Volkswagen in China, Marketing Assignment

1.0. Introduction.

Marketing nowadays is the essential element of successful organizations (Kotler, 1999). And of course all products that are produced by companies are made to be sold and provide the profit for producers in this light marketing is the most important tool because it effects profitability and sales dramatically and provide the healthy turnover for the company. According to Kotler marketing is "the process that satisfies needs and wants through an exchange process" (1999). The Chartered Institute of Marketing enhances this definition to 'The management process responsible for identifying , anticipating and satisfying customer requirements profitably'. Marketing is based on several marketing concepts (Appendix 1).

This paper will describe the marketing strategies on the example of Volkswagen Group China (VGC) , automotive industry.

2.0. Organisation back-ground.

VGC is an affiliate of Volkswagen AG. Volkswagen has been in China automotive market since 1984. Volkswagen opened its headquarter in Beijing, China (www.vw.com.cn ) . During this period of time VGC demonstrates sustainable growth and profitability, for example in financial statements (2010) its sales revenue was shown as €126.9 billion, with 20.6% in difference from the previous year profit, with 1.9m sold cars in total (Appendix 2). Net liquidity of the Automotive Division has increased to €18.6 billion in 2010 (Appendix 3). The quantity of employees reached amount of 53,000 in 2010. Current President of the VGC is Dr. Karl-Thomas Neumann (CEO). The VGC is operating through 2 joint-ventures: Shanghai Volkswagen Automotive and FAW-Volkswagen Automotive Company .

3.0 Industry analysis Pest.

3.1. Economic Impacts.

There are 2 main events that have changed the economy of China cardinally. The first is the open policy from the 1970s and the second its WTO membership in 2001, according to which China's economic system became more market-oriented. In January 2004 the National Bureau of Statistics has provided data that China's GDP had raised by 9.9% in 2003. According to the opinion of analytics, China's GDP is predicted to rise for 17,84% in 2020, what means it will reach predicted GDP of USA for same 2020, this is shown in table in (Appendix 4 )(www.forbes.com) . The significant increase of GDP (Appendix 5) will influence China's consumer spending trend. The membership in WTO has made China to be very attractive FDI destination, it has created more pressure on Volkswagen Group China by very strong competition, as before Volkswagen was one of few automotive manufacture on Chinese Cars Market and now nearly all international car producers are available on Chinese market. The wide availability of different car manufactures, brands, products is increasing the shift in customers demand and decrease of customers' loyalty. Moreover the world economy now is facing trend of increasing price for Commodity and Raw materials, for example: steel, resins and iron that are mainly used in the car manufacture industry (Appendix 6). And it is resulting in growth of demand for it in car manufacturing industry, what means that Volkswagen's pricing policy will be strongly influenced. New Chinese automotive producers (such as Chery Automobile) (Appendix 7) with lower prices than average market prices and support of government are trying to capture their share of the Chinese market, what makes Volkswagen Group China increase its investments. Furthermore strong fluctuations in exchange and interest rates (Appendix 8) provide another challenge for Volkswagen Group China.

3.2. Political Impacts.

FDI activities in automotive industry in China is regulated by Chinese government by laws, pacts and restrictions. Chinese government allowed the entry for foreign producers only through joint ventures and only less than 50 % in share (The Excerpt of Chinese Auto Industry Policy). Moreover Chinese government wants to develop its own production with help of foreign investment. That is why, the Chinese government created encouraging laws and pacts for the domestic manufacturers to develop their own autonomous brands. Moreover Chinese government is becoming more concern about environment, chronic traffic jams, pollution and created new laws and pacts that leads to increasing of taxes and barriers for foreigner's car production in China.

3.3. Social-cultural impacts.

For adopting the right marketing strategy is crucial to evaluate and take into attention all social factors, social constructed behaviour and interpretations which is affected by their broader social force, structures or process (Saunders, Lewis & Thornhill, 2003) that may influence company in the foreign market (Hill, 2001).

In comparison with Western countries China has many different cultural habits and beliefs, types of behaviour and traditions that impact even business sphere. For example the "Guanxi" issue - interpersonal connections are more important than your knowledge, based on trust (Malcolm Warner, 2003; Jie Tang and Anthony Ward, 2003) adopting that concept can determine the success and stability of business, domestic partners may decrease cultural problems and issues and minimize the risks ( Cai Qian ,2007).

The other social aspect is that China is the most populated country all over the world with the biggest market in the world.

The next important social impact that may influence Car producers in China is that there is a big gap in income distribution of population.. At the same time the average population income is growing with growth of country's GDP (Appendix 5 and 9)..

4.0. External analysis for VGC. Five forces analysis.

4.1. Power of Suppliers

As was discussed above automotive industry depends very high on suppliers of steel, resins and iron. That is why the power of suppliers is very high because all big suppliers of raw materials in China are controlled by government and there are no possibility to substitute these raw materials.

4.2. Bargaining Power of Customers

Nowadays bargaining power of customers is quite high because great variety of international and domestic car manufacturers presents currently on Chinese market, a lot of choices are available that keeps shift in customers' demand accelerating.

4.3. New Entrants

After the WTO membership in 2001 opened boarders and China has attracted a lot FDI and new international manufacturers