ford hybrid case
TRANSCRIPT
FORD HYBRID Market strategy
Matthew Lam Alice Lin Dennis Jiang Sara Omar
kThe problem
01.
02.
Ford requires 10-year forecast in unit sales
of the total hybrid market in the U.S. to
assess Way Forward Plan - 250,000 cars
by 2010
Ford needs a short- and long-term strategy
to optimize position and effectively
respond to forecast
kFord hybrid situational analysis
Product Characteristics
- New product category
- Environmental Shift
- Conspicuous consumption
- Government regulations
- Strong Competitor Landscape
(Toyota, Honda, Lexus)
Environmental Analysis
- Combines diesel engine with
electric motor
- $3000 higher price point
- 15% improvement in gas
mileage
- Two models: Ford Mariner and
Ford Escape
7.98%1.26%
Honda Insight
Toyota Prius
Honda Civic
Honda Accord
Toyota Camry
Toyota Highlander
Lexus RX400h
Lexus GS450h
Ford Escape
Ford Mariner
Ford’s Total
Market Share9.84%
Toyota’s Total
Market Share67.21%
2006 TOTAL UNIT SALES: 252,636
Honda’s Total
Market Share14.87%
Lexus’ Total
Market Share8.69%
kFord hybrid MARKET SHARE
Why aren't people buying?
01.
02.
03.
04.
05.
06.
07.
New product category
High price point
Toyota Prius is the leader
Escape and Mariner
similar MPG EPA
Psychology: delay of
gratification
Tax incentive unsustained
and not valued
Fuel Prices
k
Pessimistic Scenario
SCENARIO 1 : ANTI -GREEN REVOLUTION
01.
02.
03.
Population shift into suburban
lifestyle
Low fuel prices
Green symbol viewed as low value
04.Competitors innovate faster than
Ford
k
Neutral Scenario
SCENARIO 2 : status quo
01.
02.
03.
No innovative developments
Eco-friendly hybrid remains luxury
good but with more mass adoption
No changes in fuel price
04. No additional government regulations
k
Optimistic Scenario
SCENARIO 3: hybrid heaven
01.
02.
03.
Aging population shift increases
hybrid market size
Fuel prices rise
Green revolution booms
04.Government regulations increase
hybrid demand
05.Ford innovative advances
increase competitive advantage
• Tool for forecasting time-path adoption of new products and new product categories within a target population
• Two modes: • Analogy
• Past Data
• Parameters: • p – “innovation” component
• q – “word-of-mouth” component
kBass model
kANALOGs used for bass model
01. 02. 03. 04.
Optimistic Scenario
Ford Hybrid Projected
Adoption Rate:
2010: 9.06%
2016: 17.46%
Electronic Fuel
InjectionSolar Energy
Realistic Scenario
Ford Hybrid Projected
Adoption Rate:
2010: 8.70%
2016: 12.07%
Anti-Lock
Braking System
Realistic Scenario
Ford Hybrid Projected
Adoption Rate:
2010: 2.10%
2016: 4.75%
Diesel Car
Pessimistic Scenario
Ford Hybrid Projected
Adoption Rate:
2010: 1.75%
2016: 5.58%
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EFI Solar Diesel ABS
kFord hybrid analog comparisons
Acquired a range of forecasts
Pessimistic Scenario Realistic Scenario Optimistic Scenario
kScenario analysis
243822
1009615 1050960
783773
1991445
2880900
0
500000
1000000
1500000
2000000
2500000
3000000
Pessimistic Realistic Optimistic
2010 2016
Ford’s Problem:
• Ford’s projections
are unrealistic
• Current marketing
strategy not viable
kFord hybrid : The Problem
Current state
Consumer Profile:
- Medium income consumer (Affordable Escape)
- High income consumer (Premium Mariner)
Product:
- 6 years of brand presence
- Cannibalization
- Market share (Escape 8.0%; Mariner 1.25%)
Product:
- Differentiated product lines
- Stable product category
- Captivate – conspicuous consumption
- Target market share: (Escape: 20%; Mariner:
10%)
Consumer Profile:
- High income, educated, older consumer
- Innovative, luxury status
Ideal state
Achieving the Ideal State
0
10
20
30
40
50
60
70
0 20000 40000 60000 80000
Com
bin
ed E
PA
MP
G
Manufacturer Suggested Retail Price (USD)
Insight
Prius
Civic
Accord
Camry
Highlander
RX400h
GS450h
Escape
Mariner
• Short Term Strategy
• Marketing Mix for
Increasing Brand
Awareness and Adoption
• Cost Cutting
• Hedging
• Lobbying
• Long Term Strategy
• Increase capacity
• Invest in R&D
• Lobbying
kFord hybrid : The Problem
kFord hybrid Marketing mix strategy
PRODUCT PRICING
Ford Escape
Fuel Economy: ~30 mpg
Car Type: SUV
Horsepower: 153 hp
Mercury Mariner
Fuel Economy: ~30 mpg
Car Type: SUV
Horsepower: 200 hp
Ford Escape Pricing:
$18,000 – $20,000
“Affordable Hybrid”
The luxury SUV both in
appearance, functionality,
and efficiency – the
premium hybrid for the
educated consumer
Comfortable, large
interior space, durable,
great affordable SUV for
young starting families
Mercury Mariner Pricing:
$25,000 - $35,000
“Premium Hybrid”
WHERE?
• Target marketing efforts in states
where:
• Tax credits are available
• Utah, Illinois, Colorado
• Sales Tax Exemptions
• Connecticut and New
Mexico
• Tight environmental
regulations
• California (CARB)
HOW?
• TV Advertisements
• Viral power of celebrities
(Mariner)
• Print Advertising
• Forbes, Time, Motor-Trend
• “Rental” test drives
• Interactive advertising
• Blogger Advertising
• Consumer Education Campaigns
kFord hybrid Marketing mix strategy
kShort-term strategy
Hedging01
S- Investing in Flexible
Manufacturing
- Invest in other
Renewables
- Lean/Six-sigma
production
- Overhead Cost
Reduction
- Tax Credits in more
States
- Emission standards
- Fuel Economy
Standards
02 Cost-Cutting 03 Lobbying
kLong -term strategy
- Purchasing more
production facilities
- Increasing production
efficiency
- Tax Credits in more
States
- Emission standards
- Fuel Economy
Standards
- Push for more optimal
positioning (increase
MPG through R&D)
01 Enhancing Position Enhancing Capacity02 03 Lobbying
kFord hybrid monitoring outcomes
Tracking Success – Key Performance Indicators
01.
02.
03.
04.
Ford’s Market Share in Hybrid Market
Overall Hybrid Market Growth year over year
Market Research on Consumer Perception
Unit Sales per State
k
kFord hybrid value proposition
For the conscientious consumer, Ford Hybrid vehicles are the
future of personal cars, offering you the freedom to go the
distance you want without worrying about the mileage. Ford
will take care of transportation peace of mind, so you can focus
on the more important things to your life.
“
”
FORD HYBRID
QUESTIONS?
APPENDIXCar Model Base MSRP
(USD)
Honda Insight $19,330
Toyota Prius $21,725
Honda Civic Hybrid $22,150
Honda Accord Hybrid $30,990
Toyota Camry Hybrid $26,200
Toyota Highlander Hybrid
$33,030
Lexus RX400H $44,660
Lexus GS450H $54,900
Ford Escape Hybrid $26,900
Ford Mercury Mariner Hybrid
$29,225
Base MSRP of various hybrid vehicles (2006) from AutoTrader.com
APPENDIXDemographic •traditional, environmentally friendly consumers
•high level of education
•more likely female
•average age: 50
•average income $100,000/yr (vs $85,00 for average buyer)
•long-term investment in vehicle (not buyers who frequently switch vehicles; psychographic:
invest now, save later)
•increased road traffic - data in case = 800M used worldwide/240M in US -> 1B worldwide in
2020
•hybrid customers less price-sensitive to environmentally-friendly products
•more pessimistic of future fuel prices than average customer
Economic •Manufacturing costs of hybrid vehicle relatively high compared to gasoline-only vehicles
•success of hybrid dependent on increasing oil prices - middle/east situation & depleting oil
reserves/new reserves
•Oil prices between 2000-2006 (find data), what’s the trend?
•price range of hybrid products vs average car price
•“@$2.50 price per gallon of gas, breakeven point btwn hybrid and regular gasoline car can occur
after 50,000 miles of driving’ (p4)
•high initial cost; consumer barrier
APPENDIXEcological •want to reduce vehicle pollution
• in particular, US was single largest polluter in the world in 1999 (25% of
worldwide emissions)
•overall drive fewer miles on average
•counterintuitive: potential environmental issues wrt disposal of rechargeable batteries in
hybrid cars
•Competition: clean fuels for non-hybrid cars
Political/Legal •Tax incentives for ‘cleaner’ transportation vs incentives to use public transportation
•CAFE regulation (increased min mpg)
•Federal government begins legislating for emissions control (greater incentive to
purchase hybrid) - v
•Greater dependence on foreign oil (increase from 8% - 52%) = higher oil prices
•California Air Resources Board mandate - 10% of vehicles for sale in California must be
zero-emission vehicles
•Locations to charge hybrid cars
•(EPACT) energy policy act of 2005 - consumers and businesses get federal tax credits (in
effect 2007); between $400-$2500 per vehicle
•Solo use of high occupancy lanes (Georgia, florida, arizona)
•tax credits (utah, illinois colorado)
•exemption from sales tax on car purchase (connecticut, new mexico)
APPENDIXSocial •word-of-mouth phenomenon
•conspicuous consumption
•social perception of hybrid cars: form, function, luxury, status, intelligence
•lack of awareness on how to take advantage of hybrid cars (improved gas mileage only if driver
has good habits)
•unclear whether consumers were as committed as the state and federal government in terms of
reducing gasoline consumption
•Consumers ranked functionality, safety, and price over gas mileage (check sources for this one)
Technological •how long do hybrid cars last? (product life cycle) vs. average vehicle
•convenience of maintenance and replacement (parts)
•improved oil extraction methods
•decision to make 100% gas-electric hybrid vs fully electric, type of fuel used eg hydrogen
•advantage of hybrid cars:
• high mileage if utilized properly = cost-effective
• practical for long trips
•disadvantage:
• slower than diesel-only cars
• less efficient internal combustion engine
APPENDIXStrengths (internal)
•Way Forward Plan - restructuring operations to
reduce fixed costs and optimize profits
Weaknesses (Internal)
•Not very differentiated from competitors in
terms of average mpg and average price
therefore losing market share
Opportunities (external)
•Rising fuel prices is making hybrid vehicles
more appealing to the consumer
•CAFE regulations raises mileage requirements
over 35 mpg
Threats (external)
•Hybrid market highly dominated by Toyota
Prius and Honda
•Environmentally friendly products appeal to
high-income consumers but the hype dies
quickly. Hybrid cars are $3,000 more expensive
than regular cars.
Upcoming Competitors:
1.Gas electric hybrid
2.pure electric cars
3.fuel cell cars
4.E85, Clean diesel, natural gas (clean fuels for
non-hybrid cars)
SWOT ANALYSIS