1. What is Smart’s competitive advantage? Its brand image? The Smart Car, made by DaimlerChrysler, offers a cost focus and focused differentiation. It brand image is very narrowly focused. Smart appeals to single people (or families with no children), who primarily do city driving and want a no frills automobile that is economical and eco-friendly. Some advantages that Smart brings to the table are as follows. First, the vehicle has an exceptional look that appeal to those who want to be unique.
Next, this very small, but roomy vehicle makes city driving and tight parking easier. Subsequently, crash testing and safety experts consider Smart as an extremely safe vehicle. Moreover, its models are very fuel efficient at 35 mpg on average. In addition, this automobile’s low exhaust emissions earned an Ultra Low Emission Vehicle (ULEV) classification. Finally, the vehicle is very economical and cost friendly. 2. Assess the U. S. market potential for the Smart. Do you think the car will be a success? Why or why not? Smart Car is economical, unique, and eco-friendly.
Generation Y (Gen Y) is a target market, which should be pursued because Gen Y’s, those born from 1977 to 1994 (1980-1995, depending on who you ask), is demographically too large to ignore. In 2009, the US Millennials made up 25% of the population, which already exceeds the size of the Baby Boomers’ buying power, spending over $200 billion, annually. In addition, from a behavioral sense, the Gen Ys are seen as more frequent purchasers, even for vehicles. This is due to their technical shrewdness and their brand conscious ways.
If Smart continues with their current strategy, they will not be a success in the U. S. market. First, one of the major reasons that DaimlerChrysler moved into the U. S. market was out of desperation, since they were not as successful in the European market as they wanted, being rated in the bottom five in 2006. With all of the bad publicity, Gen Ys were already skeptical of the Smart Car. Next, while Smart differentiated their product some for the U. S. market, it will not be enough for our Gen Ys. From a psychological sense, this product s not what they want. Gen Ys believed they are entitled enjoy life first and work second, due to being raised by the Baby-Boomers, who taught them that could do and be anything. Therefore, anything they buy needs to be an experience or adventure. Moreover, they have the “Have it your way! ” expectations. So, making a no frills car (similar to flying Ryan Air), which means one starts with a very basic model and then has to pay for basic amenities, like air-conditioning, stereos…, does not appeal to this generation.
Next, while Smart is economical, great for driving in the city, and can drive up to 90 mph, the vehicle rides very rough. This takes away from the Gen Y’s need for adventure and enjoying the moment. Finally, this generation is unique, but there are many similarities in the way they operate. While Smart fits the bill for being eco-friendly and unique, it does not come even close to matching the other twelve items listed. 3. Identify other target markets into which you would introduce this car. What sequence of countries would you recommend for introduction?
Back in 2007, with the Smart Car being so economical and appropriate for city driving, I would recommend expanding the market in England and introducing it to Japan in that order, rather than going to the US. The two countries are known for their large city populations with big city driving. In 2002, England’s city population was over 30 million people, and Japan was over 50 million. Also, while Smart would have to differential their product to accommodate the countries, they would stay quite similar for both markets have similar vehicle specifications, including the requirement for right-hand drive automobiles.
In addition, both market are similar that want small economical vehicles for their crazy city driving. While importing vehicle to England is much simpler, Japan has free trade agreements with the European Union. Finally, they would both take interest in the newly developed electric car, called the Smart EV. Once they are back in their “happy place”, Smart should entertain going to developing countries that require vehicle as they introduce themselves. No frills vehicles are perfect for meeting the expectations of this market.
In addition, since the vehicles are so simple to assemble, they would want to entertain the idea of manufacturing them within the country once they are comfortable that the market is sound. If done as a joint venture, it would stimulate economy within the country and assist in “developing” them, but eventually, it would also raise the need/want for more automobiles. Of course there are many factors they would have to be accessed (to include economic and government stability) at the point of the actual decision, but regardless should be at least entertained. 4. Review Case 7-2 on Honda Element and Toyota Scion.
Are these models targeting the same consumers as Smart? In view of the Japanese carmakers’ success with these brands, do you think the Smart’s U. S. launch is too late? The Smart did try to hit the same market for uniqueness and economy. However, the Element and Scion had more emphasis on luxury, which is something the Smart was not. The Smart car seemed to compete more with the Mini Cooper, which was introduced in the early 60s without success, but then was revived in the 21st Century as not only an economical and eco-friendly vehicle but also as a sport and luxury item, which appeals to the Gen Ys.
Shortly after Mini’s success, Smart started to enter the market in 2002 with teaser introductions, but did not announce coming into the market until 2006. However, with delaying their entry into the market, bad publicity following them from Europe, and only being an economic and environmentally friendly vehicle, they could not compare to vehicles with establish reputations like Element, Scion, and Cooper. Therefore, coming into the market late was a major setback for the U.
S. Smart launch. 5. Assess United Auto Group’s marketing strategy for the Smart. Do you think the strategy will be effective in reaching the niche market for minicars? Smart has been very successful. In fact, their overall sales were up 24% in 2010. United Auto Group has a good strategy for marketing to the economical minicars niche. To me if the product does not evolve to the luxury and high tech need wants of the Gen Ys, they will never be the top of the heap.