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Deck 8: Global Marketing
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RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Assess China as a potential market for luxury cars. If you worked for a luxury car manufacturer, such as Volvo, would you enter or attempt to increase your presence in China What entry strategy would you use Why
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Assess China as a potential market for luxury cars. If you worked for a luxury car manufacturer, such as Volvo, would you enter or attempt to increase your presence in China What entry strategy would you use Why
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Question
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Drivers in China approach the luxury car market with a set of strong associations that influence their perceptions of the foreign brands currently available in the marketplace. Multiple factors affect those consumer attitudes, including history, class, and social status. Why are these attitudes so entrenched in China, and why do they play such a critical role in shaping car customer preferences
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Drivers in China approach the luxury car market with a set of strong associations that influence their perceptions of the foreign brands currently available in the marketplace. Multiple factors affect those consumer attitudes, including history, class, and social status. Why are these attitudes so entrenched in China, and why do they play such a critical role in shaping car customer preferences
Question
Question
Question
Question
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Both Audi and BMW have allied with other companies to target particular market segments. Assess the relative strength of these two very different positioning strategies.
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Both Audi and BMW have allied with other companies to target particular market segments. Assess the relative strength of these two very different positioning strategies.
Question
Question
Question
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
BMW has successfully targeted China's affluent, young car drivers, but the brand's success in that market has also provoked public backlash. What drives such public hostility to the brand, and how serious a problem is it What marketing approach, if any, should the company undertake in response
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
BMW has successfully targeted China's affluent, young car drivers, but the brand's success in that market has also provoked public backlash. What drives such public hostility to the brand, and how serious a problem is it What marketing approach, if any, should the company undertake in response
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Deck 8: Global Marketing
1
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Assess China as a potential market for luxury cars. If you worked for a luxury car manufacturer, such as Volvo, would you enter or attempt to increase your presence in China What entry strategy would you use Why
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Assess China as a potential market for luxury cars. If you worked for a luxury car manufacturer, such as Volvo, would you enter or attempt to increase your presence in China What entry strategy would you use Why
Evaluating Country C as a Potential Market
Country C has evolved as a potential market for luxury cars for the following reasons:
• Developed roads and bridges paved way for smooth car driving.
• Historical connections with some particular brands
• Efficient marketing campaigns influencing enthusiastic, affluent and brash drivers
• Alliances focusing on prolonged collaborations
• Potential less traffic locations
Yes, the presence of Company V can be increased in Country C.
Entry strategies :
The presence of Company V would be increased in Country C by using the following entry strategies:
• Joint ventures
• Connections with Country C
• Geographic areas
• Cultural diversity
• Target customers
Explanation :
• As Country C is open for collaborations and joint ventures, Company V can attempt to increase sales growth in Country C.
• Since Company V has connections with Country C, Company V can expect a strong position as the top luxury car manufacturer.
• The second-and third-tier cities of Country C prove to be promising for the car industry because of economic growth and the highly developed transportation systems.
• Though cultural diversity is the main challenge in Country C, Company V can overcome this difficulty by government intervention.
• Being a luxury car manufacturer, Company V should target both the rural and urban regions.
Country C has evolved as a potential market for luxury cars for the following reasons:
• Developed roads and bridges paved way for smooth car driving.
• Historical connections with some particular brands
• Efficient marketing campaigns influencing enthusiastic, affluent and brash drivers
• Alliances focusing on prolonged collaborations
• Potential less traffic locations
Yes, the presence of Company V can be increased in Country C.
Entry strategies :
The presence of Company V would be increased in Country C by using the following entry strategies:
• Joint ventures
• Connections with Country C
• Geographic areas
• Cultural diversity
• Target customers
Explanation :
• As Country C is open for collaborations and joint ventures, Company V can attempt to increase sales growth in Country C.
• Since Company V has connections with Country C, Company V can expect a strong position as the top luxury car manufacturer.
• The second-and third-tier cities of Country C prove to be promising for the car industry because of economic growth and the highly developed transportation systems.
• Though cultural diversity is the main challenge in Country C, Company V can overcome this difficulty by government intervention.
• Being a luxury car manufacturer, Company V should target both the rural and urban regions.
2
What metrics can help analyze the economic environment of a country
2. What types of government actions should we be concerned about as we evaluate a country
3. What are five important cultural dimensions
4. Why are each of the BRIC countries viewed as potential candidates for global expansion
2. What types of government actions should we be concerned about as we evaluate a country
3. What are five important cultural dimensions
4. Why are each of the BRIC countries viewed as potential candidates for global expansion
(1)
Economic analysis metrics:
The following are the economic analysis metrics that are helpful to analyze the economic environment of the country:
• The general economic environment of the country
• The size of the market and the increase in population of the country
• The level of income of the country
(2)
Government actions to analyze the environment:
The following are the government actions to analyze the environment of the country:
• The import duty levied on the imported goods of the country and the restrictions for the import of commodities.
• The restrictions laid by the government on import and export of the goods in a specific period to avoid oversupply in the market is called quota. This helps the government to control the flow of goods from global market into the local market.
• A technique or tool that helps the country to measure the value of currency with another country currency is termed as exchange control. This helps the government to analyze the business value of the country in the global market.
• The restrictions and encouragement provided by the country for trade agreements with other country is termed as trade agreement.
(3)
Five cultural dimensions:
The following are the five cultural dimensions given by Geert Hofstede:
• The acceptance of social inequality in the society is termed as power distance.
• The steps taken by the individual to avoid the uncertainty in day-to-day activities.
• The level of dependence on the group and the level of individualism
• Masculinity ranking in the society.
• The value commitment of the society toward each activity and the time orientation of the values.
(4)
Justification:
BRIC countries' markets have more opportunities for the product survival and business expansion. The following are the reasons for viewing the BRIC countries as potential candidates for global expansion:
• The resources, market, and capital are the major advantages which attracted the business world toward the BRIC countries.
• BRIC countries are politically stable with sound infrastructural facilities which protect the investments of the organization.
Thus, BRIC countries have more advantages which attracted the whole business world with certain manageable challenges like skilled labor, poverty, and economic imbalance.
Economic analysis metrics:
The following are the economic analysis metrics that are helpful to analyze the economic environment of the country:
• The general economic environment of the country
• The size of the market and the increase in population of the country
• The level of income of the country
(2)
Government actions to analyze the environment:
The following are the government actions to analyze the environment of the country:
• The import duty levied on the imported goods of the country and the restrictions for the import of commodities.
• The restrictions laid by the government on import and export of the goods in a specific period to avoid oversupply in the market is called quota. This helps the government to control the flow of goods from global market into the local market.
• A technique or tool that helps the country to measure the value of currency with another country currency is termed as exchange control. This helps the government to analyze the business value of the country in the global market.
• The restrictions and encouragement provided by the country for trade agreements with other country is termed as trade agreement.
(3)
Five cultural dimensions:
The following are the five cultural dimensions given by Geert Hofstede:
• The acceptance of social inequality in the society is termed as power distance.
• The steps taken by the individual to avoid the uncertainty in day-to-day activities.
• The level of dependence on the group and the level of individualism
• Masculinity ranking in the society.
• The value commitment of the society toward each activity and the time orientation of the values.
(4)
Justification:
BRIC countries' markets have more opportunities for the product survival and business expansion. The following are the reasons for viewing the BRIC countries as potential candidates for global expansion:
• The resources, market, and capital are the major advantages which attracted the business world toward the BRIC countries.
• BRIC countries are politically stable with sound infrastructural facilities which protect the investments of the organization.
Thus, BRIC countries have more advantages which attracted the whole business world with certain manageable challenges like skilled labor, poverty, and economic imbalance.
3
What is globalization Why it is important for marketers to understand what globalization entails
Globalization:
It is the worldwide movement that grow internationally in economic, financial, and in trade integration. Globalization can also be phrased as the tendency of organization to invest funds to move beyond the domestic and national markets. This would help the business to have international connections globally.
Company tends to adapt global marketing when it views all aspects of the market and decisions are made to avoid borders.
The importance of globalization for marketers is shown as below:
• An organization could generate a possibility to raise the economy of scale by standardizing its marketing to global marketing. Due to this reason, marketers experience a growth in economy of scale.
• As globalised firms have central monitored protocols, organized products can be introduced in to the market. This accelerates the business speed in its market operations. Thus, markets can think for further strategies to increase the business operations.
• In segmentation, the globalization of market would help marketers to reduce the significant cost to communicate to the target market. The cost of communicating to create a unique brand name can be reduced using the concept of global markets.
• Global market would guide the marketers whether there is any possibility for the company to have market expansion.
• Global market also helps to have access to resources. It also helps the marketers to source the financing alternatives to the organization.
It is the worldwide movement that grow internationally in economic, financial, and in trade integration. Globalization can also be phrased as the tendency of organization to invest funds to move beyond the domestic and national markets. This would help the business to have international connections globally.
Company tends to adapt global marketing when it views all aspects of the market and decisions are made to avoid borders.
The importance of globalization for marketers is shown as below:
• An organization could generate a possibility to raise the economy of scale by standardizing its marketing to global marketing. Due to this reason, marketers experience a growth in economy of scale.
• As globalised firms have central monitored protocols, organized products can be introduced in to the market. This accelerates the business speed in its market operations. Thus, markets can think for further strategies to increase the business operations.
• In segmentation, the globalization of market would help marketers to reduce the significant cost to communicate to the target market. The cost of communicating to create a unique brand name can be reduced using the concept of global markets.
• Global market would guide the marketers whether there is any possibility for the company to have market expansion.
• Global market also helps to have access to resources. It also helps the marketers to source the financing alternatives to the organization.
4
For many small businesses, the idea of entering a foreign market is intimidating. The U.S. government and most state governments now offer assistance designed specifically for small-business owners. Visit the website of the Massachusetts Export Center at http:\\www.mass.gov\export\ and examine the types of services it provides. Click on the Export Statistics link. To what five countries did Massachusetts export the most Are you surprised
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5
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Drivers in China approach the luxury car market with a set of strong associations that influence their perceptions of the foreign brands currently available in the marketplace. Multiple factors affect those consumer attitudes, including history, class, and social status. Why are these attitudes so entrenched in China, and why do they play such a critical role in shaping car customer preferences
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Drivers in China approach the luxury car market with a set of strong associations that influence their perceptions of the foreign brands currently available in the marketplace. Multiple factors affect those consumer attitudes, including history, class, and social status. Why are these attitudes so entrenched in China, and why do they play such a critical role in shaping car customer preferences
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6
Which entry strategy has the least risk and why
2. Which entry strategy has the most risk and why
2. Which entry strategy has the most risk and why
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7
Moots is a high-end bicycle manufacturer located in Steamboat Springs, Colorado. Assume the company is considering entering the Brazilian, Chinese, and Indian markets. When conducting its market assessment, what economic factors should Moots consider to make its decision Which market do you expect will be more lucrative for Moots Why
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8
Adidas is a global brand, yet it alters its promotions to meet local tastes. Go to www.addidas.co.uk\shop and visit the U.K. site. Now click on the U.S. or Canadian sites. How are these websites different
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9
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Both Audi and BMW have allied with other companies to target particular market segments. Assess the relative strength of these two very different positioning strategies.
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
Both Audi and BMW have allied with other companies to target particular market segments. Assess the relative strength of these two very different positioning strategies.
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10
What are the components of a global marketing strategy
2. What are the three global product strategies
2. What are the three global product strategies
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11
Now consider the political, economic, and legal systems of China, India, and Brazil. Explain why you think one country might be more hospitable to Moots than the others.
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12
RACING TO CAPTURE CHINA'S LUXURY CAR MARKET
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
BMW has successfully targeted China's affluent, young car drivers, but the brand's success in that market has also provoked public backlash. What drives such public hostility to the brand, and how serious a problem is it What marketing approach, if any, should the company undertake in response
China's car market dates back just three decades, yet the Asian giant is well on its way to surpassing the United States as the world's most lucrative and strategically important auto market. Government investment in infrastructure, including the development of roads and bridges, has helped the nascent car industry, and sales growth in the overall market has soared by 30 percent annually for several years. Last year, Chinese consumers bought 2.2 million vehicles more than United States drivers purchased, and more than 60 percent of them were foreign-origin brands, produced in China through joint ventures.
Perhaps the fiercest arena of competition is China's luxury car market, projected to become the world's largest within five to seven years. The dominant players include Audi and BMW, as well as Mercedes-Benz and Buick. Audi has reported 61 percent increases in Chinese sales; BMW sales in China, Hong Kong, and Taiwan were projected to rise by 85.3 percent over their previous rates.
Yet these figures are not the whole story: China is a challenging market to penetrate, especially because of its continent-wide geographic area, complex cultural diversity, and growing gaps (both economic and social) between poorer rural regions and the booming cities on the coastline. Furthermore, prevailing stereotypes and images of particular car brands are rooted in history, and no foreign carmaker can safely ignore these strong opinions and ideas. Some foreign companies, such as Audi, have eased the path by entering into joint ventures.
Audi was the earliest entrant into the Chinese prestige car market, when its German owner, Volkswagen, struck a joint venture agreement with the Chinese carmaker Yiqi in 1988. By the time BMW opened a plant in China in 2003, Audi had secured a place on the central government's authorized purchase list, and its A6 line had become the de facto car of choice for Chinese bureaucrats. The company captured so much of China's government-car market that it has given rise to the stereotype that the sleek looking A6-invariably with dark, tinted windows-must be carrying a party technocrat whenever it appears on city streets.
Audi has done well with this market segment. A basic Audi A6 costs 355,000 renminbi, or $56,000. Its key competitor, the BMW 5, is more expensive, at 428,000 renminbi, or $67,520. Audi's sales to the government accounts for approximately 20 percent of its Chinese revenues, and it sold 227,938 cars in China in 2010, more than twice the number that it sold in the United States.
Not to be outdone, U.S. carmakers have worked to establish effective brand perceptions and reputations, largely based on improving stereotyping about the car's "face." The American-made Buick seemed "damaged" at the start of the twenty-first century because of the car's longstanding popularity and association with older retirees, but in China, it played on unique historical connections to help ignite demand by reminding car buyers that China's last emperor and its one-time premier Zhou Enlai both drove Buicks. Thus the brand gained a strong position as a top-tier luxury carmaker. Its 2010 Chinese sales were more than triple its revenue in the United States. But for Mercedes-Benz, such stereotyping has persisted. Whereas most U.S. consumers view both these automobiles as cars for people with established wealth, the Mercedes in China may be for the wealthy, but it is still associated with older, retired drivers.
The most dynamic market niche for luxury cars reflects a rising class of young, affluent entrepreneurs with flashy buying habits. BMW, the world's top-selling luxury car brand, 75 has vigorously targeted these brash new drivers with exotic marketing campaigns. The Munich-based automaker began offering test drives and cross-country expeditions with its high-end X5 SUV in the deserts of Inner Mongolia and along Silk Road, enticing thrill-bound luxury car customers. Their campaign showcases new technology, and it has helped build brand loyalty: China is BMW's third-largest market.
Yet its targeting strategy has also left behind some negative Chinese attitudes that link BMW to careless, nouveau riche drivers. That stereotype grew after young BMW drivers, in separate incidents, were charged in fatal accidents. When a young woman intentionally ran over an indigent man after he dented her BMW X5, then settled out of court for $11,000, the story helped fan the tensions between China's rich and poor. In the cross-fire, BMW was tagged with a reputation for catering to the arrogant and the reckless. That tag now extends to other BMW drivers; government officials who show up in a BMW, rather than the typical, less expensive Audi, run the risk of being accused of corruption.
In a push to innovate and perhaps revive a broader appeal, BMW has launched a strategic alliance with Toyota, focused on sustainable technologies. The companies will collaborate on diesel engines, which dominate Europe's fuel-efficient car market. They also have agreed to develop a next-generation lithium battery, a key component of laptops and electric cars.
Other examples of market expansion by luxury carmakers include ventures into some of China's less developed cities. These second-and third-tier locations provide access to a new class of potential buyers, that is, affluent consumers who live farther from the major metropolitan centers. Major cities such as Beijing and Shanghai are limiting car purchases, because their streets cannot handle more traffic, but smaller cities in outlying provinces offer promising alternative markets.
Its early entrance into the market, through a joint venture with a Chinese carmaker, allowed Audi to become deeply entrenched in the government's purchasing system. But with BMW courting wealthier young drivers, the competition between these two foreign automakers is heating up. Strategic partnerships will continue to play a key role in shaping new opportunities, though limits on car registration in some major cities may shift those opportunities to other geographic segments. Amid all these dynamics, Chinese brand attitudes will continue to determine the buying decisions of drivers in the world's largest car market.
BMW has successfully targeted China's affluent, young car drivers, but the brand's success in that market has also provoked public backlash. What drives such public hostility to the brand, and how serious a problem is it What marketing approach, if any, should the company undertake in response
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13
Colgate sells its products in many countries throughout the world. How would you expect its market position to differ in various countries, compared with that in the United States Consider various areas across the globe in formulating your answer.
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14
CITGO, the petroleum company owned by the Venezuelan government, sells its products throughout the world. Do you anticipate that its market positioning and advertising differ in different countries Why or why not
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15
What are the benefits of being able to offer a globally standardized product What types of products easily lend themselves to global standardization
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16
Compare and contrast Ford's global marketing strategy for Figo and Fiesta.
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