Posted: July 4th, 2015

What is the best market strategy of Audi AG in China?

 

2.0 Back ground

The rising income of the Chinese citizens and their subsequent improvements of purchasing power had prompted increasing interests of the Chinese customers on luxurious products, including automobiles. IHS (2013) reported that by 2005 there are approximately 6 million vehicles that were sold in Mainland China. This number had been tripled by 2012, reaching 19 million and making Mainland China to become the largest automobile market in the world. (Accenture, 2014) suggested that although it is hard to maintain such exceptional compound annual growth rate, Mainland China would remain as one of the most potential target market in the upcoming years. This could be seen from the figure presented by Accenture (2014) as follows:

 

Figure 1

Historical and Projected Automobile Sales Growth in China (2005-2020)

Source: Accenture (2014)

Due to its future growth potential, Chu (2011) suggested that China would remain as the main target for various automobile companies in the long-run. While currently Volkswagen still maintains its position as the sales leader in China, the consumer market could be considered as rather immature, where the consumer behaviours would continue to evolve (Huo et al., 2012). This indicates that there are wide opportunities for automobile manufacturers to develop their market share, as long as they are able to understand the market needs and preferences of Chinese consumers and capable of presenting the desired vehicles and car-purchasing experience.

Motivated by such tendencies and market inclinations, this paper would like to explore the case of Audi car brands in China and developing appropriate suggestions on the possible marketing strategies that could be used for the company to increase its overall competitiveness and capitalising from the rising demands in the Chinese markets. In particular, the assessments on the PEST characteristics in China would be examined and synchronised with the SWOT aspects of Audi to develop adequate marketing strategy, which balanced the external influence factors (PEST) against the internal competitiveness of the company (SWOT). Additionally, assessments on the consumer purchasing behaviour for automobile products in China would also be conducted and compared against the current marketing channel implemented by Audi in attempts to develop relevant strategic framework for Audi

3.0 Preliminary review of literature

3.1 Customer behavior

Zhang (1996) suggested that there are strong prominences of cultural influences during the decision making process of the Chinese customers. First of all, in terms of their needs recognition, Zhang suggested the importance of emphases in both Confucianism and Taoism philosophy on the importance of family (such as prioritisations and emphases of parents as respected figures or sons as bloodline inheritors) as the key driving factors in determining needs.

The strong emphases over collectivist cultures had also caused the Chinese customers to prioritise the information searches and investigation on alternatives based on words-of-mouth, and it is more effective if the message is conveyed by the customers’ friends or family members. Huff and Kelley (2005) implied that this stemmed from the nature of the collectivist culture, which emphasise the importance for group acceptance or approvals; and the importance for the customers to possess group identities.

The prominence of the “Mianzi” (face) culture is heavily emphasised during the customers’ process in evaluating alternatives (Jiang, 2005). This culture emphasise low involvements in private purchases. However, it exerts considerable attention for purchases of items that could enhance the customers’ symbolic value in their societal life, suggesting that there are very strong inclinations of luxury item purchases in China. Wong and Ahuvia (1998) argued that the cultural emphases on symbolic value would also lessen the emphases in the process of post-purchase evaluation, provided that they are able to ascertain that the purchases had been able to accomplish their needs of societal recognitions. If this is not the case, they would look for other alternatives that could better serve their personal esteem needs.

The changing demographics and proliferations of new technologies had also reshaped the market trends and consumer behaviours of the Chinese customers, where Chen and Chen (2004) discussed the impact of governmental birth control plan in creating new generations (the Dusheng generation, who are raised as the sole children in their respective family). The status as the sole children in the family (and therefore, the inheritor of familial bloodline) as well as their subsequent pampered upbringing had caused these segments to become rather individualistic and self-centred, of which they would emphasise differentiation in their purchasing decision initiatives and are relatively not price sensitive in favour of their differentiation preferences (Ye et al., 2012).

This also extends to their tendencies in purchasing automobiles, particularly on the technological aspects, where Chinese consumers are less likely to visit a dealership or purchasing the vehicle from their preliminary research. Instead, they had more deliberate car-purchasing experience that involves internet searches combined with test drives at the dealership. The advancements of internet in the country is also substantial; where the Chinese are considerably more reliant on the internet to determine their purchasing decisions. As noted by Hu et al. (2012), they tended to develop ROPO (Research Online, Purchase Offline) behaviours. In particular, as seen from Figure 3, their proficiencies in utilising social media to assist their purchasing is particularly important; as it might implied that it would be more appropriate for manufacturers to abandon the traditional advertising approach that relies on television and radio in favour of establishing strong social media presences (Chiu et al., 2012).

3.2 Market positioning

Marketing positioning is ensuring the company’s position on the target market. According to the competitor’s product          position and customer’s demand, the company creates some featured product to build a distinctive brand image to get customer’s attractive and establish market position (Peter 2010). The market positioning need to considerate several factors, which are market segmentation, customer needs, brands and products. A directly market position will provide a strong competitive and help the company to account more market shares (Graham 2008). The first step of market positioning is the potential advantages of competition. The main three question need to considered: What is the positioning of competitor’s products? What is the customer’s demand in the target market? How to fulfill the customer’s benefits demand? Second step is determining the company’s core competitive advantages. Generally, the company can through compare seven standards to know which aspects is strength or weakness. These seven standards are management, technology, purchase, production, marketing strategy, financial and products. For examples, Audi’s technology is the strength aspect, such as Audi FSI technical; it not only can improve the power, but also can save fuel (Audi 2014). Over analysis these standards, the company can confirm their position on target market. The last step is strategy formulation. The company can through a series of promotion activities to propagate their competitive advantages to the customers. Establish a good corporate image and use brand effect to attractive customers.

3.3 Advertising strategy

Advertising is the most widely strategy in business activities, and it can divide four types: product strategy, marketing strategy, media strategy and advertising implementation strategy (Dennis 2013). Media strategy is one of the most popular types of advertising. This advertising strategy is through the social media to make the introduction of products and promotion, such as TV advertising, online advertising, traffic advertising, radio advertising, product placements, billboard advertising and so on (Sater 2011). For instance, Audi through TV advertising on sports television to propagate Audi A5’s sports performance. Shaping corporate image advertising strategy: Aims to show the company’s long history and high quality brand. Besides, advertising also can divide into several different types according to their different functions. For examples, Living information advertising strategy: Aims to let consumers obtain the benefits of living information. Shaping corporate image advertising strategy: Aims to show the company’s long history and high quality brand. Furthermore, in the aspect of advertising product positioning strategy it can divided into two categories: physical positioning strategy and conceptual positioning strategy. The physical positioning strategy is highlighted new value of product in advertising and emphasizing the differences of products with similar products. It also can divide into quality positioning, market positioning, price positioning and function positioning. The conceptual positioning is highlight the new meaning of products, changing consumer habits and establishes a new concept of products. There are two specific methods: reverse positioning and non-positioning (Dennis 2013).

4.0 Research question and objectives

4.1 Research question

What is the best market ingstrategy for Audi AG in China?

According to this question, it can extend following specific areas:

1. What is the current competitive landscape of Chinese automobile Industry?
2. What are the factors that influence the Chinese consumers’ general purchasing decisions?
3. To examine what Chinese newspapers are saying about Chinese consumer opinion of Audi AG

 

4. Are there any factors of improvements or potential barriers that could hamper Audi’s initiatives in developing their marketing strategy in the Chinese market?

4.2 Objectives

The main objectives of this research are:

1. The explorations of the consumer behaviours and consumer characteristics in China.
2. The assessments on the external competitive factors for Chinese automobile markets.
3. A strategic analysis of Audi VAG in order to determine its business level marketing strategy
4. Develop a marketing strategy for Audi in China

(their subsequent focus on target customers, to develop adequate marketing positioning and advertising strategy.

 

5.0 Methodology and research methods

5.1 Philosophical orientations

This research would be conducted under the premise of interpretivism philosophy, which integrates human interest into a study. As implied by Myers (2008), this philosophy assumes that the reality is developed through social constructions such as consciousness, language, shared meanings and instruments. This orientation is adopted based on the suggestions by Moon and Blackman (2014), that the main subject of observation in interpretivism philosophy is on aspects that are specific, unique and deviant, which would be useful to address the extent to which Audi developed specific marketing strategy that might be specifically aimed to attract the Chinese customers. Moreover, interpretivism philosophy also has the main goal to develop understanding, which is in line with the research aim to understand the consumer behaviours and consumer characteristics in China.

 

To complement this philosophical orientation, the researcher would design the dissertation based on an inductive approach, where reasoning from what Chinese consumers are saying about Audi VAG are developed to obtain specific conclusions and compared to on the literatures of consumer behaviours theory specifically the Chinese consumer behaviours. And, appliedto theories on marketing strategies, especially on the advertising and positioning against the advertising and positioning strategic orientations by Audi.

5.2 Research method

Based on the inductive reasoning concept, this research would be conducted under the premise of pure qualitative approach with the emphases on secondary data from various literatures and industrial reports. The selection of this methodological orientation is also stemmed from the usability of qualitative research to be implemented in both academic fields and its prominent usage in market research (Denzin and Lincoln, 2011); a similar topic with this dissertation’s aim, making it rather suitable to assess the issues in Chinese automobile market.

The tendencies of the qualitative method to investigate the concept of ‘why’ and ‘how’ in the decision making process (Patton, 2002) is also expected to be capable of presenting deeper understanding on the field of Chinese consumer behaviours for automobile products in China and the strategic orientation currently adopted by Audi.

5.3 Data collection and data analysis methodology

The selection of secondary data as the main data source is selected based on the considerations that the researcher is not currently residing in China, and that there are limitations on time and money to conduct thorough primary research that could cover all respondents in Mainland China. This also refers to recommendations by Ghauri (2005) who suggests that the secondary data collections could enhance the time and analytical effectiveness of the research, where the time could be allocated to focus on data analyses instead.

The accessibilities of information from the internet and campus library would also be useful to enhance the practicalities in data collection processes. However, as noted by Zikmund et al. (2014) the main problem and limitation on this orientation is to ascertain the validity of the data. Therefore, the researcher would limit the selection of secondary data only for peer-reviewed sources and official news release from China, to ascertain the data’s validity.

The data analysis would be performed using the content analysis for both literatures and news articles, where the researcher would analyse the presence, meanings and relationships between words and concepts before making inferences on the messages as written in the texts. As argued by Yin (2013), reanalysing data could potentially generate new insights from previous researches and led to unexpected new discoveries. In particular, the researcher expected that this orientation could shed new lights on the existing literatures about consumer behaviours and their applicability in China, or on how the general marketing strategy theory could be implemented in real-life, especially for Audi’s case.

 

6.0 Planning and any special resources required

This gantt chart is used to help manage time to do the research, complete objective and questions, achieved each tasks in limited time since April 2015 to August 2015. The research is a very important part for a report and the reliability of data will influence the final results, so it will use a certain part of time to do the research.

Gantt Chart For Project

Time	17th, May	31st, May	17th, Jun	31st, Jun	17th, July	31st, July	17st, August
General research
Literature review
Methodology
Data collect
Data analysis
Conclusion
References
Proofreading

References

Peter C. Brinckerhoff, Mission-Based Marketing Positioning Your N

ot-for-Profit in an Increasingly Competitive World.Chichester: Wiley 2010

 

Graham J. Hooley Nigel Piercy; Brigitte Nicolaud (2008) Marketing strategy and competitive positioning. Harlow: FT Prentice Hall 2008.

 

Dennis. Caton (2013) Advertising Explained. Hoboken: Taylor and Francis 2013.

Sater, Gregory J.; Alexander, Benjamin (2011) Implementing a social media advertising strategy, Response Vol.19 (11), p.48 (1)

 

Yang jian (2012). “Why China’s auto market still has tremendous growth potential”. Auto News [online]. Available from

<http://web.b.ebscohost.com/ehost/detail/detail?sid=736a21c5-bad0-4522-90eb-b041c42558bc%40sessionmgr110&crlhashurl=login.aspx%253fdirect%253dtrue%2526scope%253dsite%2526db%253dbth%2526AN%253d76275751%2526msid%253d-427810369&hid=107&vid=0&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=76275751>

 

Audi(2015)The profile of Audi A1 [online] available from http://www.audi.cn/cn/brand/zh/models/a1/a1.html

 

Chu, W. W. (2011). How the Chinese government promoted a global automobile industry. Industrial and Corporate Change, dtr010.

 

Huo, H., Zhang, Q., He, K., Yao, Z., and Wang, M. (2012). Vehicle-use intensity in China: Current status and future trend. Energy Policy, 43, 6-16.

 

Zhang, Y. (1996). Chinese consumers’ evaluation of foreign products: the influence of culture, product types and product presentation format. European Journal of Marketing, 30(12), 50-68.

 

Huff, L., and Kelley, L. (2005). Is collectivism a liability? The impact of culture on organizational trust and customer orientation: a seven-nation study. Journal of business research, 58(1), 96-102.

 

Jiang, C. (2005). “Mianzi” Culture Promoted “Mianzi” Consumption.

 

Wong, N., and Ahuvia, A. (1998). Personal Taste and Family Face: Luxury Consumption in Confucian and Western Societies. Psychology and Marketing, 15(5), 423-441.

 

Chen, X., and Chen, C. (2004). On the Intricacies of the Chinese Guanxi: A Process Model of Guanxi Development. Asia Pacific of Management, 2

 

Ye, L., Bose, M., and Pelton, L. (2012). Dispelling the collective myth of Chinese consumers: A new generation of brand-conscious individualists. Journal of Consumer Marketing, 29(3), 190-201

 

Hu, J., Liu, X., Wang, S., and Yang, Z. (2012). The role of brand image congruity in Chinese consumers’ brand preference. Journal of Product and Brand Management, 21(1), 26-34

 

Chiu, C., Ip, C., and Silverman, A. (2012). Understanding social media in China. McKinsey Quarterly, 2(2012), 78-81.

 

Moon, K., and Blackman, D. (2014). A guide to understanding social science research for natural scientists. Conservation Biology, 28(5), 1167-1177.

 

Denzin, N. K., and Lincoln, Y. S. (2011). The SAGE Handbook of qualitative research ( 4th ed.). Los Angeles: Sage Publications.

Patton, M. Q. (2002). Qualitative research and evaluation methods. Thousand Oaks, CA: Sage Publications.

 

Ghauri, P. N. (2005). Research methods in business studies: A practical guide. Pearson Education

 

Zikmund, W., Babin, B., Carr, J., and Griffin, M. (2012). Business research methods. Cengage Learning

 

Yin, R. K. (2013). Case study research: Design and methods. Sage publications.