IMPROVEMENT CASE

22-3-2013 Authors: Francisco Pellicer Robert Reitsma Joaqun Agera Alexandra Marinas Teacher: Lynn Kahle

Course:
International Marketing

TABLE OF CONTENT
1 INTRODUCTION........................................................................................ 1 1.1 1.2 1.3 Assignment ...................................................................................... 1 Main question: ................................................................................. 1 About SEAT: ..................................................................................... 1
Mission statement (Volkswagen Group): ............................................... 1 Mission statement: ............................................................................... 1 Vision statement: ................................................................................. 1

1.3.1 1.3.2 1.3.3

2 3

SWOT ANALYSIS ..................................................................................... 2 RECOMMENDATIONS.................................................................................. 3 3.1 3.2 A new market ................................................................................... 3 Electric SEAT .................................................................................... 4
Why Electric?......................................................................................... 4 The car ................................................................................................. 5

3.2.1 3.2.2

1 INTRODUCTION
1.1 Assignment
Spanish automobile manufacturer, SEAT, is a subsidiary of the Volkswagen Group. In order to build the business, top management in SEAT has asked your consulting group for help. They have heard that you are engineers who understand global market trends, opportunities and threats. SEAT wants to become an innovative, design-thinking organization in 2013. They are looking for some serious changes that have impact and they need some input on how to incorporate shared value to improve their sustainability and make their business more attractive to Headquarters in Germany. In order to transform SEATs business, your group will hand in a written report to the CMO, Lynn Kahle, lyka@dtu.dk, no later than 29 March 2013. Your report should include the problems that need to be addressed and recommendations that illustrate the application of the theory from class. You are welcome to include drawings or other visual materials but the report should not exceed five A4 pages.

1.2 Main question:

How can SEAT become a more innovative and design-thinking organization in a sustainable way by 2013?

1.3 About SEAT:

1.3.1 Mission statement (Volkswagen Group): The goal of the Group is to offer attractive, safe and environmentally sound vehicles which are competitive on an increasingly tough market and which set world standards in their respective classes. 1.3.2 Mission statement: To be the number one among the worlds automobile manufacturers, and to make individualized, sustainable and safe mobility based on superior quality possible for people throughout the world. 1.3.3 Vision statement: Our pursuit of innovation and perfection and our responsible approach will help to make us the worlds leading automaker by 2018 both economically and ecologically.

2 SWOT ANALYSIS
The strengths, weaknesses of SEAT as an organization have been researched, on the market side both the opportunities and the treats have been identified. A summary can be found in Table 2.1 below.

Strengths: o Capital o Technology o Know how o Strong and stable position within the Volkswagen Group (VAG) o Market leader in Spain o Capacity for manufacturing every part o Marker of youthful and sport cars o Presence in the motorsport o Good brand presence and awareness across Europe Opportunities: o They can enter emerging markets for better growth. o Volkswagen can put in more resources in SEAT for development and expansion. o It can still expand in the ecomotive range to include mode products in the range.

Internal

Weaknesses: o Currently not profitable and may be sold by Volkswagen or discontinued. o Not present in the emerging markets where there is high growth opportunity. o There is a possibility of clash of cultures as the company is primarily Spanish with the parent being German. (Different mindset)

Threats: o Changes in the global macro-economic scenario. o SEAT doesnt offer as much electric or hybrid cars as their competitors. o Aggressive growth plans by the Korean and Japanese counterparts. o Competitors Honda Chevrolet Nissan Toyota

External

Table 2.1 - SWOT Analysis

3 RECOMMENDATIONS
3.1 A new market
In the SWOT Analysis several key points have been identified, in particular the weakness of not being profitable and not operating in emerging markets, which competitors do. Also some opportunities have presented themselves, SEAT can expand their market share by stepping into emerging markets and to make better use of the resources of its parent company, the Volkswagen Group. This has led to research into the global automotive market. It has shown that big changes are expected for the coming years, China and India are the two main emerging markets. The gross domestic product (GDP) for the Asia Pacific region is rapidly growing each year, specifically for China and India. Chinas GDP is expected to be 126% bigger in 2020 than in 2010, for India this percentage is 116%.1 Looking at this trend and comparing it to the automotive market, it is clear that the growth of the automotive market closely follows the GDP growth. Figure 3.1 illustrates the number of automotive products being sold in past years as well as a forecast for 2020.

Figure 3.1 - Automotive sales by geography

A big geographical shift towards the Asian market can be identified and it is wise for SEAT to be part of this trend. Currently no vehicle in SEATs product range is produced or sold in China nor India. However the Volkswagen Group in general has several factories and retailers in China and India that are producing and selling Volkswagen, Audi and koda. For SEAT to enter these markets quickly within 2013, factories and distribution centers of the whole Volkswagen Group should be used. This solution to the addresses several weaknesses and threats by capitalizing on different opportunities. By rapidly stepping into the emerging markets using existing resources from their parent company, SEAT can increase their market share thus making them a more profitable

1 2

DBS Bank Ltd. "Imagining Asia 2020 - Make way for the Asia giant." China, October 2011. Booz & Company Inc. "India Automotive Market 2020." Delhi, 2011.

organization. And at the same time counteracting their competitors rapid expansion on emerging markets.

3.2 Electric SEAT

SEAT has a range of so-called environmentally friendly (eco-friendly) cars in their assortment, environmentally friendly is in quotation marks because the technology used to produce and drive these cars still pollute the environment. With the current technology much more clean ways of automotive transport are available, hybrid or even fully electric cars are not a thing of the past anymore. At this moment SEAT is one of the few car producer with no hybrid and or electric cars in their product range, in contrary to several of its biggest competitors. However technology for hybrid and electronic cars is still in full development, this day and age good alternatives to the conventional combustion engine(s) are available. 3.2.1 Why Electric? The SWOT analysis has identified that there is enough technological know-how available in both the parent company as well as in SEAT for developing a hybrid and or full electric car. A good addition to SEATs Ecomotive line would be a full electric car, to become a stronger organization and to counteract the threat of competitors leaping even further ahead on the eco-friendly car front. A good place to start with SEATs full electric car is the European market. Forecasts say that as many as four million plug-in vehicles will be on the road in Europe by 2020, with a potential of up to 10 or 15% of new vehicle sales (one third of which would be pure electric vehicles and plug-in hybrid two thirds)3. One of the reasons the full electric car is chosen, is because of the European Unions policies4. The European Union plans cut the use of fossil fuels by cars in half by 2030, prior to its gradual replacement by 2050. The EU argues that by then, the major urban centers are free of CO2 emissions and greenhouse gasses. For smooth integration of electric vehicles in society, it must have support from the government. In the beginning, SEAT will market their electric car in its home country, Spain. The Spanish government has already granted SEAT their support, this support consists of a network for electric cars with testing in major cities to test the performance and acceptance of this vehicle type.

3 4

http://www.revistaambienta.es/WebAmbienta/marm/Dinamicas/secciones/articulos/Ingeteam.htm European Commission. Roadmap to a Single European Transport Area. Brussels, 2011.

3.2.2 The car The type of customer SEAT should focus on is the average European customer, making small changes to the electric car where needed to adopt it to certain country markets and standards. Research into customer demand has shown that an average European citizen has a preference to specific attributes of a car. The order of preference is listed in Table 3.1 below. Priority 1st 2nd 3rd 4th 5th 6th 7th 8th 9th Criteria Purchase Price Cost of using Fitness for use and needs Specifications / security Model / design / comfort / ergonomics Brand Driving pleasure Country where manufactured / assembled Image provided by the vehicle Percentage 72% 63% 52% 51% 30% 17% 11% 4% 1%
Table 3.1 - Customer preference

The table shows that price of both purchase as well as the cost of use are most important. Not only these criteria are important, also the age of the target group is important, SEAT can best focus on customers between the age of 30 and 60. Study on customer behavior on the automotive market has shown that this age are group are the most intensive users. Figure 3.2 below shows the percentage of vehicle use within the different age categories.
%

18-24

25-34

35-44

45-54

55-64

> 65 years

Figure 3.2 - Usage of cars

Regarding the technology in electric vehicles in general, their electric motors provide a quiet and smooth ride, as well as stronger acceleration. Besides those ride features they also require less maintenance than conventional combustion engines and are cheaper in use. Considering that the cost of use is the second most important criteria when buying a car (Table 3.1), it is smart to choose a
5

Cetelem. elobservatoriocetelem. 2013. http://www.elobservatoriocetelem.es/.

technology with low operating costs like the electric motors. Operating costs of electric vehicles are about half or even less than regular vehicles. Whereas the benefit on maintenance costs can be up to 35% in favor of electric cars. Battery capacity and recharging capabilities are the most important issue nowadays. The ideal situation is a full electric car that offers extensive range without an electrical car with the certainty of not breaking down or run out of power. This day and age the main problem with full electric cars is their range without the long recharging period. New technologies are available and can be adopted by SEAT to develop a less recharge dependent car. The main source of energy for SEATs full electric car should be a lithium-ion liquid battery with its own cooling capabilities. What would make this car innovative is that the battery can be recharged wirelessly via a network integrated in the infrastructure. Power can be generated via a magnetic resonance coupling, this system consists of two coils, one on the car and one integrated into the road. The two coils oscillate in sync transmitting power to the batteries as you drive over it.6 When this wireless charging system is not available and the batteries would runs out of power, a 1.4L gasoline fueled engine will function as a generator backing up the electric system. Unlike hybrid cars this little engine cannot be used to drive the car, it can only be used for recharging the batteries, extending the range with up to 600 km.7

6 7

Delphi Wireless Charging System. Performed by TreeLiving. 2012. From the desk of Chevrolet Volt. Performed by Chevrolet. 2012.