Transcript Slide 1

China Automotive Industry:
Market Entry Strategy for
McLaren Automotive
Guido Milner – Student 22
Tiemba 2011
Project P 11 : M P 4 -1 2 C
From 1985 to 2008 (PV only)
1958
From 1900 to 1950s Car production was shared between United States and Europe only
1958 Dong Feng Hongqi “East Wind”
From 1985, start of China’s production of domestic cars
From 1985 to 2008 (PV only)
1994 1st Automotive Policy (Regulation: Consolidation/Protectionism/market creation)
2002 production increase by + 36%
2003 production increase by + 37%
From 1985 to 2008 (PV only)
2001 WTO and Forecast of 2003
From 1985 to 2008 (PV only)
2004 2d Automotive policy (Strategic Direction: restructure/WTO requirements/market drive/Environment)
Actual substantially above forecasts
China becomes N1 market in the world by end of 2009
CHINA LUXURY Market:
“ If I do not know the brand, I will not buy
it…all my friends are like me”
“ If nobody knows the brand here
(domestic market), I would never buy it
even if it is
famous abroad”
“ If the price is
High, the quality
Should be very
Good and
Company
Prestigious..”
Luxury cars represent 34.2% of the cars
market Rich Chinese are buying.
EXOTIC CARS / HIGH SPORTS LUXURY Definition
“Our problem is not doubling
sales, our problem is getting
enough cars from the Factory”
Richard Lee Chairman of
Ferrari China.
Limited
Production
(less than 1% of the
Total workd owners mkt)
Scarcity
Personalization
Market sales data, very
difficult to find and highly
confidential
(handbuilt & custom)
(less than 8000 units
Per year)
Exotic in
Context
Availability
(Delicery time)
(out of the ordinary
Design & concept)
Price Tag
(min 250KUS$)
MP4-12C: Market & Competition
Porsche 911 Turbo
Ferrari F430
Main title
McLaren MP4-12C
Aston Martin DB9
Lamborghini Gallardo
Audi R10
Performance
(Image, volume,
speed, rarity,
appreciation)
MP4-12C: Competitive positioning
• P12
+ 13.6%
Source: JATO, McLaren analysis
• P11
• Enzo
• SLR 722 + 60.9%
• Carrera GT
• SLR
• Murcielago
• 599
• 911 Turbo
• P13
• Audi R8
• 911 4S
• AM V8
• F430
• Gallardo
Core Competences:
Engineering excellence,
Use of processes & Tech from F1
Rapid decision making processes,
carbon fiber technology
Price
China Market Analysis: Porter five forces
An Attractive segment
Of the Automotive
Industry!
Bargaining Power
of Suppliers
•
•
•
•
Highly fragmented
Plethora of substitutes
Low switching costs
Fragmented suppliers
customers
=> Low force
. Limited number of players
. High differentiation
. High market growth
. Barriers of exit
Bargaining Power of Customers
• Low leverage to negotiate
lower prices
• Low price sensitiveness
• Product is of strategic
importance
• Production costs high but
not known
=> Relative low force
Competitive
Rivalry
Threat of
Substitute Products
• Low substitution for lower
segments
• High increase of potential
buyers
• Close customer relationship is
high
• Relatively low switching costs
=> Still low force
Threat of New
Entrants
• No economies of scale
required
• Brand loyalty a barrier to
entry
• Scarcity of qualified
professionals
• Chinese legislation and
government actions
=> Relative High force
CAGE Framework: High distance
Culture
• High cultural differences
• China Elite consumer behavior
• Different business practices
• Guanxi
• Degree of sophistication
Geography
• Differences between 1st tier and 2d/3d
tier cities
• Size of the country
• Transportation challenges
• Beijing or Shanghai or Guangzhou?
Administration
• High government involvement
• Counterfeiting challenges
• Corruption challenges
• Priority to SOEs
• Doing Buisiness in China
Economy
• Currency exchange challenges
• Distribution channels issues
• Growth rates
• Market evolution
High
Bridging the Gaps
•Cultural Gap / Doing Business in China
- Intl experience / Flexibility will be highly necessary / limits of Rep office
High
•Counterfeiting&corruption levels + future threat of Substitutes
- F1 high tech and processes + Carbon fiber technology
High /
Medium
Medium /
Low
Low
• Lack of service excellence and qualified workforce
- Commitment to winning values and passion
•China Elite sophistication + Market growth expectations
- Rapid decision making + low cost Rep Office entry mode + competitive pos
•Brand loyalty
- Strong brand equity + service excellence standards + brand culture
Recommendations
Develop a deep understanding of Chinese behavior
Of consumers and Elite sophistication
Create an efficient and passionate distribution
Network to deliver the value proposition
Deliver a superior Brand experience : Driving
Centers /Clubs / Simulators
Maintain a lean cost structure and keep maintenance
Costs as low as possible
Successful
Consider customizing
products to local taste
Market
and invest inTakeoff
Green + EV technology even further
My MP4-12C