Return
Cost of Revenue
Selling General and Administrative
Total Operating Expenses
Operating Income or Loss
Income from Continuing Operations:
Total Other Income/Expenses Net
Earnings Before Interest And Taxes
Income Before Tax
Income Tax Expense
Net Income From Continuing Operations
Effect Of Accounting Changes
Preferred Stock And Other Adjustments
Net Income Applicable To Common Shares
Operating Activities, Cash Flows Provided By or Used In:
Adjustment to Net Income
Changes In Accounts Receivables
Changes In Liabilities
Changes In Inventories
Changes In Other Operating Activities
Total Cash Flow From Operating Activities
Investing Activities, Cash Flows Provided By or Used In:
Other Cash Flows from Investing Activities
Total Cash Flows From Investing Activities
Financing Activities, Cash Flows Provided By or Used In:
Sale Purchase of Stock
Other Cash Flows from Financing Activities
Total Cash Flows From Financing Activities
Effect Of Exchange Rate Changes
Change In Cash and Cash Equivalents
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