Suzuki Case Study Essay Example for Free

Suzuki Case Study Essay This analysis provides the background, SWOT analysis and different marketing alternatives such as positioning the vehicle as a car, compact truck or sports utility vehicle. Later the recommendation is made on which marketing strategies are suitable for the success of the Suzuki Samurai in US market. The analysis has also highlighted in detail the pros and cons of the â€Å"unpositioning† that we propose versus three options of positioning that were considered earlier. We have also evaluated the strength of the marketing research done by Pearlstein in terms of ensuring market of success in US market. In this analysis, there is also the recommendation on how the $2. 5 Million six-month adverting budget should be spent in accordance to the positioning strategy chosen. 2. 0 Situation Analysis 2. 1 The company 2. 1. 1 Company Background Starting business in 1909 as Suzuki Loom Works, the firm was incorporated in 1920 and was to produce textile looms that would surpass the innovation and quality of other competitors. Since foundation Hamamatsu, Japan, SUZUKI has steadily grown and expanded. In 1952, Suzuki created a new type of motor vehicle, a motorized bicycle call the â€Å"Power Free†. This motorized bicycle featured a 36cc two-stroke engine with a double sprocket gear system that enabled the rider to pedal with the engine assisting, pedal without the engine assisting. Suzuki’s first mass produced car in 1955, the Suzulight, was a technical marvel. It included radical innovations for the time such as front-wheel drive, four-wheel suspension, and rack-and-pinion steering. In 1963, Suzuki brings its innovation motorcycle line-up to the U. S. A fast growing line enables them quickly to become a major player in the motorcycle market. Suzuki takes the lead in the all-terrain vehicle market in 1983 by introducing the first four-wheeled ATV. In 1985, Suzuki introduces its automotive line to the U. S, with the arrival of the Samurai. SJ 413 as an upgraded model of SJ410 and designed especially for US market. Today, constantly going forward to meet changing lifestyles, the SUZUKI name is seen on a full range of motorcycles, automobiles, outboard motors and related products such as generators and motorized wheelchairs. The mark trademark is recognized by people throughout the world as a brand of quality products that offer both reliability and originality. More than 45,000 Suzuki people worldwide now create and distribute their work in over 120 countries. Worldwide Suzuki Automotive sales now reach over 2 million each year, surpassing the sales of many other renowned companies such as BMW, Mercedes and Saab. Additionally more than 2. 5 million motorcycles and ATVs are sold each year. Sales of the Suzukis outboard motors also continue to grow. SUZUKI stands behind this global symbol with a sure determination to maintain this confidence in the future as well, never stopping in creating quality products. 2. 2 Product of Suzuki Samurai The Suzuki Samurai was introduced to the U. S. market in November 1985. It appealed to younger consumers with its inexpensive and fun-oriented positioning. This marketing strategy was successful, since over 160,000 Samurais were sold in just three years. The Suzuki Samurai was introduced as an inexpensive multi-purpose sport/utility vehicle. These vehicles were light pickup trucks with back seats, an extended roof, and part-time four-wheel drive intended for use on snow, ice, mud, or off-road driving. Sport/utility vehicles do not have to conform to the same safety regulations that apply to passenger cars. 2. 3 Positioning According to Douglas Mazza, he wanted a fresh approach for his company’s new products, he assigned advertising task to an agency which had no experience in developing campaign for automobiles. The advertising agency found out that the industry practice was to position vehicles according their physical characteristics. They also found out that most advertising was feature/benefit or price oriented. Based on its physical characteristics, the major three positioning for Samurai SJ413 were position as a compact sport utility vehicle, as a compact pickup truck and as a subcompact car, so it should be advertised as a â€Å"tough ittle cheap jeep†. Moreover, the samurai’s size and price distinguished it from all other sport utility vehicles sold in the U. S in 1985. The Samurai was smaller and lighter than the other vehicles, and its $5995 suggested retail price was well below the other vehicles’ $10,000 to $13,000 price range. 2. 4 SWOT Summary 2. 4. 1 Strengths : Suzuki Company followed selective distribution strategy, which allowed the company to achieve higher profitability, dealer loyalty, greater sales support and also higher degree of control over the retail market. Also, their pricing strategy was to sell high volume with low profit margin, which helped company to gain market response for its high quality with low price advantage. Suzuki Samurai has been positioned as a compact sport utility vehicle, a compact pickup truck and a subcompact car. This positioning would be good to place their brand in the particular part of the market where it would receive reception compared to competing products. It also well explained Samurai’s physical characteristics. 2. 4. 2 Weaknesses: Suzuki Samurai set their very low price, which meant it will came up with very low profit margin. The planned dealer invoice rice was $5095, only 7. 5%higher than ASMC’s own landed cost for the vehicle. And they planned to limit the number of samurai dealers, so each dealer might be stressed on as they needed to sell approximately 30 Samurai per month to cover its costs. Samurai was positioned as a sport utility vehicle; however, the market for sport utility vehicle was relatively small. In 1984, it was les than 3% in the U. S market. And it was positioned as a subcompact car, then it might not meet the expectations of the consumers because the Samurai was built on a truck platform, its ride was stiffer and less comfortable than the least-expensive subcompact cars. On the other side, if other consumers start to use it as subcompact car or pick up truck, it will lose its brand image. Thus it might lose potential market, bring trouble for the sales people and increase market confusion among customers. 2. 4. 3 Opportunities: Suzuki Samurai should be unpositioned in the market to get the opportunity to target the entire potential consumers segment. The unpositioned Suzuki Samurai will appeal the users of sports utility vehicles, pick up truck and subcompact cars. That ensures higher consumer acceptance and consumer satisfaction by offering a car for various needs. It would also increase sales and thus add large profit to the company’s income statement by targeting a large customer segments. The unpositioning strategy is better combined with company’s goal that is to establish ASMC as a major car company in the U. S market. The low price of the Samurai can be used as a strategy to impress consumers and to capture great share of the market. And this low price and also encouraged dealership investment in which expanded and increased sales. There will be a good opportunity for Samurai if can build a strong brand image among the potential customers such as some TV advertisement or promotion, in which creating and increasing buyer awareness of the car influencing buyer attitude toward the Suzuki Samurai. 2. 4. 4 Treats: Suzuki Samurai will bring some treats to its competitors if offering a car with different purpose. The broader appeal of the car can reduce sales of its competitors’ who are in the same industry. In addition, it will quite risky for Samurai’s sales if Suzuki overdefine the vehicle, because a product should broad enough to attract a wide range of consumers and meet consumers with different needs. 2. 5 Historical Results According to Appendix 6. 1, in 1984, there were approximately 25100 Japanese vehicles sole among the total of 424810 sport utility cars in U. S market, which was only 5. 9% of the market share. And Suzuki Samurai only had 8. 4% to the Japanese imported cars in the U. S market. In another words, Samurai did not have much market share compared with other Japanese competitors in the U. S automobile industry. In 1985, Samurai has decreased to 4. 6% market share among the Japanese car industry, and only 0. 46% market share of the whole compact sport utility vehicle in the U. S market. However, as compact pickup trucks and subcompact cars, it did not shown any Samurai products in which meant the sales could be very low and unsuccessful during the year of 1984 and 1985. 3. 0 The Market 3. 1 Background Since the introduction of its first production car, the â€Å"Suzulight†, in 1961, Suzuki had sold cars and trucks only in Japan until 1979. It took Suzuki only 5 years to export and distribute its automobiles into more than 100 countries including Hawaii (US). As a global firm, Suzuki captured and maintained its production and R ; D momentum to succeed in international marketing. Aiming at opening the continental US Market, Suzuki Samurai, designed with the US market specifically in mind, was introduced in 1985 in order to establish Suzuki’s brand presence in the United States. 3. 2 Market Entry 3. 2. 1 Exporting Before projecting the Samurai, Suzuki had cooperated with General Motors on a model named under GM as Chevrolet Sprint. Exporting Japanese cars to the US was subject to voluntary restraint agreement (VRA). In 1984, Suzuki’s total VRA quota of 17,000 cars went to GM as Sprints and Sprint’s distribution was limited to its West Coast dealers. GM’s success with Sprint showed Suzuki that a market existed for its cars in the continental United States. 3. 2. 2 Joint Venture – Suzuki + GM (Production in Canada) Japan’s VRA quotas made it impossible for Suzuki to export any cars other than the Sprint to the United States in the foreseeable future. In 1985, Suzuki and GM began negotiations with the Canadian government to build a plant in Ontario producing approximately 200,000 subcompact cars per year. This initiative could help launching more Suzuki automobiles into the US market under its own name by early 1989. 3. 3 Direct Investment – ASMC Market share of Japanese imports in the U. S. automobile market and the overall automobile industry in the US surged during 1984 – 1985. Facing the upcoming entries of other overseas brands, Suzuki was unwilling to wait until 1989 to introduce the Suzuki name into the continental United States. With SJ413 (Samurai), Suzuki had the right product for the market whereas the continental United States was a piece of new land – a dealer network needed to be established, since there was no guarantee that GM would market any Suzuki vehicles other than the Sprint in the US market. Customs clearance issue was solved by exporting SJ413 without a back seat, under which circumstance the vehicle was classified as a truck by the US government. Trucks were not subject to Japanese VRA quotas; instead, they were subject to a 25% tariff, much higher than that on cars (2. 5%). Suzuki management was convinced that the time was right to enter the continental US market and believed the high tariff was worth paying. American Suzuki Motor Corporation (ASMC) was established for the development of a Suzuki dealer network in the United States. 4. 0 Marketing Strategy Analysis 4. 1Entry Strategy The market strategy used by Suzuki varies in accordance to the nature of the Market. This can be evidenced by looking at the strategy used in entering Canadian Market and the entry strategies used in the US market which in some way varied in different times. In Canada the entry strategy was a joint venture which also involved opening the manufacturing company in Canada. In US, the first strategy was to export the Suzuki Samurai manufactured in Japan to the US market meanwhile the later strategy was to export Suzuki Samurai from Canada under its own name, American Suzuki motor Corporation (ASMC) which would keep them competitive in the automotive industry. 4. 2 Distribution Strategy The ASMC under Mazza formulated a strategy to ensure the company achieves its goal of being a major car company in the US. The strategy was: †¢To build exclusive sales facilities for the Samurai which would include showroom, sales office, customer waiting and accessories display area. †¢A minimum of two service stalls dedicated to Suzuki and operated by Suzuki trained mechanics for service and parts. †¢A minimum of three sales people, two service technicians, one general manager and one general office clerk dedicated to the Suzuki dealership. †¢In the long run, with the growth of the product line dealer requirements would expand to include a full, exclusive facility complete with attached parts and services. Limit the number of Samurai dealer network to 47 so that ASMC could guarantee the minimum supply of 37 units per month to enable the dealer to breakeven and earn some profit. Assumption: Dealer has to sell 30 cars per month to breakeven. -If the dealer sells all allocated 37 cars in a month he will be expected to earn a monthly profit of $6300 (See Appendix 1) 4. 3 Pricing Strate gy ASMC’s pricing policy was to sell the basic Samurai at a retail price of $5995 and a dealer price of $5095 which was only 7. 5% higher than ASMC landed cost. The contribution expected by ASMC from each unit sold was $382 (See Appendix 6. ). The ASMC pricing strategy was to sell its high quality product at a competitive price of $5995 which was far below competitors’ price ranging from $10,000 to $13,000. This strategy would enable the company to sell higher volume at considerably low margin. 4. 4 Promotion and Advertising Strategy 4. 4. 1 Product and Positioning Strategy Samurai was planned to be poisoned in the market in three different categories based on its physical characteristics. It could be either, a compact sport utility vehicle (SUV), a compact pickup truck or a subcompact car. See the figure below: Table 4. 4. 1: Market Share 19841985 Ratio of Suzuki to Total Japanese cars import in US8. 5%4. 6% Ratio of Suzuki to Compact Sport Utility Vehicles0. 5%0. 5% Note: The Suzuki sales were only for Hawaii excluding the grey market in Florida and other markets in Puerto Rico, Guam, the US Virginia Islands and Panama. Douglas Mazza wanted a fresh approach for his companys new product so he gave the responsibility to keye/ donna/ pearlstein advertising agency, which had no experience in developing campaign for automobiles. After accepting he offer, Pearlstein and his associates scanned the industry practice for automobile advertising. They found out that the industry practice was to position vehicles according their physical characteristics. They also found out that best advertising strategy was to base on either its feature, benefit or price. It was from physical characteristics that they positioned Suzuki Samurai as a compact sport utility vehicle (SUV), a compact pickup truck or a subcompact car.