The Executive Summary
Ford Motors, through the past five years or so, have been experiencing difficulties with their significantly present decline market share. Being a dominate player in the auto business for over a century, Ford Motors have been reluctant to keep up with current trends and evolving competitors from growing economies. Considering the company's external and internal opportunities, and directing their resources towards a more skillfully R& D (research and development) department would be the first step to recovering this remarkable loss.
Applying this strategy to current trends and innovating vehicles leading us in the direction of hybrid technology. When evaluating our strengths and weakness and applying them to the current opportunities while considering our threats, we thought of creating a product responding to the growing environmental awareness trends concerning cars, would hopefully regain our past success. One of the biggest complaints regarding Hybrids was the condensed size which is where Ford decided to place hybrid machinery in an already successful skin, the Ford Escape SUV. This would be the world's first sports utility hybrid on the market with an unbeatable price.
In this report we inform you with a company outline including a backgrounder and mission statement. We have also provided you with a S.W.O.T (strength, weakness, opportunities and threats) analysis which gives you an clear insight and understanding to why we have chosen the route and objectives which lead us to the production of the Hybrid Escape. We have provided a detailed profile of our target segment which through their needs guidelines, in depth, the marketing strategies, implementing a combination of the marketing mix components and alternative strategies.
Brief Company History: Ford Motors, through the past five years or so, have been experiencing difficulties with their significantly present decline market share. Being a dominate player in the auto business for over a century, Ford Motors have been reluctant to keep up with current trends and evolving competitors from growing economies. This has forced Ford to take dramatic measures by cutting jobs and closing a large numbers of its manufacturing facilities. Considering the company's external and internal opportunities, and directing their resources towards a more skillfully R& D (research and development) department would be the first step to recovering this remarkable loss. Applying this strategy to current trends and innovating vehicles relating to them will hopefully regain our past success.
Founded in the United States, Michigan in 1903, June 16th by Henry Ford and eleven investors with $28 000 as starting capital.
Company name: Ford Motor Company
Publicly owned vehicle Manufacturer
Brand: Ford (being one of eight brands and three automotive service providers)
Approximately 13,000 dealers worldwide
Head Office is located in Detroit
137 markets worldwide
Major competitors: DaimlerChrysler, Fiat, General Motors, Honda, Nissan, Toyota, Volkswagen, Hyundai/Kia
Company Mission Statement
We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world. We anticipate consumer need and deliver outstanding products and services that improve people's lives.
The Ford brand has always embodied Henry Ford's vision for producing a reliable, high- quality, affordable vehicles. In recent years the brand has also taken on the image as a safe, durable, comfortable and environmentally friendly automaker. (2)
Vision: To become the world's leading consumer company for automotive products and services.
Values: Our business is driven by our consumer focus, creativity, resourcefulness, and entrepreneurial spirit. We are an inspired, diverse team. We respect and value everyone's contribution. The health and safety of our people are paramount.
We are a leader in environmental responsibility. Our integrity is never compromised and we make a positive contribution to society. We constantly strive to improve in everything we do. Guided by these values, we provide superior returns to our shareholders
We have over a hundred years of experienced production.
We provide quality, affordable vehicles.
We inhabit a valued and ethical working atmosphere for our employees
We are a leading American icon.
Brand familiarity (promotion strategies)
We are involved in numerous social concerns; for example: Ford schools Construction program (in Mexico)
We are attentive to the increasingly environmental issues regarding vehicle pollution.
Declining market share. By 2010, 30 000 jobs are expected to be lost as it tried to adjust. We are making more than they are selling due to the increase competition coming from developing countries such a China.
We were very slow in reacting to the increased competition therefore consequently resulting in production loss.
We have the oldest cars and trucks in the showroom in comparison to the other top six competing manufacturers who are innovating car/trucks taking advantage on the American market.
Cuts in management
Customer loyalty (U.S markets are Fords largest consumers)
The motivations of the earliest Escape drivers, especially the fact that the wait for a Toyota SUV hybrid was too long, may no longer be as compelling for some shoppers.
Asian vehicle manufacturers such as Honda, Nissan, Toyota, Hyundai/ Kia dominating the markets; providing high quality, fuel efficient, low cost automotive vehicles
The world is experiencing an overall economic growth due to globalization which results in emerging economies like China and India, who in the past could not afford the luxury of owning a motorized vehicle can now do so. In addition to economic growth usually means a higher standard of living within an economy, which also results in greater consumer spending therefore opening more markets globally. Overall globalization is opening markets.
Economic growth is occurring around the world and is opening the door to evolving companies (for example firms in China are gaining a comparative advantage due to low labour cost allowing them to have greater focus on their R&D, research and development). This is a huge threat to leading industries from developed countries. (Ford in the U.S vs. Honda in China)
Increasing fuel cost. Ford being a world leader in the truck industry now is experiencing a low demand for this high fueled engine (trucks).
Cultural / Social Environment:
Ford can develop tailored car/trucks according to the lifestyle and different cultures around the world. For example
It is said that women influence the overall decision when purchasing a relatively high cost household assets (vehicles); therefore appealing the product, psychologically, to the female's taste can and will create a higher demand for the product.
A presently huge concern in many nations is environmental issues. Global warming is scientifically proven to become a surfacing concern for the up coming years. Automakers can look at this situation as an opportunity by innovating environmentally friendly vehicles
North Americans want big luxury environmentally friendly vehicles. (the only hybrid available vehicles are small cars; which is a big complaint)
People are presently migrating to urban areas unlike earlier years where people were doing the opposite which means the use of public transit and car pooling have become a growing trend which means the demand for motorized vehicles are at a all time low.
In developing countries where the increase presence of motorized vehicles emerges, the number of casualty and harm to human increases. The World Health Organization predicts that road traffic injuries will be the third-leading cause of death and disability worldwide by 2020. Safety has becoming an all time high concern regarding motorized vehicles in the emerging economies. Responding to this concern through Promoting safe driving in developing nations is one way Ford can use the situation to their advantage.
Meeting regulations by the government for example emissions test.
Governments endorsing public transit and carpooling will lower the demand for individual car ownerships.
Create regulatory environments governing markets and behaviors, and establish infrastructure for new fuels and technologies
innovating vehicles relating to current trends such as environment issue
releasing hybrid versioned vehicles of existing popular cars/ trucks to adapt to the increasing “oil gap” (see figure 1.1 )
Fuel cell batteries
Advanced diesel; improve driving characteristics compared to earlier generations of diesels.
Companies evolving in china with high tech, up to date trendy cars are ahead of the game.
Considering the opportunities and threats occurring in the present environments and relating them to our current strengths, entering the Hybrid market seems extremely logical. Bearing in mind that arising issue connecting to the Hybrid is the small size therefore what better way to deal with the issue than to innovate one of our existing SUV's (the Ford Escape)to be run on electricity. Firstly, it will be the SUV Hybrid in the world market, creating Ford a long over due comparative advantage. Secondly, it is responding to the current environmental concerns and thirdly it is using recent technology to adapt to the economic oil gap.
The new sport hybrid will produce 97 percent less hydrocarbon and oxides of nitrogen emissions than vehicles that meet todays nationwide Tier I emissions standard. The Escape Hybrid uses a “full” hybrid system, which means that it can be powered by the electric motor alone, by gasoline engine or both working together. The Escape Hybrid achieves fuel economy that is fifty percent better than the conventional Escape,
With in the next year, after we are satisfied with its performance and feedback gathered in the test market, it will finally be released to mass market. The feedback will also determine future endeavors regarding improvement, targeted market and promotions. The new integrated structure of hybrid will include a greater emphasis on strategic marketing and brand positioning while accomplishing a whole new market. The Escapes' rate of success within a year will also determine the reserved entrance to the market for other Ford Hybrid innovations. This makes Hybrid a raising star of the down falling Ford Company. It's the hope and trend of the future.
"Our customers are increasingly concerned about the price of gasoline, air quality, oil supply issues and the effects of CO2 emissions on climate change. At the same time, they tell us how much they appreciate the versatility and capability of our SUVs. They don't want to give them up, and we don't think they should have to. That's why we built the Escape Hybrid." William Clay Ford, Jr., Chairman and CEO, Ford Motor Company (4)
Target Segment(s) Profile
Ford being a manufacturer that is offering a heterogeneous product means that their retail deals with extensive problem solving shoppers. Because the Escape Hybrid targets a market where customers are inspecting for quality and innovative environmental solutions while still attaining a social acceptance fitted for there lifestyle, the customers are going to do extensive research before making a purchase making sure it meet all of their expectations. The Escape Hybrid gathers many qualities/ features to fulfill and go beyond the needs expected of their target market.
Considering the price (initial cost plus cost of new technology $30 000 US) the targeted market of the SUV Hybrid is mainly based on an upper quintile family, possibly a trend of two incomes, consisting of a family of four or more. And because of the added “more space” features to the hybrid market it's considered as a luxury asset therefore to purchase this the family must have a personal discretionary income (income left after paying for necessities). This new segment is growing knowledge around the world (the majority in North America) which is why it is vital for our company's to respond fast!
Note: In North America those aged 50 and over are responsible for 50% of all consumers spending, hold the 70% of all wealth, and make 50% of all the automobile purchase. At the same time another challenge facing ford is how little people understand about hybrid. Therefore future promotional strategies can be targeted towards a more elderly population in hopes to raise environmental awareness in respects for future generations.
We offer a larger car for a lower price in comparison to other leading hybrids.
Our product, The Escape Hybrid, is produced by the well-known, all American renowned auto manufacturer; Ford Co. Ford Escape Hybrid is a member of the Ford family, entry model of the Ford SUVs, which belongs to the Ford Escape product line, featuring the remodeled fuel-efficient, full hybrid, version of the Escape. Ford's current trademark is “built for the road ahead” meaning; Ford's vision now is to take environmental issues into considerations by creating a product that concerns the future. Like all Fords, Escape Hybrid is built to be tough, and to fit rough, which refers to the guaranteed excellent safety and quality of the vehicle. The Hybrid Escape does not look any different than the traditional gasoline fuelled Escape other than a few subtle cues on the exterior labeling it as an Escape Hybrid (packaging). It's featured in a robust electric motor and regenerative braking, which, again, is an environmental concerned green technology. The electric motor can power the vehicle on its own at speeds up to 40 km per hour; when you need to accelerate above that, the gas engine takes over; transition between the electric motor and gas engine is hardly noticeable. When the SUV makes a stop, the electric motor and regenerative braking system capture energy that would normally be wasted; when the brakes are activated, the electric motor transforms the vehicle's momentum into electric energy; it is then transferred to the battery and stored for later use. The Escape Hybrid also provides an option to become 4WD to make it a real SUV. With Ford, customers enjoy a nation wide service. Seeking out alternative features and more efficient ways of producing the hybrid through past pioneering firms' experiences has allowed us to create our competitive advantage with innovating the first Hybrid sports utility vehicle available on the market with an unbeatable price. (7)
The distribution strategy for the Ford Escape Hybrid is direct, keeping customer and company in close relation while cutting in cost/expenses. Because of the capacity and volume SUVs and other automotive vehicles contain it is almost impossible to store them in-house, which is why Ford provides our own retail/dealership (direct distribution). As the result the firm has direct contact with its customers ensuring the company that their brands are being sent, sold and promoted by their own at a quality meeting our high standard. If changes are needed, they are in a better position than companies with a long distance channel. The marketing mix is thereby tailored and adjusted, when needed, on a quick response without extra added bothers. An additional positive to the direct distribution would be the cost. It enables Ford to serve the target customer at a possible lower price due to a lower cost (full control over price flexibility). Ford does not stretch one brand in order to grow and go into segments which don't really fit to this brand. That's the approach goes hand-in-hand with the distribution strategy which is that “wherever there's a chance to do it, wherever the local situation allows it, Ford will go for so-called common ownership PAG dealers.” That means that one dealer has five showrooms for Ford's five brands all-exclusive, with exclusive sales people, so that customers really have a consistent brand representation. Escape Hybrid is focusing on the entry sport utility market. Consumers nowadays, especially in North America, do own more than one car. They have a sports utility and they have a sports car and maybe a sedan. That's a new opportunity for the good dealers because the dealer now builds up a very close relationship with his customers. So why should this customer buy another sports utility from another brand when he or she can find a very attractive portfolio with the same dealer? Ford therefore can have the right product for every need and for every customer requirement. And Escape Hybrid is one of the outcomes. The customer has thirty days to return the SUV Hybrid if not satisfied. As to the warranty, the Ford Escape Hybrid offers a 3 year/60Kkm limited warranty and roadside assistance, and even longer term for it's high voltage battery and corrosion warranty. Ford includes the warranty because it adds to our customer “care” image plus consumers buying a heterogeneous product prefer assurance within the first few years of purchase. A loss of sale could arise with this as an absence.
The Internet can be used for distribution because its can be another form of selling the product in stead of the actual dealer. The internet works hand in hand with the distribution process. The web-site links to a page where you can design your own Escape Hybrid, you can then send (via Internet) your own “developed product” to the company, from that point the nearest dealership will contact you and arrange an appointment for a test drive and further post sale duties. (This can be done because the site informs you with almost the same, if not more (complete), information than an actual sales representative would present you with, allows you, the consumer, to relax in your home without the inconvenience of going out to the dealership numerous times). This makes the internet the first “channel” the customer retreats to before the actual purchase while retaining direct communication with the company. The Internet creates a supporting retail method creating a straightforward and less time consuming means for both the seller and consumer.
Overall, distribution holds a considerable high impact on the concluding marketing plan. It can have a negative and positive affect on the product itself, the overall selling price, and the contribution added promotional efforts (personal selling). If the location does not reach a reasonable distance to the targeting market it could lose the product demand. If the distribution is indirect requires a significant investment, therefore distribution cost would then increase, raising the overall selling price for the consumer, and if there were many intermediaries involved who were also dealing with other competing producers, Ford may not have the advantage it currently has of giving its products the special emphasis they want.(7)
The Hybrid Escape is a “new product” entering a “new market” creating the opportunity for the Escape Hybrid to attain a form of diverse asset from competitors, which primarily was that we had the first hybrid SUV. But since no matter how we develop our product, it is easy for other competitors to “replica” it and enhance it; therefore our marketing mix will have to ensure a competitive advantage through the price (especially during the product introduction and growth). Positioning ourselves with an unbeatable price and creating a psychological want/need for the product. Our objective is sales-oriented, while still keeping in mind the profit margin. We are using the penetration policy to try to sell to the whole market at one low price. Our entry administered based price reached an attractive $30, 000, (1)which follows a one-price strategy, thereby only shifting to certain conditions; for example, on added features and discount regulations. Because we're selling to a target market where the demand curve is rather elastic and strong competition is expected, this plan is fairly justified. This can be proven extremely successful if, during the introductory stage, the Escape Hybrid wins over a high market share accomplishing leadership and dominance over innovating competitors.
Low prices attract customers; therefore when entering the marketplace like this requires us price our products lower than the competitors so that our product will capture the attention of the prospective customers. Escape Hybrid is delivered with a price that is already competitive in the SUV market while further penetrating it by offering luxury package discounts (if a certain number of feature are added to the vehicle), even cash incentives for purchase, discounts through the dealers as one-time-use discounts, or limited time offers. Ford furthermore, encourages customers to make early payments. Ford also is offering the zero-percent financing for Escape Hybrid (cash discount; also stated in the promotion section). Doing this will further secure a dominance in the market.
The price is extremely important in the Hybrid Escape overall marketing mix because ultimately customer must be willing to pay the price if the remaining 3 P's want to succeed.
Note: customers can use the internet as an aid prior the actual sale but cannot purchase the vehicle unless accompanied by a sales rep in the retail outlet. There are excessively, many legal regulations in relation to the final sale of any automobile. (7)
Hybrids target a market of people who generally most often ask questions or advice when satisfying their need,–extensive problem solving shoppers- also known as opinion influencers. Being that they are curious about new technology and care about the environment than the average consumer, they are willing to research the product more and not only because of the price. This explains why high volumes of information are primarily generating most of their promotional efforts. As previously stated in the “Place” category, Ford's channel of distribution is direct therefore it is in a better position to adapt its marketing mix to a more aggressive and cooperating personal selling approach. The solution, dealers are being educated through a special certified program for sales and service to really emphasize the new Escape Hybrids (and other Hybrids soon to follow). This will allow the producer, through its retail, to accurately provide information and correct frequently misconception regarding the new launch, while having an effect on a possible future prospect/consumer. In addition to personal selling, Ford along with traditional efforts such as competitive advertising both direct and indirect. For instance, indirect would involve their high definition billboards, magazines and quality commercials. Direct would relate to the Ford web-site where they have also provided plenty of information. Before the launch of the Escape, the Ford web-site, offered consumers to sign up for the e-newsletter to receive the most up-to-date information concerning it. This proved its success when over 30 000 people signed up, 70 percent of whom do not own any Ford vehicle proving the hybrid a great opportunity to attracting new customers into the Ford domain. Currently Ford is also shooting a link to their home web-site titled “Truth” which is a series comparing its vehicles (including the Escape Hybrid) with other leading competitors. In respects to sales promotions, Ford further stimulates interest on the Escape Hybrid by offering discounts through the dealers, ensuring limited time offers, for example, they encourage customers to make early payments while offering a zero- percent finance, free trail runs, hard to resists discounts on additional features and so forth. In regards to publicity ford had received numerous recommendations on the innovation granting them "North American Truck of the Year" for 2005 for, “the cleanest, most fuel-efficient SUV on the road”, at the North American International Auto Show in Detroit.(6) With all these promotional efforts, Ford is carving its way back into the competitive market.(7)
1. If the market potential is over-estimated or the unbelieving low price does not dominate the market and the majority targeted market continue to be engrossed to other innovating competitors disregarding the low penetrating price causing Ford to barely reach breaking point, will result in dramatic alternative counter-plans. For instance, price cutting is not considerable due to the already low price, if the cover of production cost is not being accounted for, stopping fabrication is a reasonable solution.
Furthermore, the amount invested in this project would further handicap any alternated solutions that would require additional capital. Therefore it would not be possible considering the companies current situation. (7)
2. Discontinuing the product and add the hybrid (plus the entire R&D) to a more popular Ford vehicle. This could be another sufficient replacing plan. (7)
3. Play on the competition, provoke promotion, innovate product, research on how to lower production cost while providing better quality. I believe it would be unattainable and if achievable high costs would be involved (not recommended). This alternative only should be considered during the end of its market growth and beginning of its maturity when competitors and other vehicles start replacing it. (7)
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