RENAULT INTERNATIONAL MARKETING PLAN
Executive Summary This report presents an international marketing plan for marketing electric and hybrid cars at Renault. The report starts with a brief introduction of Renault’s business and its alliances globally. It highlights the reasons for Renault’s international plans - proactive factors like profitability, unique technology and economies of scale, and reactive factors like competitors, domestic markets, tax incentives and closeness to customers. The report provides a brief analysis of the micro- and macro- environmental factors that influence the international marketing strategy for Renault’s electric cars. International market analysis includes macroeconomic issues like geographic, political, economic, technological and cultural issues which Renault will face while undertaking its plans. Microenvironment issues illustrate internal strengths and weaknesses as well as challenges and opportunities in the potential markets for electric cars. The report also throws light on obstacles – internal and external obstacles like management, government, politics and economic issues, faced by Renault. The marketing plan is based on a carefully chosen target segment for Renault’s electric cars. The target segment will be different in various geographical regions, depending on buyer behavior and demographics. The regions of focus for Renault are the U.S. and emerging Asian countries. The marketing strategy will offer target customers a value proposition that is competitive and lucrative. Renault will have to price the product it offers differentially across geographical regions depending upon the geographic, demographic and buying behavior of consumers in their respective target markets.
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The marketing plan includes the influence of foreign currency exchange rates on pricing and other aspects of the international business of Renault. Renault will continue to leverage its strength of developing strategic partnerships with global firms to strengthen its market share and position in overseas markets.
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Table of Contents Executive Summary.....................................................................................................................................2 Table of Contents........................................................................................................................................4 Company Profile..........................................................................................................................................8 Renault is headquartered in Boulogne-Billancourt in France and was established in the year 1899. It is among the largest three European automobile manufacturers by production volumes, behind Volkswagen Group and PSA. It is the ninth largest automaker by production in the world. The company produces a wide range of cars, vans, trucks, tractors, tanks, buses/coaches and auto-rail vehicles...........8 Renault owns the Romanian manufacturer Automobile Dacia in addition to Korean Renault Samsung Motors. It is a multinational company with subsidiaries and operations spread across 118 markets. Renault designs, develops, manufactures and sells innovative, safe and environmentally friendly vehicles worldwide. Its worldwide employee strength of 128,893 employees contributes to its strategy of delivering profitable growth with environmental sustainability, competitiveness and international expansion. The company's core market is Europe. It is known for its role in motor sports and its success in rallying and Formula 1. As a part of its expansion, the company wants to scale up its operations in global markets, primarily developed markets in America and Europe, and emerging markets in Asia and Africa...........................................................................................................................................................8 As part of the Renault-Nissan Alliance, Renault and Nissan are undertaking significant electric car development, investing â‚Ź4 billion (US$5.16 billion) in eight electric vehicles over three to four years from 2011. For Renault, electric and hybrid cars are a long-term solution to ongoing sustainable business. Consumers around the world are looking for solutions to their transportation needs that decrease their dependency on the limited reserves of fossil fuels worldwide....................................................................9 Renault has seized on the opportunity to become the first auto manufacturer to present a complete range of zero-emission electric and hybrid cars. With innovations in technology, it is now commercially possible to mass market an electric vehicle at reasonable cost. In addition, changes in vehicle use make electric cars ideal for the majority of trips, with 87% of Europeans currently driving less than 60 km a day. Renault will therefore be looking to capture demand for such markets in developed markets like the U.S. and Europe, and developed parts of Asia for this product...................................................................9 Reasons For International Plans................................................................................................................10 Proactive factors....................................................................................................................................10 Macro Environment...............................................................................................................................13 Cultural Environment.............................................................................................................................18 4
The importance of culture has risen in recent years, with the development of international business. Cultural theories identify differences and similarities in cultures. Renault electric car distribution and marketing strategy will consider the buying behaviour of consumers, business environment and culture of the countries.........................................................................................................................................18 Cultural models are used to understand social systems and how they work (Hofstede, 2001). Hall’s theory is based on three issues related to cultural differences in interpersonal communication as well as personal space. Cultures can be divided into low context cultures and high context cultures. Cultures with a low context focus on the message itself, with direct and precise use of words based on feelings and true intentions (Gudykunst & Ting-Toomey, 1988). In high context cultures, focus lies on the social cues surrounding the message. Personal reputations, relationships and mutual trust are of high importance. Examples of high context cultures are countries like Vietnam, China, Japan, Arab countries and Russia. Here handshakes and oral commitments are more important that agreements (Dumetz, 2009). Examples of low context culture are countries like Germany, the U.S. and United Kingdom. Hall also refers to the manner of using time. Mono-chronic countries like the United States, Germany and Scandinavia value punctuality and scheduling working time (Steers, 2005), concentrate on one activity at a time and do not value interruptions. Southern European countries like France and Spain, South America and Arab countries, belong to a polychromic group, where taking more effort in relationships than in appointments and schedules is how organization and business culture works. ...........................18 The Hofstede Model makes it easier to compare countries with each other by providing a scale for measurement. Hofstede’s theory distinguishes different business cultures on the basis of values (Steers, 2005). The theory refers to values like – Power Distance, Uncertainty Avoidance, Individualism versus Collectivism, Masculinity versus Femininity, and Long-Term versus Short-Term Orientation. Power distance describes the extent to which people and businesses accept authority and power. Countries with lower power distance, like Scandinavian countries and Germany, do not accept hierarchical structures in business, in contrast to Asian, Latin American and Arab countries, that expect authority to use power. Likewise, cultures with low uncertainty avoidance tend to have fewer rules at work, and stay open minded to new ideas and situations. Cultures with high uncertainty avoidance need “certainty, clarity and predictability” (Steers, 2005). The United States and most Scandinavian countries like Sweden and Denmark refer to the first group, while Japan and Russia refer to the second. The third dimension describes the extent to which countries rely on individualism or collectivism. Most of Europe, and especially the United States, are individualistic and emphasise independence, responsibility and freedom. These countries also admire individual achievement in work performance. Japan, Russia, Malaysia, Singapore and Taiwan are countries that rely on allegiance. Loyalty and personal relationships play an important role in building business relationships in these countries (Steers 2005). However, these theories do not reflect the actual picture as on the ground, and have their own limitations. In business, Russians are known to be rather distant, sometimes rude and withholding of information on the one hand, while Russian hospitality is well known on the other.........................................................19 Micro & Meso Environment......................................................................................................................20 Company ...............................................................................................................................................20 5
SWOT Analysis...................................................................................................................................21 Competitor Analysis...............................................................................................................................24 Porter’s 5 Forces Model for Competitiveness...................................................................................24 Internal And External Obstacles................................................................................................................26 Market Segments & Targeting...................................................................................................................28 Mode Of Entering Markets........................................................................................................................29 There are various modes of entry available to Renault for its international foray. The company can set up a domestic manufacturing unit and export cars from the same to foreign markets. However, to export to countries like the U.S. and Asia will be difficult given the cost of logistics involved. For markets in Europe, Renault can look into exporting the cars either wholly assembled or in component parts, wherein the company will have to assemble the parts in an assembly established in a different country...................29 The most viable option for Renault is to have global manufacturing units, considering the long-term cost advantages, laws and political situations, as well as the strategic and geographical efficiencies in countries where infrastructure and availability of raw materials are not an issue (Smith, 2006). In countries where the business environment is tough, local partners can help significantly. Renault should look for strategic partnerships to manufacture and markets its electric cars. This will lower the risk to Renault as well as help the company to establish itself with minimum risk in a new country like India, Russia or China. .........................................................................................................................................29 Marketing Mix...........................................................................................................................................30 Exchange Rate Fluctuations and Pricing.............................................................................................31 Conclusion.................................................................................................................................................33 International expansion plans present a huge market and opportunity for Renault to capture market share, create new demand for hybrid/ electric vehicles and increase its overall profitability. Developed markets like the United States and European countries, where the per capita income is high, and demand for innovative, environmentally friendly product is also high, present a ready market for Renault to market electric cars. ................................................................................................................33 Geographical, political, legal, economic, technological and cultural factors influence business in international markets. Renault’s business expansion to offer its electric / hybrid cars in other countries will have to address these challenges. Technology, financial strength, strategic alliances and partnerships are the key strengths of Renault (Weeks, 2010). The company enjoys a reasonably strong market position among its competitors, in terms of competitive rivalry, buyer –supplier relationships and substitutes in the near future....................................................................................................................33
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Renault’s product strategy will be centered on new product development, innovation and launches in the electric car/ zero emission car segment space. Broadly speaking, consumers in auto markets can be segmented on the basis of their demographics - factors like income, age, geographic regions, sociocultural attributes and buyer behavior. There are various modes of entry available to Renault for its international expansion. The company can set up a domestic manufacturing unit and export cars from its home base to foreign markets. In countries where the business environment is challenging, and where local partners help significantly with market knowledge and technology, Renault should develop strategic partnerships to manufacture and market its electric cars. Renault should ideally undertake a differentiated pricing strategy, taking into consideration the overall value proposition to target customers, consumer price sensitivity and competition...........................................................................34 References.................................................................................................................................................35
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Company Profile Renault is headquartered in Boulogne-Billancourt in France and was established in the year 1899. It is among the largest three European automobile manufacturers by production volumes, behind Volkswagen Group and PSA. It is the ninth largest automaker by production in the world. The company produces a wide range of cars, vans, trucks, tractors, tanks, buses/coaches and auto-rail vehicles. Renault owns the Romanian manufacturer Automobile Dacia in addition to Korean Renault Samsung Motors. It is a multinational company with subsidiaries and operations spread across 118 markets. Renault designs, develops, manufactures and sells innovative, safe and environmentally friendly vehicles worldwide. Its worldwide employee strength of 128,893 employees contributes to its strategy of delivering profitable growth with environmental sustainability, competitiveness and international expansion. The company's core market is Europe. It is known for its role in motor sports and its success in rallying and Formula 1. As a part of its expansion, the company wants to scale up its operations in global markets, primarily developed markets in America and Europe, and emerging markets in Asia and Africa.
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As part of the Renault-Nissan Alliance, Renault and Nissan are undertaking significant electric car development, investing â‚Ź4 billion (US$5.16 billion) in eight electric vehicles over three to four years from 2011. For Renault, electric and hybrid cars are a long-term solution to ongoing sustainable business. Consumers around the world are looking for solutions to their transportation needs that decrease their dependency on the limited reserves of fossil fuels worldwide. Renault has seized on the opportunity to become the first auto manufacturer to present a complete range of zero-emission electric and hybrid cars. With innovations in technology, it is now commercially possible to mass market an electric vehicle at reasonable cost. In addition, changes in vehicle use make electric cars ideal for the majority of trips, with 87% of Europeans currently driving less than 60 km a day. Renault will therefore be looking to capture demand for such markets in developed markets like the U.S. and Europe, and developed parts of Asia for this product.
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Reasons For International Plans Proactive factors •
Profitability: International expansion plans present a huge market opportunity for Renault. It can capture market share, create new demand for hybrid/ electric vehicles and increase its overall profitability. Developed markets like the United States and European countries, where the per capita income is high and demand for innovative and environment friendly product is also high, present a ready market for Renault to market electric cars. It is important for Renault to continuously deliver cutting edge, sustainable and long-term technological solutions in mature markets to deliver growth on its profitability.
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Unique Product / Technology: Renault is an established player in the automobile market. Product safety, quality, design and manufacturing components play an important role. Most of Renault’s products are rated five stars on quality and safety. An electric car is an offering that reduces the carbon emission / footprint of buying a vehicle and appeals to a growing segment of environmentally friendly consumers including individuals, institutions and governments. The electric cars from Renault are unique as Renault is among the only top manufacturers of automobiles that have launched a full range of electric cars. By expansion of its business internationally, Renault wants to garner a significant portion of market share for such vehicles benefiting from it being the first mover and also leveraging its international reach.
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Economies of scale: Developing new technologies and entering into commercial production after undergoing stringent tests on quality, experience and customer safety incur huge costs 10
that increase the price for delivering such innovations to the end user. By offering the product globally in the developed and emerging markets, Renault has an advantage of delivering the product at a lower price point by realising economies of scale in production and also using its global facilities to deliver the product at a lower cost, increasing its overall profitability. Renault can take advantage of the lower cost of resources available at in overseas countries, to deliver electric cars at a highly competitive cost to customers. Reactive factors •
Competitors: Increased competition and maturing of markets for automobile manufacturers have made technology and innovation more important. The competitive landscape globally consists of the same companies, yet new innovations and technology provide a means to hive away competition by offering a differentiated product offering. Renault’s overseas plans underline its strategy to be competitive by venturing into new technology. Renualt is committed to being a formidable player globally by providing clean, emission-free vehicles and has initiated benchmarks like ’eco2’ to reduce carbon dioxide emissions.
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Domestic market : The domestic market for cars provides limited opportunities for growth and expansion. In Europe, recent years have witnessed a sharp slowdown in both the domestic and European economies. Renault is therefore looking for new markets, including the U.S., which is the largest consumer of goods world wide. Emerging economies like BRICs and African nations will also help to deliver growth and profitability in the future. Renualt has recently undertaken alliances with Nissan and
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other companies to jointly enter difficult but growing emerging economies that provide huge opportunity for growth. •
Tax incentives: Tax incentives also motivate manufacturers to look overseas for expansions. Tax rates in countries differ and incentives often exist for foreign companies wishing to invest in developing countries, as this helps to boost local employment.
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Closeness to customers: Renault already has a huge customer base in the countries where it operates. By launching its new products like electric cars, Renault will be able to deliver this technology to its customers worldwide. It will not only help Renault win new customers, but also help its existing customer base to enjoy the benefits of its offerings . Expansion in new markets will take Renault closer to its potential and existing base, and also help its local divisions and subsidiaries to use local knowledge to deliver its product more effectively.
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International Market Analysis Macro Environment Business in international markets is influenced by a lot of factors at a macro level like geographical, political, legal, economic, technological and cultural factors (Baker, 2008). Renault’s business expansion to offer its electric / hybrid cars in other countries will have to face the following challenges while operating in international markets. Geographical Environment •
Climate and topography: Marketing strategy for Renault should consider the climate and topography of the region. Electric or hybrid cars have been designed and tested in France and at European facilities. The electric cars are designed for use within the city limits where maximum usage per day is not more than 60kms. Therefore the product will have to be targeted in countries where climatic conditions are not too harsh and are similar to the conditions as prescribed by the manufacturer.
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Raw materials: Raw material availability is also an important factor in determining the manufacturing location. The presence of local suppliers with dependable supplies is key to quality production. Raw material supplies is not a concern in developed countries in Europe, the U.S. and Asia. However, for developing countries, Renault will have to consider either importing the car in broken down kits or manufacturing the same locally. This will have implications in the cost of delivering the product, and profitability of the company.
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Environmental protection: Being an electric vehicle manufacturer, Renault will get considerable support from the governments the world over, as there is a positive impact when using the product. The decrease in carbon emissions not only helps to decrease noise and air pollution, but also helps in building a more sustainable future around renewable sources of energy.
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Urbanisation: Urbanisation is an important factor Renault will look into before entering into a new country. The level or urbanization in the target market will determine access to developed roads, electricity and other facilities required to manufacture and use the product. Political Environment
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Political system: Political stability is important for running a business in a country or ecosystem. Renault will have to consider the political systems and their implications on businesses. Stable government policies for investment, taxation and development are prerequisites for long-term investments in any country. Europe and United States lately have seen a lot of volatility in terms of their overall economic growth. Austerity measures, a fall in earnings and high debt levels are causes for concern in European countries and the US. Present political system in the US favour the capitalist policies, however stringent internal legislations on traffic safety make it difficult and costly for new companies to enter US markets.
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Changes of the government: Change in government brings about changes in policies and affects investors in the country. The government determines import tariffs, taxation and policies. Renault must ensure that it takes into account bilateral and multilateral treaties to ensure that business and profitability in these countries is immune from the risks of changing 14
governments. The risk is higher in developing nations, which tend to protect the interest of their domestic industry by creating artificial barriers for foreign businesses. Lately litigations related to patents, intellectual property rights and fair business practices on US companies in European markets have created an environment of distrust and competition among the two continents.
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Economic environment •
Globalisation & Localisation: With globalisation becoming a mainstream in many countries, markets are opening up for foreign participants. Renault can take advantage of the globalisation drive in many developed and emerging economies by achieving economies of scale, and by planning production in a manner that the cost of delivery to customers is minimised. To be successful in a market overseas, it is important that Renault undertakes a reasonable degree of customisation in the product and its distribution, keeping local knowledge in mind.
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Partnerships: Partnerships and franchisee models are successful distribution channels through which Renault can sell electric cars. Depending on geographical and political factors, Renault can enter strategic partnerships to sell electric cars overseas. Its partnership with companies like Nissan and M&M will help it leverage its distribution network to increase sales. Entry Barriers in the US related to passenger safety are stringent and translate into huge costs for any car maker. Strategic partnerships can help Renault in getting market access at a lesser cost and time.
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Infrastructure: Presence of basic infrastructure is a pre-cursor for moving production to any country. In most markets where the electric car will be targeted, like the U.S., Europe and developed parts of Asia, infrastructure is not an issue. Technological environment
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Role of human resource: Apart from the technical knowhow for Renault, availability of skilled resources at a lower cost in developing countries in Asia presents a significant opportunity.
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R & D costs and innovations: Electric cars will incur high costs in R&D and new innovations. With increasing competition globally, Renault will have to constantly innovate in order to provide its customers with new and affordable technologies.
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Cultural Environment The importance of culture has risen in recent years, with the development of international business. Cultural theories identify differences and similarities in cultures. Renault electric car distribution and marketing strategy will consider the buying behaviour of consumers, business environment and culture of the countries. Cultural models are used to understand social systems and how they work (Hofstede, 2001). Hall’s theory is based on three issues related to cultural differences in interpersonal communication as well as personal space. Cultures can be divided into low context cultures and high context cultures. Cultures with a low context focus on the message itself, with direct and precise use of words based on feelings and true intentions (Gudykunst & Ting-Toomey, 1988). In high context cultures, focus lies on the social cues surrounding the message. Personal reputations, relationships and mutual trust are of high importance. Examples of high context cultures are countries like Vietnam, China, Japan, Arab countries and Russia. Here handshakes and oral commitments are more important that agreements (Dumetz, 2009). Examples of low context culture are countries like Germany, the U.S. and United Kingdom. Hall also refers to the manner of using time. Mono-chronic countries like the United States, Germany and Scandinavia value punctuality and scheduling working time (Steers, 2005), concentrate on one activity at a time and do not value interruptions. Southern European countries like France and Spain, South America and Arab countries, belong to a polychromic group, where taking more effort in relationships than in appointments and schedules is how organization and business culture works.
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The Hofstede Model makes it easier to compare countries with each other by providing a scale for measurement. Hofstede’s theory distinguishes different business cultures on the basis of values (Steers, 2005). The theory refers to values like – Power Distance, Uncertainty Avoidance, Individualism versus Collectivism, Masculinity versus Femininity, and Long-Term versus Short-Term Orientation. Power distance describes the extent to which people and businesses accept authority and power. Countries with lower power distance, like Scandinavian countries and Germany, do not accept hierarchical structures in business, in contrast to Asian, Latin American and Arab countries, that expect authority to use power. Likewise, cultures with low uncertainty avoidance tend to have fewer rules at work, and stay open minded to new ideas and situations. Cultures with high uncertainty avoidance need “certainty, clarity and predictability” (Steers, 2005). The United States and most Scandinavian countries like Sweden and Denmark refer to the first group, while Japan and Russia refer to the second. The third dimension describes the extent to which countries rely on individualism or collectivism. Most of Europe, and especially the United States, are individualistic and emphasise independence, responsibility and freedom. These countries also admire individual achievement in work performance. Japan, Russia, Malaysia, Singapore and Taiwan are countries that rely on allegiance. Loyalty and personal relationships play an important role in building business relationships in these countries (Steers 2005). However, these theories do not reflect the actual picture as on the ground, and have their own limitations. In business, Russians are known to be rather distant, sometimes rude and withholding of information on the one hand, while Russian hospitality is well known on the other.
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Micro & Meso Environment Company Established in 1899, Renault is among the top three car manufacturers in Europe. In 2012, more than half of its sales came from outside Europe. As part of the Renault-Nissan Alliance, Renault and Nissan are investing significantly in their partnership with a mission to provide zero-emission mobility to consumers worldwide. The Renault-Nissan Alliance, founded in 1999, sold 6,160,046 vehicles in 2007. Combined with these sales was an objective to rank among the world's top three vehicle manufacturers in terms of quality, technology and profitability. Renault’s core market is in Europe and the company is looking at other international markets to sell its electric cars. Renault’s mission statement is ’to make and sustain Renault as the most profitable and competitive European car company”. For its electric car venutre, Renault has a mission to provide zero emission mobility to consumers. United States is one of the most important international markets for Renault’s electric cars. With a per capita income of about $50,000, and an estimated population of more than 315 million, United States is one of the largest consumers of goods and services globally. It is one of the most ethnically diverse and multi cultural nations. The country is also the third largest manufacturer of automobiles in the world, producing approximately 8 million vehicles a year.
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SWOT Analysis Strengths •
Strategic Partnerships: A key strength of the company is to undertake strategic partnerships to penetrate difficult and competitive markets. Renautl’s partnership with Nissan for electric cars is an important step in this direction.
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Global Operations: More than 50% of Renault’s sales come from outside Europe. Renault is a global player and has its reach in 118 countries where it operates.
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Strong Focus on R&D: The company has a strong focus on R&D, which has helped it to develop an entire range of emission free cars.
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Brand: Being among the top three automobile manufacturing firms has provided Renault with a huge brand equity .
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Innovations: The company continues to innovate and come out with new concept cars with advanced technology and efficiency.
Weaknesses •
Weak operational performance: Though Renault has been profitable, the operational performance of the company has not been strong recently. Reason might be attributed to an overdependence on Europe and the subsequent recession in major European economies.
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Weak performance in key markets: Renault’s key markets have been Europe and the U.S.. Renault has performed below expectations in these two regions due to heightened competition and an economic slowdown.
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Reliance on western Europe: Western Europe has been a major market for Renault. However, slowdown and austerity measures in European countries have dented demand. Renault is now trying to diversify into other regions with high potential for growth.
Opportunities •
Growing Asian automobile industry: Growing emerging economies like Russia, India and China present a huge opportunity for Renault. Renault has already entered these markets in partnership with local companies.
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New model launches: The car market internationally is very competitive and one way in which companies can remain competitive is by continuously rolling out innovations and new models.
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Increasing demand for emission free cars: As concerns grow globally about global warming and a carbon footprint, governments and companies are increasingly promoting green and emission free technologies.
Threats •
Economic uncertainty: Economic downturn in the European Union and concerns about falling spends in the U.S., China and other growing markets poses a threat to demand and discretionary spending by consumers. 22
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Severe competition: Global competition in the car segment is intense with companies expanding businesses across borders and competing for the same customers.
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New technology: Development of new technologies, which are cheaper and widely commercial, might render the electric car as a less preferred choice among its target customers.
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Competitor Analysis Porter’s 5 Forces Model for Competitiveness Porter’s Five Forces Model for competitive analysis provides a framework to analyse the competitive position of a company within the industry (Porter, 2008). The auto industry around the world is a mature one and has various competitive forces within and outside it that impacts upon new entrants, existing players and the existing position of Renault. Threat of New Entrants: Electric car segment is a new segment with few competitors at present. However, competitors in Europe and other countries have already started venturing into the electric car market. With Renault’s expansion into new markets, new international and local players will also enter markets and provide stiff competition. Power of Suppliers: Renault has a well-established chain of OEM suppliers. The company does not face threats from suppliers as it has more power in the marketplace to influence its suppliers and their pricing. Apart from raw material prices, Renault has considerable control over its supply chain. Power of Buyers: Lack of organised buyers or bulk purchasers mean buyers do not have considerable market power. In the electric vehicle industry, Renault will be able to market its product to the target segment without any pressures from buyers on pricing.
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Threat of Substitutes: The elecrtic car market will have considerable threat from substitutes, ranging from conventional fuel cars to fuel efficient and alternative fuel cars. Any new developments in technology resulting in alternative and more efficient modes of transportation, will result in increased competition. Rivalry among existing players: The rivalry among existing players in the car market is intense, with other players in European and US markets aggressively launching and marketing new products. This competition has led to price wars in the past. Existing and established market players have the financial and technical strength to compete internationally.
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Internal And External Obstacles There are numerous obstacles which companies face when drawing up their international marketing plans. These obstacles can be categorised broadly into internal and external obstacles. Internal obstacles relate to internal issues and challenges faced by companies. These include lack of internal competencies, like management, marketing or language, lack of infrastructure within the company to produce the desired level of output and efficiency, and internal organisational willingness to collaborate and capture new ideas at work. Renault as an organisation has a strong and capable management that has led it to become Europe’s third largest car manufacturer. Its operations are established and its workforce has significant market knowledge. Renault is a leader in innovation and implementation of new ideas. External obstacles to any global company will include various unforseen events, changes in domestic and foreign policy with respect to legal, financial, taxation, environmental, political, cultural and economical issues (Armstrong, 1996). Major challenges Renault will face while implementing its international marketing plans will be: •
To overcome cultural barriers and issues while marketing its electric cars;
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Policies and laws in other countries;
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Political situations in target countries like the U.S., Japan and other Asian and European countries;
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Tariff and non-tariff barriers to trade, which make the effective cost of the offering in a foreign country higher and costlier than the domestic alternatives. 26
Obstacles in the U.S. The United States has always been a key market for Renault. Being the world largest economy in size and consumption, the United States also has a high per capita income, and is a huge, untapped market for Renault. Renault will be keen to export its new line of electric and hybrid cars to ’drive’ its international marketing plans. Barriers to entry for new cars in the U.S. are extremely high. With the enactment of the National Highway Traffic and Safety Administration (NHTSA) in 1960, the administration has enacted numerous standards for safety ranging from child seats and airbags to wind shields and tyres. Analysts consider the regulations of the NHTSA deep, complex and unforgiving and a deterrent for new manufacturers to enter U.S. markets. New car manufacturers are expected to spend millions of dollars in stringent safety crash tests, and wait for a couple of years to put a new car on the road, without having any guarantee of consumer acceptance for their product (Weeks, 2010). Such high cost to entry has deterred many companies to enter the U.S. However, international players like Toyota and Volkswagen have been successful in establishing their presence in the U.S. Renault is an established global company, with deep pockets and the expertise to overcome the cost barriers of entering the U.S. Another barrier in the U.S. is the high cost of marketing the product to its target segment. Advertising costs in the U.S. will run into millions, and are extremely important for the success of any new product.
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Market Segments & Targeting Consumers can be segmented on the basis of their demographics like income and age, geographic factors, sociocultural attributes and buying behavior. Marketers, who operate globally, often segment the market on the basis of geographical regions, given that the sociocultural environment, buyer behavior, laws, taxes and economic aspects of operations are homogeneous throughout the geography. Car manufacturers also segment the markets in terms of price ranges - like economy (small car/compact car segment), sedan or family car and premium/luxury cars. Marketers can also choose multi level segmentation to market their products to segments, based on a better understanding of customers, their buying needs, motivations and preferences. Renault’s electric car fulfills specific customer needs and preferences. Hence, the range of electric cars can be targeted at active, young couples, or singles that are affluent and have a passion for new technology. However, Renault’s segments can vary with different markets internationally.
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Mode Of Entering Markets There are various modes of entry available to Renault for its international foray. The company can set up a domestic manufacturing unit and export cars from the same to foreign markets. However, to export to countries like the U.S. and Asia will be difficult given the cost of logistics involved. For markets in Europe, Renault can look into exporting the cars either wholly assembled or in component parts, wherein the company will have to assemble the parts in an assembly established in a different country. The most viable option for Renault is to have global manufacturing units, considering the long-term cost advantages, laws and political situations, as well as the strategic and geographical efficiencies in countries where infrastructure and availability of raw materials are not an issue (Smith, 2006). In countries where the business environment is tough, local partners can help significantly. Renault should look for strategic partnerships to manufacture and markets its electric cars. This will lower the risk to Renault as well as help the company to establish itself with minimum risk in a new country like India, Russia or China.
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Marketing Mix Product Strategy Renault product strategy will be centered on new product development, innovation and launches in the electric car/zero emission car segment. Renault will have to move ahead with its present strategy of creating a range of emission free cars for different markets and segments, thereby offering its customers a complete range. Renault’s strategy will be to strengthen its present range of electric cars, which includes Twizy, Fluence, Zoe and Kangoo. Renault’s challenge is to break existing consumer perceptions about electric cars, their performance and quality. In order to become a successful brand in overseas markets for electric cars, Renault will have to offer value to its existing and new buyers. Pricing Strategy International pricing is complex, as it includes variable factors such as currency exchange rates, economic conditions, production expenses, competitors and consumers in target markets. International pricing strategies require careful planning and ongoing management in order to be effective. Pricing strategy for Renault’s international marketing plan for electric cars can be a complex issue. The pricing strategy for electric cars will take into consideration the challenges associated with coordination with different markets on the prices, import and export tariffs as applicable in various markets, tax implications and duties payable to governments (Smith, 2006). The company can choose to keep a uniform pricing policy for export markets. Too much difference in global prices will result in a grey market for the product, and will negatively affect the profitability of Renault. Renault should ideally undertake a differential pricing strategy, 30
considering the overall value proposition to target customers, consumer price sensitivity and competition. Exchange Rate Fluctuations and Pricing Exchange rates influence the pricing decisions for all international companies. A change in exchange rates impacts exporters and importers, and might lead to foreign exchange gains and losses for companies dealing in international trade. A fall in domestic currency vis-à-vis foreign currency makes exports cheaper and more competitive in global markets. Similarly, a strengthening of the local currency benefits importers and affects exporters negatively (Coyne & Balakrishnan, 1996). The overall pricing decisions are taken considering day-to-day changes in currency exchange rates and their implications on the profitability of the business. Exchange rates and movement of the Euro – Dollar, Euro – Yen or Yuan will have significant impact on the landed cost of goods, in the case of imports and exports of electric cars. Distribution Strategy The distribution strategy for Renault’s electric cars will take into consideration geographic and economic aspects. The distribution strategy will consider the location of production, warehousing and logistics, as well as actual markets for electric cars. Renault’s distribution strategy is also dependent on cultural factors and buying behavior of target customers, which can differ between countries. Buying behavior in the U.S., where customers like personal selling of high end products, is different from personal selling in France, where the concept of personal selling is not well received (Weeks, 2010). One of the differences between the U.S. and France is the use of personal selling techniques, such as entertaining customers over 31
lunch, breakfast or dinner, social interactions, sports like golf – all common practices in the U.S., but not common in France. Therefore, having local knowledge and expertise in marketing and distribution of electric cars is necessary and important. Renault might get a strategic partner in markets that are complex and difficult to penetrate, because of cultural differences and buying behavior patterns. Promotion strategy The promotion strategy for electric cars will involve an integrated approach to marketing communications to customers. It will present the value proposition and brand in a standardized manner. Renault should position itself as a global brand and a leader in innovations and zero emission technologies. Renault’s promotion strategy should involve various media to reach to the target customers, including print television, online and outdoor advertising. However, choice of media and communication should consider local buying behaviors, culture and consumer preference, in order to make electric cars a success. Renault’s electric car brands should be promoted as global brands, with local expertise and understanding.
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Conclusion International expansion plans present a huge market and opportunity for Renault to capture market share, create new demand for hybrid/ electric vehicles and increase its overall profitability. Developed markets like the United States and European countries, where the per capita income is high, and demand for innovative, environmentally friendly product is also high, present a ready market for Renault to market electric cars. Geographical, political, legal, economic, technological and cultural factors influence business in international markets. Renault’s business expansion to offer its electric / hybrid cars in other countries will have to address these challenges. Technology, financial strength, strategic alliances and partnerships are the key strengths of Renault (Weeks, 2010). The company enjoys a reasonably strong market position among its competitors, in terms of competitive rivalry, buyer – supplier relationships and substitutes in the near future.
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Renault’s product strategy will be centered on new product development, innovation and launches in the electric car/ zero emission car segment space. Broadly speaking, consumers in auto markets can be segmented on the basis of their demographics - factors like income, age, geographic regions, sociocultural attributes and buyer behavior. There are various modes of entry available to Renault for its international expansion. The company can set up a domestic manufacturing unit and export cars from its home base to foreign markets. In countries where the business environment is challenging, and where local partners help significantly with market knowledge and technology, Renault should develop strategic partnerships to manufacture and market its electric cars. Renault should ideally undertake a differentiated pricing strategy, taking into consideration the overall value proposition to target customers, consumer price sensitivity and competition.
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References Armstrong, M. 1996. Management Processes and Functions, 1996, London: CIPD Baker, M. 2008. The Strategic Marketing Plan Audit, 2008 Coyne, K.P. and Balakrishnan, S. 1996. Bringing discipline to strategy, The McKinsey Quarterly, No.4. Dumetz, J. 2009. Communication within the Russian business culture: Mind the context! http://old.goinglobal.com/hot_topics/russia_jerome_business.asp Retrieved on 18th May, 2013. Gudykunst, W. B., & Ting-Toomey, S. 1988. Culture and interpersonal communication. Newbury Park, CA: Sage. Hofstede, G. 2001. Culture’s Consequence. Thousand Oaks, CA: Sage. Porter, M.E. 2008. The Five Competitive Forces That Shape Strategy, Harvard business Review, January 2008 Smith, M.S. 2006. The Automobile and its Allies. The Emergence of Modern Business Enterprise in France, 1800-1930. Harvard University Press. pp. 402−405 Steers, R. M. 2005. Managing in the Global Economy. Armonk, NY, USA. Weeks, L. H. 2010. The History of the Automobile And Its Inventors, Books on Demand. pp. 101−102 35