future automotive industry
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UGB 309 Critical Issues in Marketing
Alvin Chai Ming Han Page 1
EXECUTIVE SUMMARY
The marketing concept has been changed since 19th
century to 21st century. It is basically
changing from product base to social base. Marketing orientation can be used as an
implementation of marketing concept. The marketing orientation consists of production
orientation, product orientation, selling orientation, marketing orientation and societal marketing
orientation.
The background of the automotive has transform tremendously since it was created starting from
a wind driven vehicles to combustion engines and hybrid today. However in this assignment it
will be focusing in electrical vehicles. At the model and theory part, the six market model was
used to discuss how it applies into the electric sector.
Last but not least, it discuss about the future base on model and theory used. It also discusses
how it helps marketing manager understand and make informed decision making in the future in
terms of concept and approach.
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1.0 INTRODUCTION
What is marketing concept? Marketing concept defined as the marketing management
philosophy which holds that achieving organizational goals is very much depends on
determining the needs and wants of the target markets and delivering the desired satisfaction
more effectively and efficiently compare to the competitors do. (Kotler et al, 2005). To simplify
it, the philosophical idea underlying all marketing thought. (Blythe, 2006) The corporate success
will basically come from satisfying customer.
The evolution of the marketing (Appendix 5.0) has been changing since 19th
century to the early
of 21st century. The marketing started off with production oriented in the 19
th century where it
focuses on producing cheap. The demand at that particular period exceeds the numbers of supply.
When it move to the early of 20th
century, the marketing changed to sales oriented whereby they
practicing the philosophy of “Let sell as many as we can”. However, when it moves to the late
20th
century, it changed to marketing oriented. The reason of changing is because consumers are
getting more intelligent and more educated, therefore it is necessary to find out what exactly the
markets want. By knowing what exactly the markets want isn’t enough to capture consumers.
Therefore the marketing evolution today which is the 21st century has come to the relationship
oriented. The world has become extremely competitive out there. The number of supply is
exceeding the number of demand, therefore in order to attract customer, it is a must in building a
long term relationship with the customers.
In April 1990, Kohli and Jaworski (1990) have stated that marketing orientation can be used as
an implementation of marketing concept in his book title Journal of Marketing. Marketing
orientation can be defined as the organization-wide generation of market intelligence,
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dissemination of the intelligence across departments and organization-wide responsiveness to it".
(Kohli and Jaworski, 1990)
Marketing orientation can be separate into five different types of orientation. These are:
Production Orientation
Production Orientation is basically a general approaches to business that well focuses on
production base. Companies that focus on production orientation will tend to make its
operation more efficient due to the demand of producing in bulk. This orientation was
started in 1950s. Jean-Baptiste Say – a French businessman stated in Says Law suggested
that if a company able to produce good products, the demand will eventually rise
Product Orientation
Product Orientation exists when companies started to concern about product quality. In this
orientation, companies are more focus on the product quality together with the product
features.
Selling Orientation
Unlike production and products orientation, selling orientation is more focusing in selling
and promotion of a particular product. This orientation became popular after the World War
II as products were not selling as easy as they have been.
Marketing Orientation
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Marketing orientation is to define what customers want and follow by looking for an aim to
satisfy them. This orientation became popular when the world changed to supply more
demand.
Societal Marketing Orientation
Societal marketing orientation move into the world where companies address the needs
wants and desire of customers and then deliver the desired satisfaction to the customers
more efficient and effective than their competitors do. This orientation helps to build a solid
relationship with the customers and aiming for long term run.
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2.0 BACKGROUND OF AUTOMOTIVE INDUSTRY
The automotive industry is often thought as one of the most global of all industries. It is one of
the world's most important economic sectors by revenue. Automotive was not invented in a
single day and a single inventor. The history of the automotive shows the evolution that took
place around the world. The modern automotive was created with not less than 100,000 patents.
Nevertheless, it can be point to the many firsts that occurred along the way in the evolution of
automotive industry.
PAST
Back to 1335, Guido da Vigevano an Italian designs a wind driven vehicles. However, it
does not build. Later, Leonardo da Vinci evolve the wind driven vehicles to a clockwork
driven tricycle where it has a tiller steering and a differential mechanism between the two
rear wheels.
Later on, the automotive does not evolve much until 1678 where a steam powered vehicle
was built by a catholic priest named Father Ferdinand Verbiest. Nearly 100 years later, the
first vehicle to move under its own power was designed and constructed by Nicholas Joseph
Cugnot and M. Brezin respectively in 1769. The second unit of steam powered vehicle was
built the following year which it weighed 8000 pounds and having a top speed of 2 miles per
hour. Unfortunately, the early steam powered vehicle was too heavy that it only can practical
on a perfectly flat surface.
However, the first gasoline powered car was created by Charles E. and J. Frank Duryea, two
brothers in America in 1893. The evolution from gasoline powered car to petrol powered car
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took about 3 years which built by Eli Olds in 1896. On 1906, the Rolls Royce Silver Ghost
was a six cylinder car. It represented the most modern car on the particular period. This
period therefore marked the end of beginning of the automotive.
PRESENT
Automotive todays is not about traveling form a place to another. While the road and
technology improves tremendously, people expecting more on speed. They expected to go
much faster, comfortable and safety. Cars that produce by the early of 1930s majority are
able to meet those criteria. However, as time goes by, the speed that produces by a car is
good enough. But people are looking into more fashion as the world enters the year of
millennium. Therefore, engineer and designer todays are not only design on speed but also
into a more stylist look for an automotive.
FUTURE
In the future, the automotive industry will need to react to the new market requirement in a
quick, flexible and cost saving manner. There is much concern today about the air pollutants
that automotive has put into the atmosphere. Therefore, automotive differentiation in the
marketplace is very much depends on the electronic features. To remain competitive in the
competitive world, automakers should offer better features such as multiple airbags, comfort
control, hybrid system, electronic system and so on.
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3.0 SPECIFIC SECTOR
The future of the automotive sector is still quite open mainly it might be possible to move into 3
different sectors which either electric, hybrid or hydrogen fuel-cell vehicles. The following is the
more in depth information about the three different sectors.
3.1 ELECTRIC
Electric cars (Appendix 1.0) look exactly like gas-powered cars. What makes it different
is that electric car does not have a gas tank and a tail pipe. Instead of big engine that
trigger the car, all it has in an electric car is basically an electric motor and its controller.
There are three major types of electric motors in today’s electric car . These are DC
brushless, AC induction and the Permanent Magnet motor. Each types of electric motors
has its pro and con. The DC brushless will offer higher speed but low in acceleration. The
AC induction has better acceleration but average in top speed. The Permanent Magnet
Motor falls right between the two types of electric motors.
3.2 HYBRID
Hybrid (Appendix 2.0) cars are one of the most symbolic and popular symbols of “Go
Green”. These vehicles continue the functionality of traditional internal combustion
engines and then combine it with a battery-powered electric motor. The reason of adding
the battery-powered electric motor is to takes some of the works off from the combustion
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engines. By taking off the works of the combustion engines, hybrid cars often consider as
a fuel saving car.
The on board batteries of hybrid cars are recharged by capturing the kinetic energy that
generated while using the brake. However, some of the hybrid cars use its combustion
engine to generate electricity by spinning the electrical generator. This electrical
generator will either recharge the battery or directly feed the power to the electric motor
that powers the vehicles.
3.3 HYDROGEN FUEL-CELL VEHICLES
A fuel cell vehicle (Appendix 3.0) is powered by hydrogen. This type of vehicles is
using a completely different propulsion system than the conventional vehicles. Unlike the
conventional vehicles, the hydrogen fuel cell vehicle does not omit harmful emissions.
Fuel cell vehicles use electricity to power motors that located at the vehicle’s wheel. This
type of vehicle will produce its primary electricity by using a fuel cell powered by
hydrogen. Polymer electrolyte membrane (PEM) is the type of fuel cell that most
commonly use in fuel cell vehicle.
The fuel cell vehicle is built in such a way that the electrolyte membrane is sandwiched
by a positive electrode and a negative electrode. Both side of electrode call cathode and
anode respectively. Normally, hydrogen will be introduced to the anode side while
oxygen will be on the other end – cathode. The hydrogen molecules that travel through
the membrane produced the electrons. The flow of the electrons through the external
circuit forms the electrical that needed to power up a fuel cell vehicle.
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The sectors that should be focus in the future will be the electrical sector. The reason that
electrical will be the key sectors in the future is that it come out the top compare to the hybrid
and hydrogen fuel cell vehicle.
The electrical vehicle has its advantage in energy efficient. An electrical vehicle is able to
convert 59 to 62% of electrical energy to conventional vehicle that only able to convert 17 to 21%
of energy. Besides that, electrical vehicle do have its advantage in environmental friendly. It
does not emit tailpipe pollutants compare to hybrid car yet still having half of the part of
combustion engines that need gasoline to generate. The advantage in environmental friendly
indirectly benefit to the society as the air pollutant has cause society living in a very sick
environment
While in the marketing concept, product orientation will be much more suitable in the electrical
sector. Product orientation is concerning about product quality and its features. Although there is
advantages of electrical vehicle but there is the disadvantages as well such as the driving range of
the vehicles. Most of the electrical vehicles can only run for 100 to 200 miles before recharging
where gasoline vehicle can run more than 300 miles before refueling. On the other hand, the
recharging time to fully charge will need to cost 4 to 8 hours. Therefore, the quality of the
vehicles should improve. It should extend its capability to run long stint before recharging.
Besides that, the features of recharging should improve in order to lower down the recharging
time and yet able to increase the capacity of electrical storage.
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4.0 MODEL AND THEORY
The key theoretical marketing model to the electric sector is the six markets model (Appendix
4.0). This framework identifies the six key market domains to help organizations direct its
marketing activities and where the development of detailed marketing strategies may be needed.
The six key market domains are
Customer Markets
Customer Markets are at the center of the six markets framework. It is because that
customer is the prime focus area in marketing activity. However, marketing activities
should not focus much on transactional marketing. It has to be building long-term
customer relationships. While winning a new customer, it should be keeping that
customer as the existing customer are much easier to sell and frequently more profitable.
Referral Markets
Referral markets are the best form of marketing. It is a best marketing that done by the
organization’s customer. It show how crucial is the customer loyalty and how important
it is to be to the organization.
Suppliers Markets
Organizations’ relationship with the suppliers seems to have changed. In the traditional
relationshi ps, organizations’ often squeeze its advantages to its own side. The new
relationship is to aim at close co-operation between customer and supplier starting from
the very early stage, mutual concentration on quality, commitment to flexibility, lowest
costs and long term relationships.
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Recruitment Markets
The most scarce resource for an organization no long capital or raw material - It is
skilled people for the organization. Skilled people is vital, perhaps the most vital element
in customer service delivery.
Influence Markets
Influence markets cover a range of markets. This influence markets tend to be vary
according to the type of the industry or industry sector that an organization is in. To
make it simple, the involvement in other activities may be crucial in protecting the core
business.
Internal Markets
The internal markets can be separable into two aspects. The first aspect is the idea of
every employee and every department in the organization is both an internal customer
and internal supplier. The goal is to ensure that the organization is on 100% effort by
providing and receiving excellence service from every individual and every department.
The second aspect is to ensure all working staff work together that is aligned with the
organization’s stated mission and vision. Internal marketing is an important activity in
developing a customer focused organization because it concerned with communications
and responsibility.
The six marketing model is very much important in electrical vehicle sector. In the customer
markets, the electric vehicle industry not only has to look for new customer but also need put in
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effort in keeping their customer. It is because the existing customer will be much easier in
generate profitability by providing repeating sale.
While in the referral markets, the viral marketing is crucial to the electric vehicle industry. It
helps the industry to market for free. Usually viral marketing majority was done by the loyal
customers that are happy and satisfy with the product. Therefore, it is important to keep the
existing customer that the organization do not wanted to lose its customer while working so hard
to gain a new customer.
In this 21st century, the relationship with the supplier is important. The demand has exceeded the
supplier. Therefore, it no longer likes tradition relationship where each party fights hard to gain
as much as they can. In this century, people are looking for win-win situation. The electric sector
is very much demanding in quality, a strong relationship with the supplier will definitely able to
gain a good piece of quality material. Besides that, a strong relationship with the supplier will
able to trigger flexibility in credit terms and have the power to negotiate to the lowest price.
Recruitment markets are important to the internal part of the electric sector as it involve a lot of
complicated and skillful problem. A skillful people will definitely able to bring the sector to
another height by innovate much more features in the future.
Besides recruitment markets able to bring the sector to another height, the influence markets can
does the same to lead the sector to another level. Being an electric sector, information technology
should be a field that should keep addressed.
The internal market is the key player within the sectors. Automotive industry is huge and it is
separate into different department that each department has its own duty. Although the employee
has its own duty, but built relationship with another department is important. It is because the
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departments are working together and its link. The process of producing an electric vehicle is
from a department to another. Therefore, it is important that internal market relationship remain
strong.
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5.0 CONCLUSION
As a conclusion, the six marketing model illustrate how organizations have a network of
relationship with different market. The customer market is place at the center of the other five
markets is because it is the most important after all. Without customer organization will not have
profit. In the future, the manager should implement loyalty bonus reward to the existing
customer in order to keeping them and be loyal to the organization. Besides that, referral bonus
should be reward to the loyal customer due to its effort in marketing the product. While the
automotive electric sectors should be focusing in product orientation, the relationship with the
suppliers is crucial. If the suppliers can provide materials that are quality, a strong relationship is
crucial. It is because that the automotive electric sector does need quality material to produce a
good product. The industry does not want to lose good suppliers. If a supplier provides bad
quality material and the industry produce a bad product, it surely will lose the customer market.
The relationship with the suppliers can strengthen by paying on time whenever there is a bill to
the supplier. On the other hand the recruitment market, marketing manager should provide
internship program for several engineering institution. This will allow the automotive electric
sector to haunt for skillful people. As the student graduated from the institution, the industry can
capture the student into the sector. Whereas in the influence market, marketing manager should
look into which activities involvement will able to protect the core business of the industry. For
instance, the automotive industry that focuses in electric sector should join the automotive show
that held once a year. Last but not least the internal markets. The relationship within the
organization should be strong and solid. Without motivation, the employee will not perform to
their potential. When the morale of the employee in the industry is low, the quality of the
outcome of the product will not be satisfying. Therefore, it is crucial to acknowledge the
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employee about the goal of the industry. Besides that, in order to keep their motivation high, the
industry should hold a motivation camp to boost up relationship of the employee that from
different department of the industry. With a healthy relationship, the way of working will be
much more efficient and effective.
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6.0 APPENDIX
Appendix 1.0
Appendix 2.0
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Appendix 3.0
Appendix 4.0
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Appendix 5.0
Product based approach
Least cost production Paradigm
Sellers’ market
Relationship based approach
Market led Paradigm Buyers’ market
1946 2000
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7.0 REFERENCES
Kholi, A. and Jaworski, B. (1990) The Journal Of Marketing . p.1 - 18.
Oracle Education Foundation (n.d.) How They Work . [online] Available at:
http://library.thinkquest.org/20463/howtheywork.html [Accessed: 29 April 2013].
Professor Adrian, P. (1993) Relationship Marketing. The Six Marketing Framework , p.4
- 14. Available at:
https://dspace.lib.cranfield.ac.uk/bitstream/1826/2910/1/SWP%252035-93.PDF
[Accessed: 28 April 2013].
Susan, H. (2003) Marketing Changes. Torquay: Thomsom, p.101.
Treehuger (2007) Hybrid-Electric Cars: How They Work, Battery Technology and More.
[online] Available at: http://www.treehugger.com/cars/hybrid-electric-cars-how-they-
work-battery-technology-and-more/page2.html [Accessed: 28 April 2013].
U.S Department of Energy (2013) Hydrogen Fuel Cell Vehicles. [online] Available at:
http://www.afdc.energy.gov/vehicles/fuel_cell.html [Accessed: 28 April 2013].
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