Transcript Automobiles

The Automobile Industry
Kristen Barnett, Alexa Davis, Skyler Dale, Gabriel Polsky
April 28, 2015
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Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
A big picture look
at the automobile
industry
Toyota and General
Motors lead the
automobile market
Auto companies’
strategies utilized
in commercials
A deeper analysis
of the commercials
Main takeaways
from the raw data
for automobiles
Deep-dives on
social media and
the effects of
recalls
Wrapping it up
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VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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Why We Chose This Topic
‣ Personal interest in the
industry
‣ Unique perspective on
how advertising can
change a company’s
brand image in
response to crisis
‣ Previously discussed
topic in class
Industry at a Glance
Car & Automobile Manufacturing in 2015
Revenue
Exports
Annual Growth 10-15
$107bn
$57.3bn
5.4%
Profit
Businesses
Annual Growth 15-20
$4.5bn
203
2.5%
Key External Drivers
The automobile industry is sensitive to macroeconomic pressures
Consumer
Confidence Index
Spending behavior on large purchases, like automobiles, have a positive
relationship with consumer confidence.
Demand from new car
dealers
Greater demand at the retail level, which is represented by car dealers,
generates greater demand at the manufacturing level.
World price of crude oil
As gas prices decrease, consumers will be less sensitive to fuel-efficient
vehicles, which are often from International brands.
World price of steel
Steel prices can be a major cost pressure, which can’t be passed onto
customers. Prices are expected to decrease.
Yield on 10-Year
Treasury note
The 10-Year Treasury note is tied to interest rates. As interest rates rise,
demand for cars rise due to lower financing costs.
Trade-weighted index
Auto industry is international so appreciation of USD lowers export rates
and industry revenues.
Supply Chain
The automobile industry is heavily dependent on its suppliers
Buying
industries
Selling
Industries
Cost Structure
Auto manufacturers are cutting costs to bounce back from bankruptcy
‣ Largest percentage of costs are inputs,
including engines, transmissions, etc.
‣ Wages falling, but still large due to
labor contracts and inflated salaries
‣ Manufacturers that work with
UAW Union will struggle to
compete with mass-market, lower
priced cars
‣ Renewed profitability due to:
‣ Lower labor expenses
‣ Improved retail sales
‣ Greater credit access
‣ Increasing consumer confidence
International Trade
NAFTA inflated trade statistics between US, Mexico and Canada
Exports
($57.3bn)
Exports
($57.3bn)
Imports ($159.8bn)
HIGH and INCREASING
1
High rate of exports to Canada due to NAFTA
restrictions and location of manufacturing
plants near Great Lakes
2
China’s growth as export market due to rising
affluence and standard of living
HIGH and INCREASING
1
2
High rate of imports from Canada and Mexico
due to NAFTA restrictions
International automakers moving assembly
plants to Mexico to lower labor costs
Products & Market Segmentation
Luxury and sports cars only comprise 17% of the market
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VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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Barriers to Entry
The automotive industry has high and steady barriers to entry
Competition
MEDIUM
Regulation & Policy
MEDIUM
1
2
Concentration
MEDIUM
3
Life Cycle Stage
MATURE
5
Barriers To Entry
Technology Change
HIGH
4
Capital Intensity
HIGH
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Internal Basis of Competition
Competition in automotive industry is medium and increasing
Price
Styling
Reliability
‣ Each car class
‣ Automakers redesign
(compact, mid-size,
vehicle’s styling every
etc.) has range of prices
five years
‣ Similar vehicles, which ‣ Recently redesigned
are marketed to
cars sell in higher
different customers will
volumes than other cars
be priced differently
‣ Redesigning a vehicle is
‣ Price varies according
not always a profitable
to personalization and
venture if customers
higher add-ons
prefer the outgoing
model
Fuel Economy
‣ Reliability concerns are
lesser since domestic
auto makers caught up
to international auto
makers, like Toyota and
Honda
‣ Quality control
procedures and
manufacturing
equipment have
improved among
domestic companies
‣ Consumers have shifted
away from cars with low
fuel economy (SUVs &
trucks) to compact and
mid-size cars
‣ Manufacturers offer
environmentally friendly
options, like hybridelectric, electric & clean
diesel engines
‣ Shift from naturally
aspirated engines to
forced-induction engines
Industry Market Share
The automobile industry has an HHI of 1123
Automobile Industry Market Leaders
GM and Toyota comprise greatest market share despite recent
struggles
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Makes cars and trucks; brands include Buick, Cadillac, Chevrolet and GMC
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Concentrating efforts on energy-saving models, growth in china
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Split into General Motors & Motors Liquidation after mid-2009 bankruptcy
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Ad strategy focused on engaging with “passion points” and featuring real customers
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2015 YTD unit sales = 684,039; annual change = -2.4% (March 2015 vs. March 2014)
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Headquartered in Japan with 50 manufacturing facilities worldwide
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Slowly attempting to repair sales and brand image after 8 million vehicle recall in 2010
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Competitive advantage from being first-mover in alternatively fueled vehicle research
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Ad strategy focused on targeting dads and sports fans through Facebook videos
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2015 YTD unit sales = 575,620; annual change = 4.9% (March 2015 vs. March 2014)
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VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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Advertising strategies
Pickup trucks
Dominant strategies
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Key differences: GM versus Toyota
Complementary, not in prestige but in “tough
guy, outdoorsy” sense
Use of animals and nature, more than most
other types of ads, car driving off road
Few product attributes discussed
Predominantly men in the ads
Music often highly involved
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Overall no discernable
difference in advertisements
Advertising strategies
Sports cars
Dominant strategies
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Key differences: GM versus Toyota
Signaling as information
Often feature long stretches of the camera
showing the car
Lots of displays of car driving, turning, drifting
Emphasize speed, boldness
Generally Male demographic
Rarely involve a story
Sex appeal
Overall no discernable
difference in advertisements
Advertising strategies
Sedans
Dominant strategies
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Key differences: GM versus Toyota
Persuasive
Use humor and stories, featured families
Rarely comparative
Little focus on attributes
GM
• More emphasis on family unit
• Rarely used attributes
Toyota
• More celebrity and complementary
advertising
• Messaging is more fun
Advertising strategies
Luxury
Dominant strategies
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Key differences: GM versus Toyota
Complementary ads - Prestige
Usually not focused on attributes
Emphasis on music
GM (Cadillac)
• Involve actual people
• More celebrity advertising
• Focus on story-telling
Toyota (Lexus)
• Some comparative advertising
• Rarely show people
• Sometimes shows attributes
Advertising strategies
SUVs/CUVs
Dominant strategies
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Key differences: GM versus Toyota
2 divergent strategies:
o Focus on durability
o Capabilities for family and space
Humorous, light-hearted approach
GM (Chevrolet Equinox)
• Use of humor
Toyota (4Runner)
• Use of humor to tell the story
• Emphasis on outdoors (targeting)
• Focuses on durability and speed of car
Advertising strategies
Compact/Sub-Compact
Dominant strategies
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Key differences: GM versus Toyota
Focus on making car trendy
Raising awareness segment
Emphasizing on unique features such
as size, environmental benefits
City, affordability
GM (Chevrolet Cruze)
• Focus on the changing world, culture
Toyota (Corolla)
• Focus on innovative features (wifi)
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VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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Sex Appeal in Segment Advertising
Sex appeal is only used in the sports car segment
Family Centric Ads in Segment Advertising
Family-centric ads are most common with SUVs and Sedans
Complementary in Segment Advertising
Complementary ads are common, but vary among segments
Speed Attribute in Segment Advertising
The speed attribute is most emphasized in the sports car segment
Off-Road Driving in Segment Advertising
Showing off-road capabilities is most common with pickup trucks
Stories in Segment Advertising
Stories are most used in the Sedan segment
Humor in Segment Advertising
Humor is used in family-branded segments
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VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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Top Shows for Market Leaders
GM and Toyota advertise on complementary shows
Number of Ads by Manufacturer
Number of ads generally related to market share
Ad Expenditures by Manufacturer
Total ad expenditures are directly related to amount of ads
Average Length of Ad by Manufacturer
Length of ads are very standard
Cost per Ad by Manufacturer
Cost per ad is more standardized than gross expenditures
Network Breakdown by Manufacturer
GM and Toyota have very similar network breakdowns
Network Breakdown by Manufacturer
Ford and Fiat have very similar network breakdowns
Network Breakdown by Manufacturer
Hyundai and Honda have very similar network breakdowns
Monthly Breakdown by Manufacturer
Toyota takes a pulsating approach to advertising
Monthly Breakdown by Manufacturer
Ford and Fiat have similar monthly advertising breakdowns
Monthly Breakdown by Manufacturer
Hyundai and Honda have similar monthly advertising breakdowns
Number of Ads by Primetime Timeslot
All manufacturers have similar ad-timing distributions
Advertising to Sales Ratios by Manufacturer
Advertising to sales ratios vary throughout industry
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VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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The recall effect: what actually happens
Effect of recalls on reputation, brand loyalty, etc.
62M
the number of
cars recalled in
2014 alone1
Recalls are essentially ubiquitous among manufacturers
LIFETIME OF A RECALL2
FIRM REACTION
Problem
identified
1.
2.
Source: NYTimes.com
According to Souiden, et al. in “Product Recall Crisis Management”
EFFECTS OF REACTION
DENY
Strong negative effect on manufacturer’s image
INVOLUNTARY RECALL
No substantial effect
VOLUNTARY RECALL
Significant positive effect of voluntary recall
SUPER-EFFORT
Very large positive effect when actively improves
The recall effect cont.
Reputational considerations
2 Considerations
Good reputation as a DISADVANTAGE because of the
expectancy-violation effect
• If firm is originally perceived to be of lower quality,
then expectations will not dip as low after recall
Good reputation as an ADVANTAGE due to effects of
reputational inertia on ordering
• Firm is able to continue with strong sales due to
durability of brand
FINDING: Reputation is an organizational liability
and a firm with a better reputation will suffer a
greater penalty as a result of recalls
Expectancyviolation effect
1.
Source: “Liability of Good Reputation” by Organizational Science
Mitigating factors
SUBSTITUTABILITY
If there are few substitutes with equivalent reputation,
the effects of a negative market reaction are lessened
• Perceived risk of going to lesser quality brand and
finding alternatives is higher than chance of
subsequent recall with higher quality brand
GENERALISM/SPECIALISM
If there is a focused product identity stemming from a
specialization, quality is still perceived to be high
• Larger, more mainstream firms will suffer more
Good reputation can be disadvantage during a recall as expectations
for quality were higher, therefore the brand will have a significant,
relatively lower position in a consumer’s mind following a recall
Case Study – Social Media Analysis
Toyota is more active on twitter though GM has had an account for longer
Brand
Followers
406K
486K
Tweets
11.4K
14.5K
Case Study – Social Media Analysis
Toyota is more engaging on social media
Case Study – Social Media Analysis
Toyota is more adaptive and creative on Twitter
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Toyota includes more videos and
links
GM included only pictures
Toyota had several instances of
humor, while GM had none
Toyota’s “women in the world
campaign” resulted in many likes
and retweets
GM’s posts were more disjointed
Overall, GM is a more traditional
brand, with less of a presence
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VI
VII
Industry
Overview
Competitive
Pressures
Advertising
Strategies
Advertisement
Analysis
Raw Data
Analysis
Case Studies
Takeaways
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Manufacturing Sales Growth
Toyota is the only manufacturer to have seen growth in 2014
Family Centric Ads in Segment Advertising
Family-centric ads are most common with SUVs and Sedans
Takeaways
We recommend car manufacturers adopt Toyota’s targeted approach to advertising by launching social media campaigns,
which will promote customer engagement
Social-media focus
Mobile-friendly
Focus on product-specific attributes
Alternative-fuel and fuel-friendly
Younger demographics
QUESTIONS?