This report compares the Volkswagen Golf MkV and Ford Focus. With brief company overview and product specific background, the analysis shall give an overview of the structure of the UK car market, its growing potential and towards smaller cars shifting trend, referring to both cars’ customers and their main market competitors.
The PEST analysis will highlight political, economic, societal and technological influences on the industry. Referring to escalating financial tax burden, increased customer expenditure, people’s changing lifestyles and rapidly advancing technology in the manufacturing sector.
A SWOT test will analyse VW and Ford comparing them as a whole company without referring to the Golf and Focus specifically. Factors playing important roles are how the companies are seen by the public. External opportunities such as increased sales figures are also looked upon besides imminent threats from the competition and the environment in the changing market structure.
If you need assistance with writing your essay, our professional essay writing service is here to help!Essay Writing Service
A Marketing Strategy will focus on both the Focus and the VW Golf and how they have a broad appeal across a range of ages and tastes. By using demographic and geographic variables the same customer groups can be identified with slight differentiations towards the lower and higher class for the Golf and Focus respectively. The economical price of the Focus reflects a lower income of its owner, while Golf owners exceed the average income in this segment.
Concerning customer personality, they seem to be practical oriented, as number one reason to buy a Golf is robustness / reliability and number three reason to buy a Focus is interior space.
For the VW Golf as well as for the Focus customer loyalty plays a significant role.
Both cars target the middle class, as well as the wealthier working class. Its high price makes the new Golf also target the upper middle class.
The Golf has the strongest image in the segment. In contrast to Volkswagen, Ford had quality problems in the past, which have hurt the image of the Focus. Its economical price makes the Focus very competitive, while the Golf is the highest priced car of the mainstream,
The Marketing Strategy will also compare both cars, look at the different pricing policies, the promotional mix, communicating the corporate identity throughout the products, its outlets and their employees.
To conclude a critical analysis of the marketing strategy shall be outlined with recommendations for the future for both companies to react appropriately to the requirements and changes of the market. Taking into account the growth in buying power of women in the new car market and responding to increased demands of service, such as online sales, are some of the priorities for VW and Ford.
Terms of reference
This report will examine the current car market in the U.K. We will look at major leading car manufacturers, Ford and Volkswagen. Ford Focus and Volkswagen Golf are going to be compared. Both are in small car segments. The comparison will highlight the strengths and weaknesses of the both products based on the Mintel report. This report will conclude with a market strategy analysis and recommendations for both companies for the future.
Background of the two companies and products
Ford Motor Company
Ford Motor Company is one of the largest producers of cars and trucks in the world. Its core businesses are automotive and financial services. The company’s automotive vehicle brands include Ford, Mercury, Lincoln, Volvo, Jaguar, Land Rover, and Aston Martin. The company operates primarily in the US, Canada, Mexico, South America and Asia Pacific. Its headquartered is in Michigan and employs about 327,000 people.
The company record revenues of $170,839 million during the fiscal year ended December 2004, an increase of 4.4% over 2003. The increase was primarily attributable to increased automobile sales in the South American market and the strong performance of Hertz during the year. The operation profit of the company during fiscal 2004 was $4853 million, an increase of 262.4% over fiscal 2003. the net profit was $3487 million during fiscal year 2004, an increase of 605.5% over 2003.
Volkswagen is Europe’s largest car manufacturer, providing a wide variety of passenger and commercial vehicles. The Volkswagen brand group comprises Volkswagen, Skoda Auto, Bentley and Bugatti, Audi, Seat and Lambhorgini.
The group operates 45 production plats in 11 European countries and a further seven countries in Americas, Asia and Africa. VW has about a 12% share of the worldwide new passenger car market. The company has a workforce of about 337,000 employees and is headquartered in Wolfsburg, Germany.
The company recorded revenues of E87,153 million during the fiscal year ended December 2003, an increase of 0.2% over 2002. the operating profit of the company during fiscal 2003 E1,780 million, a decrease of 62.6% from fiscal 2002. The net profit was E1,118 million during fiscal year 2003, a decrease of 56.9% from 2002.
The vehicles to be analysed are placed in the small car or A segment, Ford launched the original Focus in Paris in 1998; it took the hatchback market by storm and became the dynamic benchmark for every car in its class while Volkswagen Golf, the front wheel driven which began production in 1974 has been virtually unmatched.
Both cars are classified as hatchbacks and aim to be leading their class; the Ford Focus trademark high rear lamps and a distinctive side window graphic and Volkswagen Golf offers excellent specifications not only in performance but also its safety specifications. Both cars have a solid reputation; the longevity of the flagship Golf gained over the past decades; Ford because of the brand itself, attract engaged drivers with its dynamic design, excellent driving quality and new technologies.
Market/ industry Analysis
The British car market is classified as a mass market which keeps growing. The smaller car market finds itself at the peak of this growing market. Due to the variety of different models of cars, they can be classified into two different car segments. Most models are located in the city/mini/supermini segment and some in the lower medium/small family. Even at a time where the costs of driving are high because of taxation, congestion charges etc., the market share for these two segments dominate the industry, with the supermini segment showing large increase in sales making it the leader in the industry. The trend towards higher sales of supermini models is clearly visible, with 44% growth in that category stimulated by the continual addition of new and more sophisticated features by manufacturers.
In 2003, the UK became the second-largest market for new registrations in the EU, after Germany. New cars were evaluated at estimated £33.5 billions representing a relatively small increase of 3.4% on the year before, and 14% growth over the five-year period. The number of new car registrations in 2003 reached a record 2.58 million, up from 2.56 million in 2002 and 2.46 million in 2001. The forecast is for the market to remain stable at 2.5 million in 2004. The increasing trend towards smaller vehicles has influenced the value growth of new car sales as they are generally less expensive than executive/luxury/large family cars. Total sales in 2003 were boosted by yet another strong year for supermini models and sales jumped by 5.1% to account for a record 33.9% of total registrations.
Registrations of supermini models soared by 7.2% in 2002 and by 5.1% in 2003, according to SMMT data, making it the most popular market category with 35% of registrations. Over the past decade, SMMT data show that supermini registrations have climbed by more than 75%. This vast increase in popularity of superminis has limited growth in the period of five years of smaller family models and has declined sales for the medium to large family cars by 6.5%. With expectations that the supermini car segment will keep growing, as the manufacturers alterations to the smaller cars, and due to their practicality for the city life make them increasingly appealing to existing and to new consumers.
As can be seen from the chart below the city/mini/supermini and lower medium/small family segments dominate the industry accounting for 62% of the market share. They account for 34% and 28% of the total market share respectively. The pie chart below indicates the market segmentation of new car sales, by product category in 2003.
Superminis have thrived as new technology has enabled manufacturers to include features previously reserved for the larger, luxury end of the market, while retaining the advantages of fuel efficiency and manoeuvrability. This new trend marks the wanting of the old order of car ownership, whereby consumers started with a small car and gradually worked up to a larger model as finances allowed. Nowadays car buyers may trade up as they increase their income, but they are just as likely to upgrade to another small car with better features.
The smaller car segment is male dominated. The average distribution of this sector is 68% male and 32% female drivers. Both the Golf and the focus match exactly this distribution as a well engineered all rounded car, with the Focus being the UK’s favourite. In terms of manufacturer shares of the market, Ford remained the most popular manufacturer of new cars in the UK in 2003, and has been the bestselling UK car model for most of the past five years. The Focus had 151200 new registrations in 2003 whilst the Golf had 72400 new registrations and was on the seventh position.
According to the Driver and Vehicle Licensing Agency (DVLA), there were 34 million driving license holders in May 2002 in the UK, excluding Northern Ireland, the Channel Islands and the Isle of Man, plus an additional 5.6 million provisional licence holders, showing a steady increase in the number of license holders in the last 15 years (Appendix 1). The growth in the number of license holders has contributed to the total number of car registrations, which are going to keep rising unless there are significant changes in public transport.
There are over 80 competitors in this segment. Below are the 14 main competitors chosen for comparison:
- Alfa Romeo 147
- Audi A3
- BMW 1-Series
- Citroen Xsara
- Fiat Stilo
- Honda Civic
- Mazda 3
- Mercedes-Benz A-class
- Nissan Almera
- Peugeot 307
- Renault Mégane
- Seat Léon
- Toyota Corolla
- Vauxhall Astra
Appendix 2 will show information about their price, origin, design as well as their strengths and weaknesses.
The main distribution outlet for small new cars is the franchised dealership. Currently, the majority of franchises (an estimated 80%) are dedicated exclusively to selling the products of a single car manufacturer. However, multi-franchising – whereby dealers offer the cars of several competing manufacturers on one site – is steadily becoming more common.
As appendix 3 clearly shows, the number of outlets has declined over the past five years. The number of franchised dealerships per manufacturer provides a rough indication of market share in the new car market – the greater the number of outlets, the greater the share of the market.
Ford has the largest number of franchised outlets in the UK. The primary influence on the decline in dealership numbers has been the steady reduction in franchised outlets by the manufacturers. There is an arising of dealers selling more than one brand, direct imports from mainland Europe, Asia, and America as well as an increased trade via Internet.
Manufacturers will promote their finance deals via their dealer outlets and websites in order to foster customer loyalty. This increasing competition in the new small car market is forcing dealerships to close outlets in an effort to reduce operating costs, while still endeavoring to maintain volume sales and market share. Indeed, most car manufacturers have launched websites offering list prices, specifications and an online brochure-ordering service. For example Ford also offers consumers the chance to buy cars direct.
Having looked upon the car market, specifically the small car segment and its characteristics and potential, the PEST analysis will highlight the macroeconomic factors on a large scale.
- Heavier congestion forces government to impose more taxes on car and introduce congestion charges.
- Increased pollution, lower emissions and traffic free zone challenges the driving nation with implications for the whole automotive industry.
- Fewer trade restrictions within the European market see manufacturers warranties extend beyond single countries, encouraging competition and price awareness of the customers.
- Up to 1999, UK cars were between 10%-20% more expensive than other EU markets, because of the high sterling and differences in tax rates.
- UK now is one of the most competitive “new car markets” driven by increasingly intense competition.
- Since 2002 the market has gone to strength, sustained by more consumer confidence, rises in consumer expenditure, low interest rates, low inflation, and high employment and booming economy.
- Prices since have fallen by an average of 10% due to price competition between suppliers. Unleashed a credit-led spending boom on major durables.
- The cost of motoring is growing; the average weekly running costs of a car for the last quarter of 2003 were estimated by the RAC at £102.59 (+3%). The increase has been driven by increased taxes, vehicle excise duty (VED), fuel tax, rises in petrol prices, high insurance costs and increasing depreciation.
- Emission taxes and high petrol prices affect sales; trend for smaller cars with less thirst as well as a growing demand for economical diesel engines support.
- Despite a general increase in crime, car thefts have gone down since 1997.
- The demand for niche cars with variability also grows, MPV, SUVs and 4×4 vehicles are sold more than before, the latter surprisingly more in urban areas than in the rural region which could be connected to the higher driving position offering a better view in traffic situations and parking slots.
- Controversially, people are willing to spend more on a car; it turns into a fashion object and status symbol.
- But for most people, buying a car is paramount to them as a car purchase is normally the largest outlay they will make next to buying a house.
- Many factors that affect others when they buy their car – for example, the size and type of car, where to buy, type of motoring, the maintenance and running costs, their personal preferences, when to buy and cost of the car.
- New technologies are introduced into the car industry. New concepts for passenger and pedestrian safety are applied by car manufacturers.
- Harsher environmental policies and fuel prices force engineers to develop more efficient engines.
- Nowadays, through chemical processes 95% of a car can be recycled and reused, hence saving resources.
- Materials such as aluminium, fibreglass, magnesium and ceramic are no longer exclusive parts of racing cars but virtually standard on every average car, improving its efficiency and durability.
- Platform sharing is a common, cost-saving policy among manufacturers. Shared framework and engines save development costs and production time. Even two different brands can be manufactured within the same factory (e.g. Smart ForFour and Mitsubishi Colt.
- Companies gathering a huge database about products and customers, becoming more service efficient, improve targeting and cross selling opportunities.
The SWOT analysis is necessary to highlight aside from the macroeconomic issues the internal factors within the company and its imminent external influences having a direct impact on the company’s strategy.
- Large global market share (biggest foreign producer in China and Latin America, largest importer in Japan)
- Product range covers every segment of market
- Legendary products (Beetle, Minibus, Golf)
- Robust and economical to run
- Many generations first car, emotion and loyalty
- Second largest car manufacturer in the world
- Product diversity to cater to all consumer segments
- Strong non-automobile divisions
- Early success of the revitalization plan
- Big price differences between regions causes complaints
- Conservative design compared to competitors
- Future projects require lot of financing
- Critics claim Volkswagen’s cars to be overpriced
- Less reliable than cheaper Japanese car (Reliability Index, 2004)
- Competition within the own company (i.e. Audi, Seat, Skoda)
- Founded by the regime of Nazi-Germany which still causes issues for certain ethnic communities
- Weak management structure in Europe
- Rising health care and pension expenses
- Ongoing lawsuits
- Growing minicar and luxury segment
- Platform sharing trend growing
- Products are horizontally and vertically covered by product range
- Already developed lifestyle products that are increasingly in demand (GTI, big SUV)
- MPV/family cars sales increase dramatically
- Smaller markets in developing countries grow
- Many VW factories are in these market regions
- Increasing sales figures, +3.7%
- Continuous new product development
- New fuel technologies
- East Asian markets
- Consumer spending trends
- Emissions criteria
- Increasing fuel price slower sales
- Slipping market share
- Low cost cars appeal to larger audience (Logan, Kia, Hyundai)
- Small car segment is decreasing
- Germany’s economy is in trouble, Volkswagen main market and home ground
- North America sales expected to decline further
- Incentive initiatives could reduce margins in the industry
- Growing competition
- Excess capacity leading to pricing pressure
In Western Europe, Volkswagen is already the class leader in the smaller car segment, while in the UK Ford is still the favorite. As appendix 4 shows, in terms of manufacturer shares of the market, Ford remained the most popular manufacturer of new cars in the UK in 2003, despite a 13% decline in the number of units sold. The old Focus is the best-selling car in the UK for the last 6 years with 131,282 new registrations between January and November 2004. This put it more than 30,000 units ahead of its nearest rival, the Vauxhall Corsa, according to figures from the Society of Motor Manufacturers and Traders.
Audi/Volkswagen showed the highest growth rate in the UK among the top three carmakers, adding more than 25% to sales between 2000 and 2003, to leave it with a 9.7% market share. The majority of sales (6.9%) in 2003 were of the Volkswagen brand, which has undergone something of a revival since the launch of its updated Beetle model. The Golf remains the most popular model sold by this carmaker. Volkswagen tries to emphasize its three decade long heritage and the influence the car had on generations of people around the world by giving the new Golf MkV a quite traditional VW-style look. In addition Volkswagen reintroduced the German strap line “Aus Liebe zum Automobile” (“For the love of the car”). The slogan highlights the longevity and accumulated knowledge with “30 years in the making”
Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.View our services
Ford intends to design a new compact car smaller than its Focus sedan to lure young consumers. (Different target market). Introducing new products in all vehicle segments is another way to grow in a market. In the UK, Ford has a huge market share and has successfully sells cars and commercial vehicles (e.g. the Ford Transit) with market shares of 17.7% and 27.5% respectively.
Recently manufacturers have been exposed and price cuts have now followed. This means that prices and profit margins in the UK have fallen. For some cars Ford will use a premium pricing strategy e.g. Jaguar. This means charging a high price for a high quality product.
Good advertising and brand image should help Ford to differentiate its cars from other manufacturers. In this case Ford could charge higher prices as customers will be convinced that value has been added and that the extra money is worth it to buy a Ford.
Clearly Ford needs to make sure that their prices are competitive. This means charging a competitive price that takes into account what other manufacturers are charging for similar products.
Looking at the table below, it is clear that Ford is increasingly less successful at turning revenue into profit.
The fall in the Gross margin clearly suggests that Ford is not successfully managing their variable costs efficiently. Clearly this is not a good situation and Ford needs to find ways to boost sales and cut costs. Inefficient car production plants such as Dagenham may be forced to close so that Ford can switch the production to more efficient sites. This is typical Multi-National behaviour in a highly competitive global market.
As a multi national operating in a highly competitive market, it is constantly forced to keep costs down in order to keep prices down. There are clear signs that car production in Britain is becoming too expensive and the appreciated pound is making it difficult to export cars. If Ford were to close down British production plants, it would have a devastating effect on its stakeholders, employee and local suppliers.
See appendix 5 for total sales and revenues, worldwide vehicle unit sales and European market shares.
Volkswagen, Germany’s largest carmaker has been aggressive in acquiring other car companies throughout Europe. It has moved into Eastern Europe, buying the main car company in the Czech Republic, Skoda, which it hopes to re-invigorate with its own reputation for quality. It operates the SEAT subsidiary in Spain. Volkswagen has sought out more luxury badges to add to its range, buying up Italy’s Lamborghini and Bugatti labels. The company also produces cars in the United States and Latin America.
Volkswagen having a larger product range is focused on individual; advertising for the model range. By highlight the emotional characteristics of each car it tries to match the character of its consumers. VW is also focusing on individual ad campaigns on brand marketing by advertising technical products available for various models.
Interested customers can discover the range of cars featuring the advertised object and decide according to their needs (E.G. DSG automatic gearbox is available in four models each placed in a different segment; customers interested in DSG have four choices). (Linzi Cameron, 2004)
With Volkswagen one thing has barely changed at all. Despite its new curvy lines, the new Golf is still clearly Golf.
Market Segmentation and Targeting
According to cross-cultural research, the consumers in the United Kingdom see their car in very personal terms. This influences not only the choice of equipment, but also the consumer attitudes and responses to a product.
Our geographic segmentation focuses on the area of London, where dealerships have been strategically placed in relevant neighbourhoods taking full advantage of the close proximity of target customers.
Since both brands are close competitors they focus on virtually the same characteristics. Both Focus and Golf appeal to similar customer groups as one of the Golf´s main opponents is the Focus. Since the market is dominated by the male driver – 68% of Golf drivers and 73% of Focus drivers are males – both try to attract the male driver more than the female one.
Both the Focus and the VW Golf are not just vehicles that appeal to young buyers. They happen to be two of those rare vehicles that bring in people buying their first car and what may be their last. By toning down the wild-eyed look of the Focus, designers hoped to give it broader appeal across a range of ages and tastes. This approach extends deep into every detail on the new Focus. Even the Focus nameplate gets a more squared off and demure typeface.
The Golf owner has an average age of 42.9 years, 22% of the drivers are married, and 49% are not married and have no kids. The biggest increase from past few years is amongst the 35-44 year age group. Focus despite its stylish design has an audience with around 47.1 years, 26% are married with kids, while 55% are not married.
As most cars are sold in urban areas, they reflect very much the grade of education and profession of customer. There has been little change in the affluence of Golf buyers – the average household income has increased very slightly from £42,573 to £42,672. The economical price of the Focus reflects a distinction in the lower income of its owner, while Golf owners exceed the average income in this segment.
We analysed three dealerships each of Volkswagen and Ford located in different areas of London, which act as representatives for the various dealerships in the area. Using the ACORN-profile analysis we observed that most Ford and Volkswagen outlets are placed in middle- to high-income areas with an average age group under 40 (Appendix 6).
As the income analysis suggests both cars target the middle class, as well as the wealthier working class. Its high price makes the new Golf also target the upper middle class.
Concerning customers’ personality, they seem to be practical oriented, as number one reason to buy a Golf is robustness / reliability and number three reason to buy a Focus is interior space.
For the VW Golf and the Focus, customer loyalty plays a significant role. For instance, one third of the Golf’s sales go to people who used to own a previous model of golf. The number of repeat VW Golf purchasers has gone up from 37% to 43%. Their top reason to buy Golf is robustness, reliability and style.
According to DDB research, 28% of Ford Focus buyers always buy the same make. Their top reasons to buy a Focus are style and interior space. Customers of both brands are looking for a long lasting, reliable car with sufficient space. For Golf buyers, driving dynamics play a more important role than for Focus buyers, since top speed performance ranks on place four as a purchase reason for a Golf.
In contrast to Volkswagen, Ford had quality problems in the past, which have hurt the image of the Focus. The review – which is representative of the car’s reputation in the automotive press – described the Focus as “terrific to drive but a risk to own.” Concerning the negative image of the quality, reputation will still take a while to change.
The graph shows how the Ford Focus and the VW Golf are positioned among their twelve main competitors. Concerning the image factor the Golf is placed at the top of the mainstream. The VW Golf has the strongest image as car but not as brand.
The graph indicates that the Ford Company is being successful in overcoming its image problems, as it has the second strongest image of the mainstream after the Golf. Its economical price makes the Focus very competitive, while the Golf is the highest priced car of the mainstream.
Marketing Action Plan
Critical analysis of Marketing Strategy – Recommendation for the Future
Volkswagen is currently losing its market share, especially the Golf, it is immensely attacked by the large competition. Smaller cars aiming at expressing life, individuality and youth try to appeal besides promoting their high safety, quality and daily usability. Akin to its sister companies Seat and Audi it introduced a slogan in its native language. With “Aus Liebe zum Automobil” (“For the love of the car”) it signalises that people understanding the slogan had the edge compared to others.
VW is considered the most successful car ad company in the UK as it tries to appeal to new customers. With adverts that make you feel ‘Good I made the right choice there’, VW aims to build loyalty in existing customers, convincing their new purchase in the future to be a VW again.
Volkswagen has established itself as an important player in virtually every segment it covers. Many of the cars are benchmarks for the competition as seen with the Polo, Golf and Passat.
Ford remained the most popular new car purchase in 2003, despite a 13% decline in the number of units sold. In fact the Focus has been the most popular registration for much of the last five years, the Vauxhall Corsa topping the list in September 2003 but being beaten by the Focus in all succeeding monthly registrations (not tabulated). The Corsa and Astra maintained second and third positions respectively in terms of annual registrations in both years.
The massive success of the Ford Focus is partly due to the companies marketing of the product. To begin with Ford Focus is one of the main sponsors of the largest annual sporting event, the Champions League. The duration of this competition is eight months, where millions of people view it weekly and are continuously reminded about the Ford Focus. Also the Ford Focus is one of the main competitors of the WRC, the constant wins of the Focus have left an impression in the minds of the viewers. In fact the Focus was so successful in the WRC, that Ford launched a Focus advert presented by the Ford team main driver, Colin McRay. The success of this advert led to the production of even more promotional products, e.g. Ford Focus- Colin McRay 1, 2 &3, which is a game for a number of game consoles and the PC.
Even though, Ford began production as an American company, it is one of the main competitors, not only in Europe, but worldwide. It produces cars that are main competitors in all six segments, including the Ka, Focus, Mondeo and the Explorer. Through the years Ford has been established as key player in all segments of the motoring industry.
Cite This Work
To export a reference to this article please select a referencing stye below:
Related ServicesView all
DMCA / Removal Request
If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: