Running Head: MARKETING PLAN 1

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MARKETING PLAN 2

Abstract:

Shinaro, a Chinese car manufacturing company has recently planned to expand

internationally and has found that the most promising target in order to enter the international

market is the market of “United States”. Company would target upper middle and middle

class. The report will throw light upon the current position of the company in the domestic

market and propose the entry to a new market analyzing the situation in both the countries.

Micro as well as macro environmental analysis has revealed certain important findings which

prove that it is feasible to enter in the region where the industry is at its growth stage and

there is huge potential for earning dollars. It offers attractive opportunity in the form of

SHINARO, which is an elegantly designed, fuel efficient, modern technology family car and

suits best to the needs of U.S.A automobile customers.

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Introduction:

A Chinese car manufacturing company “Shinaro” whose headquarter is located in Beijing,

has planned to finally expand its operations to Northern America. Over the period of two
decades, the company has built its image as “an elegantly designed, modern technology
based, fuel efficient family cars manufacturing firm” in its domestic as well as neighboring
region. A wide variety of models are available in sedan as well as hatchback category and
prices are attractive enough to attract domestic customers. However, after extensive market
research, it has been detected that the regional market has reached its saturation level and
strategically, it is feasible for the company to expand its horizon. Market research has proved
that the psyche of Chinese customers let them place higher value to brands that have strong
presence in international market (Ye, Lilli, Bose and Pelton, 2012). After conducting the
macro environmental analysis, company is considering launching its leading models of
hatchbacks and sedan to United States of America.

Current product offerings at home country:

Currently the company is offering wide variety of fuel efficient family cars in its domestic as
well as neighboring region. A wide variety of models are available in sedan as well as
hatchback category and prices are attractive enough to attract domestic customers. However,
main target market of the company is middle class people who seek fuel efficient cars within
an affordable range. Besides that, recognizing the hour of need due to fuel resource depletion,
company has introduced a new product line by launching motorbikes which consume less
fuel and are more environmental friendly. Company is currently targeting multiple segments
but lacks depth in product line due to which currently the name of the brand is not being
recognized in world’s top car manufacturers. This diversification in the product length has
made it possible for the company to earn such healthy revenues. However, in response to the
current “green trend”, the firm has planned to launch a new product line of hybrid cars as
well.

Current pricing strategy:

It has been proposed by Kotler (2012) that success of any product is dependent upon the
effectiveness of its pricing strategy, particularly in industries where the competition is really
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intense. There are a number of pricing strategies, including: market penetration strategy,
market skimming strategy, value pricing, competition pricing and bundle pricing. Currently,
the firm has opted market penetration strategy, where affordable prices have been set for all
offerings in order to touch the lower end of the market. The company is well known in its
region as a company setting logical and justified pricing. Spare parts of the company are also
widely available at very low prices that has made this brand as heart favorite of local
customers. The main target market of the firm is middle class. So, the penetration strategy
suits best in this case. While targeting the regional countries, the value based pricing strategy
has been adopted by the firm.

Current promotional tactics

It has been proposed by Scheepers et. al (2014) that current hyper competitive environment
has caused industry players to revise their promotional and advertising budgets in order to
grab the attention of customers. However, the promotional strategies adopted by the company
is not aggressive, yet a very nominal budget is set for the promotion and advertisement. A
total of 10 percent budget is allocated for the advertisement and promotional expense which
is low than industry average. Though, in order to expand internationally, it is important for
company to revise its marketing budget. Currently, main focus of promotion is upon celebrity
endorsements and print media supplemented with certain charity campaigns. It can be said
that this is the area that needs to be considered by the management while expanding
internationally. Distribution of the marketing budget is as follows:

Promotional mix:

Channel Percentage budget allocation

T.V ads 3%
Celebrity endorsements 5%
Print media 1%
Other 1%
Total 10% of total revenue earned in a year

Current distribution channel:

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The company has set its own dealer networks throughout the region. Around 400 dealer
networks are currently operating throughout the region. In the China, company has ensured
easy access to all its dealers and the offices have been opened in populated areas, mainly
around petrol pumps, or in industrial area. As these are the places that provide an easy access
to customers in case of need. There are a number of examples where companies failed just
because of this single factor. The smart placement of dealer networks close to the target
market has actually paid off to the company.

Current positioning in minds of local customers:

It has been proposed by Kotler (2012) that effective positioning strategy has become the
source of competitive edge in such competitive environment. It is the process by which an
organization identifies and captures the value by targeting the most feasible segment.
Efficient product mix is designed that involves offering a product or service, setting a
justifiable price, placing it while ensuring access to target market and finally, employing
effective promotional strategies in order to communicate the value to customer.

Boss (2012) has suggested certain ways that can utilized by companies while setting
positioning strategies for their brands. It may include: positioning the image of customers by
highlighting the product characteristics, stressing over to affordable pricing, cultural symbol
approach, product class approach, competitor approach and application approach. Currently,
the firm has been positioned in the minds of customers as ““an elegantly designed, modern
technology based, fuel efficient family cars manufacturing firm”. It shows that the firm has
adopted “product characteristics” approach in order to target the local market. Customers
highly regard this brand as one that is distinctive on the basis of its design as well as fuel
efficiency.

Analysis (findings):

As market research has proved that the psyche of Chinese customers let them place higher
value to brands that have strong presence in international market. After conducting the macro
environmental analysis, company is considering launching its leading models of hatchbacks
and sedan to United States of America under the same brand name; “Shinaro”

Target Industry profile:

United States automotive industry is one of the prominent growing industry of the country
with annual turnover of $280 billion and involves around 200 companies (Statista, 2015).
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Whereas, the global car industry is earning a turnover that exceeds $2 trillion. However, the
industry is mainly occupied by four major industry players that account for around 75 percent
of total sales. (Bidnessetc, 2015).Talking about North American region, it is interesting to
know that the age of American cars is getting older and the average age that a US passenger
car carries is around 11.4 years. It shows that there is a need and people are willing to buy
new car models provided they are made available at cheaper prices. It has been observed that
in first half of ongoing year, there is an expected increase in sales by 8 million units (White &
Rogers, 2012). Key findings indicate that, in 2014, there had been an increase in the sales of
Nissan by five percent, a nine percent increase in revenue was experienced by Chrysler,
whereas, one percent increase was experienced by General Motors (Clothier & Naughton,
2015). These all key findings show that it is feasible to enter in the region where the industry
is at its growth stage and there is huge potential for earning dollars. It offers attractive
opportunity for SHINARO elegantly designed, fuel efficient, modern technology family cars.
SHINARO can capitalize on the opportunity by charging the nominal prices and offering its
state of the art engineering capabilities in their cars.

Marketing mix for launching Shinaro in United States of America:

Below presented is the marketing Mix for Shinar as it prepares to enter the US market.
Shinaro would keep its original name as it enters new market and maintain its marketing
strategies, but adapt to local culture, for example celebrity endorsement as a marketing
technique but using the local country’s celebrity of similar characteristic, will continue in
order to gain unified global marketing strategy.

Product:

On the basis of the market research, it has been revealed that consumer likeness and
desirability for its leading models of hatchbacks and sedan are contributing highly to the
revenue stream (Kotler, 2012). While expanding in neighboring region, at first, company
launched these two brands and it was a huge success. In addition, research has also proved
that consumer desirability for hatchback cars has significantly arisen in United Kingdom as
well as in different regions of America. So, the company would launch two of its leading
brands in the United States of America. Details of segmentation and targeting are given in the
next section of report. Briefly describing, the company would adopt segmentation approach
and its target market would include upper middle and middle class. The reason behind
targeting these two segments is that currently, the economy is passing through recession and
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oil prices are also constantly rising that has resulted into a significant decline in the
customer’s purchasing power. (Fisher, 2006). In addition, it has also been reported that the
vehicles owned by the middle class are aging, and have an average age of around 11.5 years
(White & Rogers, 2012). So, in order to fulfill the customer needs of fuel efficient cars at
affordable prices, the most desirable segments are “middle” as well as the “upper middle
class”.

Product line and Product breadth:

Currently, the line and breadth of the offered product would be having a narrow scope, yet, in
near future, the company is going to launch motorbikes as well as hybrid cars, when the US
customers would accept the company’s offering. But, at the moment, it would be risky to
launch the multiple product lines with greater breadth.

Price:

Market penetration strategy would be adopted and the reason behind it is that, the target
market is willing to buy fuel efficient vehicles in affordable prices. The prices being charged
by the local manufacturers are too high and customer satisfaction is low due to prevailing
crisis in US automobile industry. Cars would be manufactured in the China and assembling
would be done in the host country by partnering with the local dealers, until the firm
establishes its own dealer network in the state. Prices of the spare parts and after sale services
would be particularly set low in order to gain the customer acceptance. These low prices
would be justified with low production cost and cheap labor of home country. After
sometime, when the company’s offering would successfully gain customer acceptance. The
firm would shift towards the value based pricing, by introducing the premium brands and
moving upward the chain, while targeting the higher end of market. But, at the moment, if the
product needs to be positioned as “an affordable automobile vehicle”, penetration strategy
suits the best.

Promotion:

In order to promote the strategy, the budget allocated to the marketing and advertisement
activities would be revised and at least 20 percent of the budget would be allocated to the
advertisement and promotion through digital, print and electronic media. Heavy emphasis
would be given upon the celebrity endorsements as it has been analyzed that the most
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convincing strategy being opted in the US industry is celebrity endorsements that convinces
the target customers with utmost effectiveness. However, in such case, the promotional mix
would be revised as main focus would be paid upon the Television Ads as well as the most
effective promotional strategy, which is “celebrity endorsements”. It has been reported by a
number of researchers that this tool is considered as the most effective while convincing the
modern customer.

Promotional mix:

Channel Percentage budget allocation

T.V ads 5%
Celebrity endorsements 10%
Print media 2%
Other 3%
Total 20% of total revenue earned in a year
Ini

Distribution/Placement:

Firstly, the distribution would be made by partnering with the local dealer of host country
market. However, after establishing the positive market reputation, company would expand
its own dealership network. In addition, initially, the product would be launched in a few
major cities, including: Chicago, Miami and LosAngeles. However in the second phase of
expansion, New York, Philaphadia and Washington would be targeted. Initially, it would be
made sure that partnership would be made with those dealers whose offices are opened in
populated areas, mainly around petrol pumps, or in industrial area. As these are the places
that provide an easy access to customers in case of need. It has been forecasted that the
company would launch its own dealer network within first three years of international
expansion.

Segmentation, targeting and positioning strategies for Shinaro:

MARKETING PLAN 9

Market segmentation:

Market segmentation is defined as dividing a market into distinct groups of buyers who have
distinct needs, characteristics, or behavior and who might require separate products or
marketing mixes (Kotler; Armstrong, 2005). One could use many variables in order to divide
a market into number of distinct groups but for SHINARO’s strategy to enter U.S.A’s
Automotive Industry, following major variables are used and evaluated to develop insight
into the opportunity under consideration.

1) Demographic Segmentation

The demographic segmentation usually divides customers on variables such as age, gender, income
etc. Particularly, in case of automobile industry, it has been proposed by the McCrohan (2015) that
the segmentation on the basis of demographics has become a popular and effective strategy.
Following are the relevant facts and figure for selected demographic variables that can help
SHINARO’s marketing strategy for its entry to U.S market. This shows the available target population
for Shinaro that would add to the customers of Shinaro.

Population 318,892,103 (July 2014 est.)

Age/Gender Structure 0-14 years: 19.4% (male 31,580,349/female 30,221,106)

Source: index Mundi, 2012

Per capita income 45863.02 USD (2013-2014 est.)

2) Geographic Segmentation

Segmentation on the basis of geography is known as geographic segmentation. It has been

proposed by Weinstein & Cahill (2014) that segmentation on the basis of geography and
lifestyle suits well, when it is complemented with other segmentation strategy.

The geographic segmentation refers to the division of market into distinct categories based on
variables as nations, regions, states and cities etc (Kotler, 2012). In the context of U.S market for a car
MARKETING PLAN 10

manufacturer that is considering its initial launch in overseas, segmentations can be done based on
major cities of the country which may include:

Major cities – population New York-Newark 20.352 million

Los Angeles-Long Beach-Santa Ana 13.395 million

Chicago 9.676 million

Miami 6.061 million

Philadelphia 5.927 million

WASHINGTON, D.C. (capital) 4.705 million

Source: (Index Mundi, 2012)

3) Psychographic Segmentation

Psychographic segmentation refers to the division of the market into distinct groups based on
variables such as social class, lifestyle and personality characteristics (McCrohan, 2015). In
U.S.A, social status is broadly divided into three main categories with varying lifestyles.
Shianro will need to analyse these demographics before setting the price for is product. These
will help Shinaro to find a clear direction for its marketing strategy.

Social Class Upper class (comprised of around 3 percent of population)

Upper-Upper class (1 percent of total population, earnings hundreds millions to billions
annually)
Lower Upper class (2 percent of total population, earning millions every year)

Middle class (comprised of 40 percent of population)

Upper middle class (14 percent of total population, earning above $76000 annually)
Lower middle class (26 percent of total population, $46-$75 thousand annually)
Working class (30 percent of all population, earning $19to $45 thousand annually)

Lower class (27 percent of total population)

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Working poor (13 percent of total population, earning $9-$18 thousand annually)
Underclass (14 percent of total population, earning below $9000 annually)

Source: Index Mundi, 2012)

It shows that the greater population is comprised the middle class. Shinaro can target these
consumers that make the most of the population in order to get the greater market share. This
means that the prices will be set that also makes it affordable for middle class. Shinaro could
also diversify its product range. Since it is penetrating into market and where there are huge
giants present already, a diverse product range will help to sustain in the market which will
mean targeting larger population.

4) Behavioral Segmentation

Behavioral segmentation refers to the division of market into different groups on the
bases of variables such as benefits sought, user status, usage rate, buyer-readiness stage,
loyalty status and attitude. SHINARO can use such segmentation technique to refine their
marketing strategies for entering into the American Market. Shinaro would target the below
segment to penetrate into the market.

Benefits Sought

o Safety

o Fuel Efficiency

o Reliability

o Comfort

o Convenience

o Quality

o Low maintenance cost

User Attitude
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o After recession and high oil prices, customers are willing to

purchase cars that are fuel efficient, as well as cost
effective.

o Customers are willing to purchase cars that offer more

value to price

o Locally manufacturing cars are costly

Before developing the targeting strategy, analysis of Porter’s five forces would help Shinaro
getting important insights about customers. It would also assist us while devising targeting
strategy for Shinaro.

Porter’s five forces model:

Porter’s five forces model would determine the attractiveness of the industry and would help
us forecasting the financial prospects. First of all, bargaining power of buyers would be
discussed.

Buyer’s bargaining power:

In case of USA automobile industry, bargaining power of buyers is very high as the switching
cost is low and there is a lot of competition among industry players. Customers are willing to
purchase elegantly designed models with distinctive features. It is further analyzed that
customers prefer foreign brands if they don’t get value for money. Hence, it can be said that,
US automotive users are highly sensitive towards any change in price (Porter’s Five Forces of
Competition in the U.S. Automobile Industry, 2011)

Supplier’s bargaining power:

Bargaining power of suppliers in this industry is really low, as business customers are few,
who purchase those parts, yet, suppliers are numerous. This will add as a benefit to Shinaro.
Low bargaining power also lets the industry giants to purchase suppliers and do backward
integration. An example, which fits here is of Ford, when it purchased Viston in order to gain
better control upon the value chain. (Bidnessetc, 2015)

Threat of new entrants:

MARKETING PLAN 13

Apparently, it may seem that to enter in the US automobile industry is near to impossible due
to huge capital investment, extensive legal requirements and other regulatory issues. But
there are two examples available, which have proven this claim wrong. Honda and Toyota
have literally put stress upon domestic giants of industry and gained significant customer
share. (Porter’s Five Forces of Competition in the U.S. Automobile Industry, 2011)

Threat of substitutes:

Threat of substitutes in the industry is high due to prevailing recession and increasing oil
prices. People are willing to use other means, including: public transport and purchasing used
care instead of buying the new one. Used car market industry has emerged as best substitute
for automotive customers. This indirect competition has further intensified the industry
situation by putting pressure upon major industry players. (Statista, 2015). Shinaro will have
to design strategically effective marketing plan in order to deal with this threat

Competition nature:

Oligopolistic competition is prevailing in the market as industry is dominated with a few key
industry players. Decision of one company affects the revenue stream of others. One key
factor is that there is very less differentiation between the firms’ offerings, and almost all the
designs and models are somehow similar to each other. Dailmer Chrysler, Fords and General
Motors are three domestic players. However, the competition is leading the industry towards
creating better value for money by enhancing the quality and after sales services. (Bidnessetc,
2015)

Targeting strategy:

From above analysis, it is recommended to the Shinaro to enter into the USA automobile
industry by the proposed targeting startegy:

Targeting:

Upper middle class that has a more sort of comfortable living style. There are certain reasons
behind why the consumers would buy the product. It may include:

 Currently, the economy is passing through recession

 Oil prices are also constantly rising

MARKETING PLAN 14

 Customers’ purchasing power has significantly declined during past few years (Fisher,
2006).

 Particularly, the vehicles owned by the middle class are aging, and have an average
age of around 11.5 years (White & Rogers, 2012)

 Customers need fuel efficient cars, but in affordable prices

 There is an urge to get good value for money.

 Quality along with affordability is the demand of market.

 Poor quality of general motors and premium charges have depicted potential market
in the industry that could compete in consumer light vehicles. (Rhee & Haunschild,
2006).

Penetration strategy to hit the target market:

Company is recommended to enter into the market by adopting penetration strategy in order
to serve the potential market need of getting good quality at lower prices. High production
cost of General Motors and US local manufacturers directly put them in a position where
competing upon the cost of production would be really difficult. It is also suggested to the
company that manufacturing of the cars should be done in the China, where cheap raw
material and labor is readily accessible (Cussumanu, 2013). Company has already established
its manufacturing infrastructure in Beijing and manufacturing plant is currently operating at a
sub optimum level. This international expansion would not only enhance the image of firm in
its local market, but would also result into enhances economies of scale.

Positioning strategy for the Shinaro:

The company would position itself as a follower instead of leader due to strong power of
three key players of the industry. Efficient positioning strategy decides the fate of product’s
success or failure. The image of the brand will be set in the minds of customers as fuel
efficient light vehicle, best for family use within affordable price. Daewoo success in the
United Kingdom by adopting the “family value model” is an example as well as justification
for the selection of this strategy.

Product characteristics positioning strategy:

MARKETING PLAN 15

The company would launch its product “Shinaro” by highlighting the fuel effectiveness of the
vehicle which would satisfy the market need for fuel efficient vehicles. In addition to it,
affordability of the product would also be a distinctive feature that would also be highlighted
in the minds of customers. The main target market would be the middle and upper middle
class with an elegant life style. So, in order to hit the market, such positioning strategy would
help the company gaining customer acceptance.

Positioning tagline:

“Fuel efficient light vehicle, best for family use within affordable price”

Justifications for the selected strategies:

Customers would certainly buy the product for a number of reasons. It has been already
discussed that the customers are willing to buy more fuel efficient cars within affordable
prices due to certain macro environmental factors, including: recession, decreased purchasing
power and increased oil prices. The Shinaro perfectly suits the market need due to its lower
production cost and fuel efficiency. The market demand in this case will be highly elastic and
there would be a number of factors that would cause the demand curve shift towards left or
right. However, in order to give higher value for money, the most influencing product
attribute would relate to the price as well as fuel efficiency of the vehicle along with easy
availability of cheap spare parts. In fact, both these factors would be considered as the core
competencies of offered product.

The above analysis also suggests the US market as one of the ideal market for further entry
for Shinaro for expansion as it is evident that the environmental factors of the US favors the
expansion and entry for Shinaro to the US market. But, one thing that Shinaro should not
overlook while its entry is the cultural differences of both the countries. The life style and
behavioral patterns of Chinese and the Europeans differ greatly therefore the marketing plan
is designed to adapt to the changing culture of the US market and is expected to help the
company succeed.

Conclusion

Concluding the overall discussion, it can be said that United States automotive industry is one
of the prominent growing industry of the country that enjoys an annual turnover of $280
billion and is comprised of around 200 companies and four major industry players that
account for around 75 percent of total sales. Certain macro environmental factors, including:
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rising oil prices, decrease in consumer purchasing power and global economic crisis has
reshaped the industry pattern and opportunity for new entrants has successfully been detected
by Shinaro to fill those gaps. These all key findings show that it is feasible to enter in the
region where the industry is at its growth stage and there is huge potential for earning dollars.
It offers attractive opportunity for SHINARO elegantly designed, fuel efficient, modern
technology family cars. SHINARO can capitalize on the opportunity by charging the nominal
prices and offering its state of the art engineering capabilities in their cars.

Recommendations:

 Company should launch its product in European regions where the demand of fuel
efficient vehicles is constantly rising.

 Hybrid cars should be launched as the firm as capital as well as the capacity to
develop such cars

 Motorbikes should be manufactured and launched to further penetrate into the market

 Speedup the process and rely upon the personal distribution channel while going
abroad

 Increase the focus upon electronic and print media

 Advertising through the billboards and flex signs is also a feasible option

 Sponsoring different events in order to gain the international acceptance would be

effective promotional strategy.

 Exercise effective control upon the manufacturing in order to cut the production costs
of the vehicle

 Introduce the concept of “lean manufacturing” in its production line.

References
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