Structure of UK car market

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Executive summary

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.

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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.

Introduction

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.[1]

The company record revenues of $170,839 million during the fiscal year ended December 2004, an increase of 4.4% over 2003.[2] 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[3] during fiscal year 2004, an increase of 605.5% over 2003.

Volkswagen

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.

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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%[4] share of the worldwide new passenger car market. The company has a workforce of about 337,000 employees and is headquartered in Wolfsburg, Germany.[5]

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.[6]

Product specification

The vehicles to be analysed are placed in the small car or A segment, Ford launched the original Focus in Paris in 1998[7]; 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.

Analysis

Market/ industry Analysis

Market Characteristics

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.[8]

Market Potential

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.[9] 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.[10]

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.[11]

Customer Analysis

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.

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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.[12]

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.[13]

Competitor Analysis

There are over 80 competitors in this segment. Below are the 14 main competitors chosen for comparison:

  1. Alfa Romeo 147
  2. Audi A3
  3. BMW 1-Series
  4. Citroen Xsara
  5. Fiat Stilo
  6. Honda Civic
  7. Mazda 3
  8. Mercedes-Benz A-class
  9. Nissan Almera
  10. Peugeot 307
  11. Renault Mégane
  12. Seat Léon
  13. Toyota Corolla
  14. Vauxhall Astra

Appendix 2 will show information about their price, origin, design as well as their strengths and weaknesses.

Distribution Analysis

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.[14]

PEST Analysis

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.

Political

  • 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.[15]

Economical

  • 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.[16]
  • UK now is one of the most competitive "new car markets" driven by increasingly intense competition.[17]
  • 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.[18]
  • Prices since have fallen by an average of 10% due to price competition between suppliers.[19] 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.[20]

Societal/Cultural

  • 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.[21]
  • The demand for niche cars with variability also grows, MPV, SUVs and 4x4 vehicles are sold more than before[22], 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.[23]
  • 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.[24]
  • 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.[25]

Technological

  • 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.[26]
  • 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.[27]
  • Companies gathering a huge database about products and customers, becoming more service efficient, improve targeting and cross selling opportunities.

Company Analysis

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.

Strengths

Volkswagen

  • Large global market share[28] (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

Ford

  • Second largest car manufacturer in the world[29]
  • Product diversity to cater to all consumer segments
  • Strong non-automobile divisions
  • Early success of the revitalization plan

Weaknesses

Volkswagen

  • Big price differences between regions causes complaints
  • Conservative design compared to competitors
  • Future projects require lot of financing[30]
  • 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[31]

Ford

  • Weak management structure in Europe[32]
  • Rising health care and pension expenses
  • Ongoing lawsuits[33]

Opportunities

Volkswagen

  • 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%[34]

Ford

  • Continuous new product development
  • New fuel technologies
  • East Asian markets
  • Consumer spending trends

Threats

Volkswagen

  • Emissions criteria
  • Increasing fuel price slower sales
  • Slipping market share
  • Low cost cars appeal to larger audience (Logan, Kia, Hyundai)[35]
  • Small car segment is decreasing
  • Germany's economy is in trouble, Volkswagen main market and home ground

Ford

  • North America sales expected to decline further
  • Incentive initiatives could reduce margins in the industry
  • Growing competition
  • Excess capacity leading to pricing pressure

Market opportunities

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"[36]

Marketing Strategy

Marketing Objectives

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.[37]

Recently manufacturers have been exposed and price cuts have now followed. This means that prices and profit margins in the UK have fallen.[38] 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

Geographic

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.[39]

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.

Demographic

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.[40]

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.[41]

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.[42]

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).

Psychographic

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.[43]

Behavioural

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%.[44] 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.[45]

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.[46]

Market Positioning

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

  • Product
  • Price
  • Promotion
  • Place

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%[47] 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[48] 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.

Recommendations for the future of Volkswagen

After analysing Volkswagens external factors there are various recommendations we can put forward due to the ever expanding hatchback car segment.

Firstly Volkswagens could invest more into research and development to further innovate their products to further increase market share. For instance, due to consumers increasing environmental awareness, Volkswagen could research and develop ways to lower fuel emission. Not only will this set a new manufacturing trend, it will also increase sales due to lower fuel consumption.

With such a large product variety, it may be prudent for Volkswagen to differentiate its models from its competitors. This will enable potential buyers to distinguish one make from another. A clear distinction from sister brands Seat and Škoda is necessary. Both are cheaper priced, using the same platforms and engines as the Golf highlighting different design and lifestyle messages would support a premium price.

Investment in online purchasing and marketing could be a great opportunity for the company as the age group targeted is increasingly involved in online shopping. This could in turn lead to more sales for Volkswagen and customers could get information they need to know at their convenience.

"Autostadt" ("car city") has proved to be an innovative way of selling cars as well as being an attraction to the public. Building similar centres in important market regions across the UK may catch the attention of customers.

Female drivers, with a high disposable income and high consumer awareness towards the market, are generally more interested in pretty designs, colours regarding the interior and exterior of the car disregarding performance. Volkswagen could increases their colour selection and improve the interior with a more stylish and sleek design.

The time spent behind the wheel should be as comfortable and unnerving for the passengers as possible. Emphasising positive aspects such as comfort, safety and in car entertainment will appeal customers.

Volkswagen could spend more money marketing their product. They should take part in more rally competitions instead of only taking part only in local competitions. By entering the World Rally Championship (WRC) it will make the golf more appealing to young male drivers, as a rally of that status will give the golf a higher prestige.

This creates opportunity to compete with the companies that it is competing directly against like Ford, Peugeot, and Citroen. In addition, Volkswagen will put up the Golf against competitor cars in its category for example, the Focus, the 206 and Xara. Depending on the results of the races, it will contribute in gaining a larger percentage of the market share as it will prove to the customers that it is a car of high quality.

Volkswagen can create a car in a new category which will attract a larger portion of the public. This will benefit Volkswagen as it currently doesn't have any form of sports car. A new range, of sport cars, will allow Volkswagen to be viewed as more diverse. By achieving a well imaged and high performance range, Volkswagen might be viewed as 'cooler' which will attract a lot of sport car enthusiasts especially young male drivers.

As Volkswagen cars, especially the Golf is quite highly priced for cars in its category, it can attract more customer by offering free options, for example, free air-condition, metallic rims instead of hub-caps, CD change stereo etc.

Volkswagen can create a joint venture with a company creating car products e.g. tyres. Let's assume that Volkswagen created a business agreement exclusively with Pirelli would cause the companies costs to be reduced, as now Volkswagen will be able to obtain tyres cheaper. This will reduce the final pricing of the product which will lead the demand of the golf to increase.

Volkswagen should introduce adverts including celebrities, as has been done with the Ford Focus, Colin McRay, and the Renault Clio, Tiery Henry. By using a celebrity as their fronts image it will attract customers as the public will get the idea that the car is 'special or great' if a person of their status is using it.

Recommendations for Ford

After analysing Ford's external factors there are various recommendations we can put forward.

Firstly, Ford can create a joint/ventures partnership with a company creating car oils and lubricants. With advanced research and development, lubricant products can be created that are made for Fords which will enhance the performance and reduced CO2 emissions. It will also increase the life span of the car. This will attract customers as they will prefer having a more durable car with enhanced performance that will survive strain.

Seeing that many Mini drivers are women, when considering a bigger car they might show interest in the ford focus. Women generally find small cars appealing, thanks to more market awareness increased by an executive brand as seen with the A-class from Mercedes (56% female drivers).

By offering more vivid colours and fabrics, opens the market to buyers who follow fashion trends; especially young drivers and women. Their financial status and willingness to spend serious money on lifestyle objects means a market opportunity.

Ford could focus more on internet sales instead of relying highly on dealers. Ford Focus could appeal to family-focused brand by introducing more family orientated marketing. For instance, advance research projects ranging from active and passive safety technologies and concepts. Improved navigation systems, sophisticated safety testing procedures and active safety systems intended to help avoid collisions or minimise its effect.

Appealing to core customer is a necessity for Ford's, whilst expanding in a new segment in the market. A significant part of the Company's global strategy for its automotive business is to increase its level of sales to automotive manufacturers based outside of the United States.

As Ford operate in a competitive environment in which price reductions are generally expected by its customers on at least an annual basis. Emphasis on continuous improvement, lean manufacturing and other cost reduction initiatives are required to operate successfully in this environment.

Ford has been recently trying to enter the Formula 1 competition. By achieving that it will become a higher class company to the public. The formula 1 competition is the best and most popular form of automotive competition. As there is a lot of publicity and a high viewing, Ford will get more advertising and will be able to be established as a company of higher status. This will allow Ford to enter new target markets and allow them to start competing with more companies.

Since insurance costs are so high for customers, Ford can offer free insurance for a limited period with all purchases of new cars. This will become very appealing to new, but also existing customers. They could also assist customers financing by offering hire purchase with 0 percent interest. This will make the car more affordable and will make more customers attracted to the product.

Lastly, Ford Company has to continue to repatriate its image concerning the quality problems of the Focus.

Appendices

Appendix 1

Appendix 2: Competitors Analysis

Appendix 3: Distribution Analysis

Appendix 3 shows the change in the number of dealership outlets controlled by the 20 largest marques between 1997 and 2001. The number of franchised dealerships, even among the biggest manufacturers, is on the decline. Exceptions to the general trend shown in Figure 21 are Honda, Hyundai, Mercedes Benz, Suzuki, Land Rover and SEAT.

Appendix 4: Market Opportunities

Appendix 5

Appendix 6: Dealerships analysed

We chose three dealerships each of Volkswagen and Ford located in different areas of London, which act as representatives for the various dealerships in the area, to discover if there are any correlations in segmentation and target consumers.

The Volkswagen dealerships under analysis are:

  1. DOVERCOURT BATTERSEA
  2. 98 York Road, Battersea, London, SW11 3RD

  3. CHISWICK VOLKSWAGEN
  4. 405 King Street, Hammersmith, London, W6 9NQ

  5. ALAN DAY (NEW SOUTHGATE)
  6. Pinkham Way, North Cirular Road, New Southgate Road, N11 3UT

The Ford dealerships under analysis are:

  1. BROWNES OF LONDON
  2. 349-351 Norwood Road, London, SE27 9BQ

  3. DAGENHAM MOTOTS - EPSOM
  4. Nonsuch Industrial Estate, Kiln Lane, Epsom, KT17 1DH.

  5. DAGENHAM MOTOTS - TOTTENHAM
  6. 193-197 Broad Lane, Tottenham, N15 4QS

Two examples for Ford dealerships - target segments using the ACORN-profile analysis

DAGENHAM MOTOTS - TOTTENHAM

193-197 Broad Lane, Tottenham, N15 4QS.

This description is intended to illustrate likely consumer preferences and behaviour and does not describe a specific locality or its residents. Please note, it may not always be entirely accurate for your postcode. You should not base important decision-making on the ACORN classification alone.

Type 21: Singles and sharers, multi-ethnic areas

(1.68% of the population live in this ACORN type)

Likely Characteristics

These types are mainly found in Inner London and Outer Metropolitan areas such as Croydon, Harrow, Southall and Ilford.

These are metropolitan white-collar populations with high concentrations of ethnic minorities.

People are generally younger, typically under 40. There are some single parents, but most households comprise single people renting and sharing flats or terraced houses. The accommodation is small, often only one or two bedrooms. Around 35% of the population is black or Asian. Both minorities occur in broadly equal proportion across this type.

The level of education is above average, and jobs tend to be managerial or clerical. Levels of students, people working in the Public Sector and unemployment are all somewhat above the national average.

These people do not need cars given their urban lifestyles. Instead, they will get about by walking and using public transport. They tend to go to coffee shops, and lunch in pubs or restaurants on a regular basis. They may also spend time in an art gallery or going to the theatre.

Relatively high numbers have cable TV and DVD players. Reading, and sometimes religious activity also play a part in their leisure activities. They have some interest in current affairs and might be readers of The Guardian, Observer or Independent. Increasingly they will use new technology such as telephone, PC and mobile phone for banking purposes. Many would like to upgrade to gold and platinum credit cards. More realistically, others are planning to pay off their debt.

BROWNES OF LONDON

349-351 Norwood Road, London, SE27 9BQ

This description is intended to illustrate likely consumer preferences and behaviour and does not describe a specific locality or its residents. Please note, it may not always be entirely accurate for your postcode. You should not base important decision-making on the ACORN classification alone. Type 18: Multi-ethnic young, converted flats

(1.14% of the population live in this ACORN type)

Likely Characteristics

This type is almost exclusively a London phenomenon, with high concentrations in most inner and outer London boroughs.

These young multi-ethnic communities are primarily found in London, with many living in houses which have been converted into flats.

Most people are in their twenties and thirties and there are only a few, very young children. The population is diverse. On the whole they are well qualified. Many are in professional and managerial jobs, with good incomes. Others have lower level qualifications and are likely to be office and clerical staff. There are also a significant number of students.

The majority of people are renting their homes privately. However, there is also a high proportion living in Housing Association property.

Public transport is by far the most popular method of travelling to work or study. Residents are also happy to walk, and only a minority see the need for a car. At this stage in their lives this type are not really thinking about investing their money. They will spend their spare money on travel, and will take long haul trips as well as European holidays.

They like exercise and sport, as well as more contemplative pursuits such as the theatre, the arts and self-improvement classes. They are also very interested in current affairs and read The Guardian and Independent as they commute to work.

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