giulio neri - marketing assignment

7/29/2019 Giulio Neri - Marketing Assignment

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Piaggio S.p.A.

International Marketing Plan

For China

Professor Name: Georges Knell

Course: LSBF-GGSB MBA (4)

Module: International Marketing

Student Name: Giulio Neri

Student ID: A4006942

Date: 20/3/2008


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International Marketing

Giulio Neri - A4006942GGSB MBA LONDON (4)

2

Executive Summary

Piaggio is a world-class manufacturer of high quality designer scooters and commercial

light vehicles. Piaggio international expansion enjoyed outstanding results in Europe and

North America, however Piaggio has not yet significantly entered the exciting Chinese

market. This report shows that if Piaggio Group wants to succeed in China, it needs to

commit to a very aggressive marketing strategy, requiring a funding of 19m in the first

year alone. The report focuses on the contextual analysis for such an ambitious project

and it demonstrates that in the medium term Piaggio could achieve an outstanding 5%

market share, which is the equivalent of 60% of the current worldwide output for the

group.

Introduction

The Piaggio Group is a world-class manufacturer of scooters and light-weight vehicles for

personal and business use. The brand Piaggio is known worldwide for the legendary

Vespa model, introduced in 1940 in Italy and now becoming a recognized icon of

easygoing lifestyle with a touch of class while providing young business men and women

a convenient way to commute in the busy financial districts of

the city.

In April 2004 Piaggio Group started a joint venture in China with

Zongshen Industrial Group which is providing facilities for the

production of scooters and engines for Piaggio worldwide

market and a distribution channel into China.


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3

Situation Analysis

Macro Economical Environment - PESTEL

Political

Recently China has made extraordinary efforts in modernizing legal and economical

system aimed to stabilize the growth of the country; however China remains a strictly

controlled country, where civil liberties, such as freedom of communication, religion

practice and demonstration are severely limited. Major internal problems in China include

growing corruption, increasing rural poverty and environmental degradation. China

enjoys a strong relationship with the US and other western countries and is likely to

increase its influence in the region due to its expanding economy. China has difficult

relations with a number of neighbouring countries, such as Japan, Vietnam, North Korea

and Tibet; in particular the strained relationship with Taiwan could ultimately result is a

war if the Taiwanese government formally declares independence.

Economical

China economy is characterized by its extraordinary size and growth. The GDP has

grown steadily since 2003 peaking at 11% year-on-year growth in 2007 (China Business

Forecast Report 2008, [7]) and inducing concerns about the country over-capacity in the

long term.

The US government is trying to exercise its

influence to accelerate the appreciation of the Yuan,

in an effort to limit or at least control its export

deficit.

Although the Peoples Bank of China has raised the

Sustained Strong Growthreal GDP Growth (%)


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interest rates for five consecutive times in 2007, inflation is still very high with peaks of

6.2% in 2007.

Economic growth is still mainly driven by fixed asset investment and exports; however

there has been a noticeable increase of private consumption.

Social

China has the largest population in the world, 1.3 billion people increasing of about 7.8

million people every year. Research based on forecast data from the Department of

Economic and Social Affairs of the United Nations Secretariat (http://esa.un.org) shows

that the number of people with age between 20 and 39, which represent the target

customers for Piaggio scooters, is going to settle in the next 10 years around 400

millions (30% of the total population). 48%

of the population in the target age group are

female and although the gender equality has

been in the past years a priority for the

Chinese government, women still experience

a significant status and income disparity. In

average women with a university degree can

earn as little as 75% of the salary of males

with equivalent skills. Finally it should be

noted that in China title and status are very

important, as well as punctuality both

professionally and socially.

Percentage Of Population Aged 20 To 39

0%

10%

20%

30%

40%

50%

60%

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

China Italy United Kingdom

Population Forecast in China (millions) - Target Age Group (20-39)

0

50

100

150

200

250

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

Male Female

Data Source: Population Division of the Department of Economic and Social Affairs of the United Nations

Secretariat, World Population Prospects: http://esa.un.org/unpp, accessed on March 03, 2008.


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Technological

China has developed a number of industrial

centres where transport, telecommunications and

energy infrastructures are widely available. China

has also demonstrated a widespread adoption of

new technologies, for example mobile phone

subscriptions has sharply increased to 461

million, compared to the 368 million land lines (CIA world factbook, 2008, [9]). The

number of internet users has also peaked in 2007 to 162 million thanks to a

comprehensive broadband network infrastructure based on submarine trunks, fibre-optic

cables and satellite links, making China the third largest internet community after the

European Union with 247 million and the US with 208 million. Although comparable in

terms of population, China has got almost 3 times more internet users than India (60m).

Environmental

The environmental policy is becoming one of the most critical issues for the Chinese

government, which is investing $175 billion over the next five years for environmental

improvements. In fact the current ecological degradation, due to rapid industrial growth

of the country, is posing a long term threat for China in terms of economic growth and

more generally in terms of international relationships. Due to the heavy dependence on

coal and to the increasing energy demand, the air is heavily polluted, resulting in acid

rain and water reserves contamination. China is currently the world second largest

producer of carbon monoxide.

Mobile Phone Penetration (%)


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6

Legal

The Chinese legal framework is a source of uncertainty for international investors; in fact

laws remain subject to a certain degree of interpretation, mainly because of weak

wording and inconsistencies between local and national regulations (BMI 2008, [7] and

Countrywatch.com 2008, [8]). The judiciary system lacks independence, judges are

frequently corrupted and torture or other forms of mistreatment are often used to obtain

confessions.

The government has recently overhauled the anti-monopoly and competition laws,

incorporating elements derived from the European Commission, the US and other

developed countries. Anti-Monopoly Law covers the definition of Intellectual Property

and the boundary between protecting IPs and abusing dominant market position. Nathan

Bush (2008, [10]) describes the concerns about the enforcement of the new regulation

which may disproportionately target foreign firms and their Intellectual Property.


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7

Micro Economical Environment

Michael Porter 5 forces

Michael Porter 5 forces analysis provides a

comprehensive methodology to identify the nature of

the competitive relations within an industry. Michael

Porter (2008, [2]) indicates that the analysis of

competitive forces should not be limited to the

competitive rivalry, in fact pressure from buyers and

customers, as well as threats of new entrants and

substitutes may have an equivalent impact on the

underlying profitability of an industry.

Bargaining power of customers: (high). The buyer group is relatively price

sensitive because of low income: customers may bargain and compare other

offers available in the market before purchasing and the current offering does not

include fundamentally differentiated products.

Bargaining power of suppliers: (low). China offers low labour cost and a

large variety of suppliers for the materials and parts required. Piaggio also has an

existing Joint Venture agreement with Foshan, providing manufacturing facilities

and machinery.

Threat of new entrants: (low). Piaggio and other main competitors which

operate globally benefit from economics of scale which represent a high entry

barrier for new entrants. In order to be competitive in China a new entrant is also

Michael Porter (2008, [2]). The Five Competitive Forces That

Shape Strategy.


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likely to require local manufacturing facilities which represent a high level of

involvement in terms of both time and resources.

Threat of substitutes: (high). The government, as part of the environmental

programme, may carry out improvements in the public transport and create

urban cycle routes available only to electric bicycles and mopeds. Some major

city centres in China have already banned motor scooters over safety and

environmental concerns.

Competitive rivalry: (high). The motorcycle offered by different competitors in

China are quite similar to each other, therefore the competition is mainly based

on price producing the strongest pressure. The size of the market is also drawing

the attention of many competitors.

Kenichi Ohmae 3C model

Kenichi Ohmae defines 3 dimensions to analyze the micro environment:

Company: Piaggio is a specialized company, which produces high quality motorcycles

with superior and innovative design. The company has proven able to respond quickly to

changes in customer demand and market trends. Piaggio enjoys a solid financial

position, with an increase of sales of 10.9% and a turnover of 1.6 billion Euros. Piaggio

invested more than Euro 15m on R&D for the leading brands Piaggio, Vespa and

Aprilia. Finally Piaggio has already established a significant presence in China with the

joint venture Piaggio-Foshan, with a production capacity of 200K units per year


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Customers: The main Customers for Piaggio in the 2-wheel market are young business

men and women who want to commute in style and safety. Potentially the customer

base could be expanded to government

and large corporate customers in China,

following the example of Italy, where

Piaggio entered an agreement with the

Italian post office for the supply of 36m

in scooters in 2006.

Competitors: The following table summarizes the market share for the main

competitors of Piaggio worldwide and in China.

Company US (2004) EU (2007) China (2007)

Yamaha 35.2% 12.4%

Honda 34.4% 16.0%

Piaggio 19.9% 13.0%


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Product Life Cycle

Piaggio in China sells mainly products which have already reached a late maturity or

decline stage such as the Vespa GTS-250 and the LX150 models, which have proven to

be top seller products in Europe and other markets in 2006. Several new models have

been introduced in Europe in 2006 (such as Vespa-S and LXV series), however such

models are not yet available for the Chinese market. Vespa is an expensive product and

the target consumer group tends to be more demanding: in order for Piaggio to be

appealing in China it is essential that new products are introduced earlier into the

market.


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BCG Matrix

The Boston Consulting Group (BCG) matrix provides information about the product

lifecycle derived from the analysis of business growth and market share.

Currently Piaggio has a minimal market share in China and the market is predicted to

grow considerably in the next few years. The BCG matrix suggests investing either to

gain a dominant market position or to become a cash cow.

High

Low

High Low

BUSINESSGROWTH

MARKET SHARE

??


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MARKET ATTRACTIVENESS COMPETITIVE POSITION

Market size: $4 billions (high)

Market Growth: 8% (high)

Environmental impact: uncertainties(low)

Market share: insignificant

Quality of product: better thancompetitors, superior design

Distribution channel: not developed

Overall ranking: high Overall ranking: low to medium

GE Business Screen

The GE Business screen provides an alternative method to analyze the market position of

Piaggio and it is specifically designed for brands as opposed to the BGC matrix which is

mostly suitable for commodities. In particular with the GE business screen the

measurement of both market attractiveness and competitive position can be subject to a

number of criteria.

High

Medium

MARKETATTRAC

TIVENESS

Low

Strong Medium Low

COMPETITIVE POSITIONEarn Selectively

Invest - Grow

Harvest - Divest


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The GE business screen analysis shows that the most suitable strategy for Piaggio is to

invest and grow in the Chinese market, focusing on improving its competitive advantage

to increase its market share.

SWOT Analysis

The most important elements derived from the macro and micro environment analysis

can be summarized in a SWOT matrix. Strengthsand Weaknessesare variables over

which Piaggio has some level of control, whereas the Opportunitiesand Threatsdepend

only on external factors typical of the Chinese environment.

Strengths

Well Known Brand Major market share in western

markets

Superior, innovative design

World-class, specialized andadaptable company

Existing manufacturing facility inChina

Weaknesses

Non Differentiated Product inChina

Electric / Green models notavailable

Insignificant market share inChina

Products introduced towards theend of their lifecycle

Opportunities Sustained growth of economy

Large customer base in target agegroup

Growing wealth

Relative political stability

Threats Government priority to improve

environmental conditions andcarbon emissions

Possible ban for scooters in largecities over pollution and safetyconcerns

Still low wages especially forwomen

Some uncertainties on the futureeconomic growth (credit crisis,

high inflation and necessity tocontrol output)


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International Marketing Strategy

Objectives

From a marketing perspective Piaggios objectives for the expansion into the Chinese

market are:

Increase the volume of sales to 200,000 units within 2 years

Increase market share to 5% within 5 years, corresponding to 400,000 units per

year

Increase brand awareness to 30% in terms of brand recognition, based on

pictures of vespa scooters in one year. Within those who recognize the brand,

achieve 80% of brand association with high quality, luxury product.

Brand awareness increase to 50% in 5 years.

Entry Strategy

Piaggio has already established a Joint Venture with the

conglomerate Zongshen Industrial Group in China. The JV, named

Piaggio Foshan Motorcycle Company, is owned 45% by Piaggio,

45% by Zongshen and the remaining 10% by a local government

authority. The joint venture uses Piaggio technology and design

together with Zongshen industrial plants and local expertise to

produce scooters and motorcycle engines, which are sold

worldwide by Piaggio. The JV sells its products in China on a co-

branding basis using the Zongshen distribution channels.

Data from Piaggio Group annual

report (2006, [16])


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Technology

Brand

Design

Generic Strategy

Michael Porter (1980, [3]) defines three alternative strategies that form a consistent

framework for successful marketing plans:

Cost leadership: Although having the lowest cost base can compensate strong

competitive forces, it requires cuts to R&D budgets and reduction in the

perceived quality of the product, which directly impacts Piaggio competitive

advantage.

Differentiation: is the most suitable strategy for Piaggios expansion in China,

as it specifically resists the competitive forces characteristic of the Chinese

motorcycle industry. In particular differentiation reduces the price sensitivity of

customers and consequently their bargaining power whilst

easing the competitive rivalry resulting from the existing

price-based competition. Differentiation for Piaggio will be

achieved in three dimensions: design, brand image and

technology.

Focus: this strategy aims to achieve excellence by concerntrating the entire

organization efforts to one specific customer group or product range. It includes

elements of differentiation, within the specific customer or product segment, as

well as cost leadership, which cannot be achieved by Piaggio in China due to the

market share and overall level of involvement of the main competitors, in

particular Suzuki.


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Growth strategy

The growth strategy for Piaggio in China is summarized by the Ansoff matrix as follows:

PRODUCTS

EXISTING NEW

EXISTING

Market Penetration

B2B Marketing: government,distribution and postal service

companies

Product Development

Green Vespa: Electrical /Hybrid low-emission model

MAR

KET

NEW

Market Development

Pink Vespa: target professionalwomen

Diversification

Sale of apparel and otherscooter accessories

As described by Vella (2006, [14]) Piaggio is already working on a new eco-friendly

Vespa, using a hybrid combustion/electrical engine, however the timing for the

development are still uncertain.

Pink Vespa is an initiative to develop a special packaging for the vespa scooter, in

terms of colour combination and accessories, to target Chinese women, which represent

almost 50% of the target consumer group. The price of the Pink Vespa should be

adjusted to compensate the lower income of women in China, creating a particularly

attractive offer.


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Segmentation

According to Kotler et al. (2002, [1]) there is no single way to segment a market. I

particular for the expansion of Piaggio in China a specific combination of geographic,

demographic, psychographic and behavioural factors should be considered, including:

Geographic: city size and density (dense urban, urban, suburban and rural)

Demographic: age, gender, income and occupation

Psychographic: social class and personality (compulsive, gregarious,

authoritarian, ambitious)

Behavioural: purchase occasion, benefit sought, user status (non-user,

potential user, first-time user, ex-user, regular user).

Targeting

There are three main approaches for selecting the target market from the different

segments identified using the specific segmentation criteria.

Undifferentiated marketing, extending the product offering and the

marketing mix to all market segments

Differentiated marketing, inwhich different market segments are targeted

using different marketing mixes and offers

Concentrated marketing, in which all marketing resources are dedicated to a

particular market segment. This approach is particularly advantageous for Piaggio

in China because Vespa owners are typically ambitious medium-to-high income

young professionals, living and working in busy cities, looking for high quality and

stylish products.


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Positioning

The following value map shows the target competitive positioning for Vespa and other

Piaggio scooters in China compared to other manufacturers:

Other areas of competitive differentiation for the positioning Piaggio in China include

image, design, product technology, safety and customer service.

More

For

More

LOWER SAME HIGHER

HIGHER More

for

Less

More

for

the Same

SAME Same

for

Less

Me

Too

LOWER Less

for

Much Less

PRICE

VALUE


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International Marketing Mix

The international marketing mix for Piaggio is based on the extended 7P model, as

described in the following section.

Product. The product itself is a key differentiator for Piaggio. R&D efforts should

be co-ordinated between the Italian design centres and the still limited R&D

facilities in China, in order to adapt the product to the Chinese consumer

requirements. In particular Piaggio should push the development of the eco-

friendly hybrid powered Green Vespa as well as the Pink Vespa, a repackaged

Vespa model designed in terms of colours and accessories for the large base of

female Customers. Extended warranty support should be offered to improve

customer service and the overall customer experience. Innovative products

should be launched in the Chinese market immediately, rather than towards the

end of their life cycle.

Price. Vespa is positioned as an exclusive, expensive and high value item.

Discounts and other market penetration offers should always be consistent with

this marketing approach. The new Pink Vespa should be launched at a

significant lower price, allowing ambitious professional women to enjoy the same

level of quality and style for their scooter. Considering the current banking crisis

in China and worldwide, Piaggio should not offer special financing conditions to

avoid undertaking unnecessary financial risks.

Place. Distribution of Vespa will continue through the sales channel of the

partner Zongshen, which provides national coverage. New outlets, specifically

selling the Vespa models, should be opened in the main financial districts of the


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largest cities, in particular Shanghai, Bejing, Shenzen, Guangzhou and Hong

Kong. Develop an online sales channel, which is already available for the main

competitor Suzuki Grand River Group.

Promotion. Piaggio Vespa represents an expensive, high involvement product

with a high perceived differentiation of its brand. The the Foote, Cone and

Belding involvement grid (Lambin, J. 2000, [15]) suggests that the buyer

readiness stages will be likely to follow the feel, learn, do sequence. The

communication mix should therefore be concentrated on above-the-line (ATL)

advertising activities, aiming to promote Vespa image and increase brand

awareness (Attention and Interest), followed by some below-the-line (BTL)

initiatives, such as sales promotions (Desire and Action). Sales promotions should

focus on business to business marketing, trying to secure supply contracts with

major corporates or local government institutions.

FCB Involvement Grid, Lambin, J. 2000, [15].


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The message should be consistent throughout the integrated communication

initiatives and should focus on the quality of the product, in particular the design,

technical innovation and safety. Collateral messages should point to social status

and punctuality to attract the public attention, specifically for women within the

Pink Vespa programme.

People. Substantial investment in people is required for the expansion of Piaggio

in China, especially in terms of technical and operational training as well as for

the acquisition of best-in-class sales and communications staff.

Processes. European standard processes are already in place in the

manufacturing facility of Piaggio in China. Standard processes should also be

extended to sales and distribution channels as well as customer services, in order

to provide a standard high quality experience for Piaggio customers. This is

particularly important to reinforce the premium quality perception of Piaggio

products.

Physical Evidence. Piaggio should offer to its customers scooter apparel and

other symbolic gifts. This would have the triple benefit of compensating the

intangibility of the service provided, endorsing Piaggio brand and promoting the

collateral sale of Piaggio accessories and apparel.


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Numerical forecast - Marketing Budget

The average unit price is estimated based on the global average extracted from Piaggio

Annual Report (2006, [16]).

In the marketing budget for China it is assumed a unitary price of 2300 for standard

models and a 25% discounted price of 1725 for the Pink Vespa model (equivalent to

the average disparity of income for university degree educated professionals). Although

Pink Vespa itself will not add a significant contribution in terms of profit, the

revolutionary initiative will increase the overall exposure and brand awareness of Piaggio

as well as its market share. The Green Vespa model is likely to require several years to

be developed and therefore it is not included in this budget calculation. The marketing

budget is calculated as 10% of the total revenue. This amount is then distributed in the

following percentages:

52% Above The Line (ATL) activities

28% ATL activities for the Pink Vespa

10% Below The Line (BTL) sales promotions

5% Market Research

5% Staff

GEOGRAPHICAL AREA ITALY EUROPE NA INDIA OTHER TOTAL

Volumes (000) 212 281.3 23.1 139.4 24.9 680.8

Sales (millions of ) 618.4 648.1 77.2 206.4 57.3 1,607.4

Average Price Per Unit () 2917.0 2303.9 3342.0 1480.6 2301.2 2361.0


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The following table shows the breakdown of the marketing budget per activity from

March 2008 to April 2009.

Total Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09

Expected Sales ( 000)

Standard Model Units (000) 112 5 7 8 9 10 10 11 11 12 13 8 8

Pink Vespa Units (000) 40 0 0 0 1 3 4 4 5 6 7 5 5

Total Units Sold (000) 152 5 7 8 10 13 14 15 16 18 20 13 13

Total Sales 326,600 11,500 16,100 18,400 22,425 28,175 29,900 32,200 33,925 37,950 41,975 27,025 27,025

Marketing Budget (10%) 32,660

ATL - Standard ( 000)

TV 10,800 700 1,000 1,000 1,000 900 700 900 900 1,000 1,000 1,000 700

Radio 2,400 200 200 200 200 200 200 200 200 200 200 200 200

Print 2,700 50 50 400 400 50 50 50 400 400 400 400 50

Internet Advertisement 870 50 60 60 70 70 50 80 80 90 90 100 70

Total ATL - Standard 16,770 1,000 1,310 1,660 1,670 1,220 1,000 1,230 1,580 1,690 1,690 1,700 1,020

ATL - Pink Vespa ( 000)

TV 6,000 1700 700 500 400 240 240 300 1100 500 320

Radio 1,480 400 120 120 120 120 120 120 120 120 120

Print 700 200 200 100 100 100

Internet Advertisement 780 100 120 100 60 60 60 60 80 80 60

Total ATL - Pink Vespa 8,960 0 0 2,400 1,140 720 580 420 420 580 1,400 800 500

BTL ( 000)

Sales Kiosk 1,200 0 0 200 200 200 0 0 0 200 200 200 0Sponsorship 750 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5

PR 750 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5

Direct Marketing

(phone + direct internet sales) 480 40 40 40 40 40 40 40 40 40 40 40 40

Total BTL 3,180 165 165 365 365 365 165 165 165 365 365 365 165

Market Research (5%) 1,633

Staff (5%) 1,633

Grand Total ( 000) 32,176


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The marketing budget is adjusted for

seasonal cycles with peaks in the summer

and towards the end of the (Chinese) year.

The Pink Vespa will be introduced in May

2008 with a massive TV advertisement

campaign. The ATL budget for Pink Vespa

is then reduced to more sustainable levels

after the launch. Sales Kiosks in the main cities will operate twice a year for a period of 3

months each, allowing potential Customers to try Vespa and distribute symbolic gifts.

The following table shows the marketing budget forecast for the next 5 years and the

corresponding Net Present Value calculation, considering:

Inflation: 4% average in the next 5 years

Gross Profit Margin: 30.1% (from Piaggio Annual Return 2006, [16])

Current Sales Volume for China, estimated 100K units/year

Discount rate: 16%

Current Market Size: 8m units/year (Datamonitor 2007, [13])

Sales increase uniformly approximately 30% each year

Additional investment in Piaggio-Foshan of 10m in 2009/10 and 2011/12 to

increase production capacity

Marketing Budget ( 000)

0

500

1,000

1,500

2,000

2,500

3,000

Mar

-08

Apr-08

May

-08

Jun-08

Jul-0

8

Aug-

08

Sep-08

Oct

-08

Nov-08

Dec

-08

Jan-09

Feb-

09

Tot al ATL - S tand ard To tal ATL - P ink V es pa Tot al BTL


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2008/9 2009/10 20010/11 2011/12 2011/12

Sales

Standard Model Units (000) 112 146 189 246 280

Less Current Sales Volume (000) (100) (100) (100) (100) (100)

Pink Vespa Units 40 70 91 118 120

Total Additional Units Sold 52 116 180 264 300

Market Share 1.9% 2.7% 3.5% 4.6% 5.0%

Unit Price (standard) 2,300 2,392 2,488 2,587 2,691

Unit Price (Pink Vespa) 1,725 1,794 1,866 1,940 2,018

Total Additional Sales 96,600 234,655 391,884 607,443 726,482

Expenses

Unit Cost 1,608 1,672 1,739 1,808 1,881

Total Production Cost 83,600 193,284 313,487 478,087 564,234

Marketing Expenses (10%) 32,660 23,466 39,188 60,744 72,648

Additional Investment (Foshan) 10,000 10,000

Total Expenses (Outflow) 116 ,260 226,750 352,675 548,832 636,883

Cash Flows -19,660 7,906 39,209 58,611 89,599

Discounted Cash Flows (PV, 16%) -16,949 5,875 25,120 32,371 42,659

NPV 89,076

Payback Time 2Y 3M

Discounted Paybeck Time 2Y 5M

The Net Present Value calculation considers only the incremental sales resulting from

this marketing project, assuming that the profit from the existing sales of 100K

units/year will be used to offset the fixed costs of the Chinese operations. In the first

year the project will report a loss of about 19.6m, mostly because of the low price

offered on the Pink Vespa, however the NPV of the five year project is positive and the

payback time is relatively short (2 Years and 3 Months).


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Marketing Controls

The Balanced Scorecard (Kaplan and Norton 2007, [4]) provides a very effective

methodology to link long term company strategies to short term targets, evaluated on

Key Performance Indicators which are based on both quantitative and qualitative

measurements. The balanced scorecard can be adapted to implement Piaggio marketing

strategy for this project using the following KPIs.

Objectives Measures 2008/9 2009/10 2010/11 2011/12 2012/13

Financial

Revenues Standard Sales (000) 257,600 348,275 470,868 636,614 753,389

Pink Vespa Sales (000) 69,000 125,580 169,784 229,548 242,161

Volumes Standard Units sold (000) 112 146 189 246 280

Pink Vespa Units Sold (000) 40 70 91 118 120

Marketing Cash Flow Marketing expenditure (000) 32,660 23,466 39,188 60,744 72,648

Customer

Customer satisfaction Satisfaction index 50% 60% 70% 75% 80%

Value for money Highest Value in Perception Maps 20% 40% 50% 60% 60%

Brand Awareness Brand Recognition 30% 35% 40% 45% 50%

Brand Association with High Quality 80% 80% 80% 80% 80%

Internal Business Process

Implementation of CRM Customer info migrated to CRM 30% 60% 90% 100% 100%

Online Channel Efficiency Search Engine Ranking > 3 > 3 > 3 > 3 > 3

Site Visits (million/month) 0.5 0.8 1.5 2.5 3.5

Click-Through Rate > 3% >4% >5% >5% >5%

Online Sales Volume (000) 3 9 11 15 16

Learning and Grow

People Employee Satisfection Index 50% 60% 70% 75% 80%

Innovation New Packaging Options

Employee and customer suggestions

Quality and number of new packaging options

Quality and number of proposed new initiatives

ConclusionThe Chinese market offers unique exciting opportunities for Piaggio. Establishing a

significant market presence in China does require large investments and a very

aggressive marketing strategy, but it also offers the opportunity to enter the most

attractive and fastest growing market. This is a opportunity that Piaggio, which mission

statement is to be world-leading manufacturer for light mobility vehicles, cannot afford

to ignore.


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References

[1] Kotler, R. et al. (2002). Principles of Marketing, FT Prentice Hall

[2] Porter, M. (2008). The Five Competitive Forces That Shape Strategy, HarvardBusiness Review, January 2008

[3] Porter, M. (1980). Competitive Strategy, The Free Press

[4] Kaplan, R. and Norton, D. (2007). Using the Balanced Scorecard as a StrategicManagement System, Harvard Business Review, July-August 2007.

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