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© Copyright IBM Corporation 2003
China Sharpening the Vision
Tobin Alexander - Vice President IBM Global Automotive, Asia-Pacific Operations
© Copyright IBM Corporation 2005
2002 2003
Car Sales Up 75%
2003 – Exponential Growth
© Copyright IBM Corporation 2003
What a Difference A Year Makes!
© Copyright IBM Corporation 2005
2002 2003 2004
75%
15%
2004 Sales $2.3 million
2004 – Sales Up Only 15%
© Copyright IBM Corporation 2005
Declining Sales
Price Cutting
Profit Margins
Declining Sales
Profit Margins
Price Cutting
© Copyright IBM Corporation 2003
Why the Drastic Change?
© Copyright IBM Corporation 2005
1 The ratio of private car buyers to fleets has increased much faster than anticipated
2 Chinese economic policies have also impacted the market
3 Competition increased substantially
Four Fundamental Reasons
4 Steel prices increased over 40%
© Copyright IBM Corporation 2003
How Do We Respond?
© Copyright IBM Corporation 2005
Developed Markets vs. China
In Developed Markets: vs. In China:
Repeat Buyers First Time Buyers
Price reductions or cash incentives
stimulate demand
Price reductions delay purchases
© Copyright IBM Corporation 2005
The answer lies in the
forward value chain
© Copyright IBM Corporation 2005
Attract and Retain New Buyers
Invest in marketing, advertising and brand
development
Leverage warranty offerings to reduce cost of vehicle ownership
Reorganize sales and marketing organizations
Provide a complete ownership experience
© Copyright IBM Corporation 2005
Manufacturers Can’t Do It Alone
ManufacturerManufacturer
CustomerCustomer
Dealer and Service Network
Dealer and Service Network
© Copyright IBM Corporation 2005
Develop Creative Finance Options
China DevelopedMarkets
Cars Financed
20%80%
© Copyright IBM Corporation 2005
Conclusion: From Vision to Execution
Rethink and restructure sales, marketing, distribution, and after sales strategies and processes
Target messages to increasingly segmented markets
Pay more attention to the individual customer
Provide financing services unique to China
Provide best-in-class dealer sales and service
© Copyright IBM Corporation 2005
Companies that respond quickly will win in this market
Companies that respond quickly will win in this market