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GROWTH OF SMALL BUSINESSES IN AN EMPIRE OF HYPERCARS

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GROWTH OF SMALL BUSINESSES IN AN EMPIRE OF HYPERCARS

CHAPTER 1: INTRODUCTION

 

At one point of time, the automotive industry was far simpler with only few segments of automobiles launched in the market. Coupes, hatchbacks, saloons, sports, estates and off-roaders were the only few automobile segments during that time. But times havereally changed since then, haven’t they?  From a family station wagon to high-end Super cars, the automotive industry has constantly been revolutionising its technology over time and is seeing a huge growth compared to the other industries.

 

 

Indeed, there is no end to innovation.The year 2013 marked the drastic change wherein a new segment termed Hyper carstook the market by storm and have now become the pinnacle of the automotive industry. Ferrari, Lamborghini, McLaren, etc. are continuouslyinvesting thousands of dollars in R&D to launchvarious Hyper cars in the market.In 2016, nearly seven different Hyper cars were launched, each, not less than a million dollars (Supercar World, n.d). In addition, due to theirstrong brand values and reputed racing genes, these automotive giants have taken over a large part of the market share in the automotive industry globally, with, Bentley covering the highest at 37% of the market share, followed by Ferrari capturing 24% andLamborghini standing third at 11% in the same year(Munoz, 2017).

Here’s a question; with a highly competitive ultra-luxuriousniche market such as this, do small Hyper car manufacturers stand a chance? W Motors, Rimac Automobili and Koenigsegg still cover a very small part of the market share in spite of introducing many rare, tailor-made,high performance Hyper cars such as Lykan HyperSport, Rimac Concept: One, Koenigsegg Regera, etc. to stand out in the market (McCarthy, 2017).

To add to it, since there are so many companies entering this market and launching various Hyper cars, potential consumers have now become indifferent while purchasing a Hyper car. In other words, it has become prerequisite for automotive manufacturers to adoptunique and highly appealing promotional strategies in order to capture the audience’s attention.One way to do this is by investing in digital marketing platforms such as social media, emails, search engine optimization, etc. As a result, not only has the technology come a long way, but also the techniques used to advertise these Hyper cars to their potential customers have evolved, establishing new promotional techniques in the era of highly advanced Hyper cars market (McCarthy, 2017).

To sum it up,the main reason for the selection of this topic is to analyse whether Porter’s Generic Competitive strategy will help these small Hyper car manufacturers compete and differentiate among themselves in this growing automotive segment. Moreover, what impact will the Segmentation, Targeting, and Positioning Model and the 4 Ps of Marketing Mix Model have on the sales of these small Hyper car manufacturers? This is the underlying conundrum that will be aimed to resolve in this research paper

1.1       Research Questions   

1.1.1    Primary Research Questions:

 

How is Small Businesses in the automotive industry working their way in comparison to Renowned Businesses in relation to their marketing industry?

 

 

·         How will Porter’s Generic Competitive strategy assist small Hyper car manufacturers to compete against the renowned automotive giants?

·         What advantage will the small Hyper car manufacturers achieve when they use the Resource-Based View framework to differentiate themselves from each other?

·         What impact will the STP Model have on the sales of the small Hyper car manufacturers?

·         What benefits will the small Hyper car manufacturers accomplish while using the 4 Ps of Marketing Mix model?

 1.1.2.    Secondary Research Questions:  

·         What is the difference between Super cars and Hyper cars?

·         Which marketing strategies can prevent flipping of cars?  

·         What is the differences between the small businesses and the renowned businesses in the Hyper-car market?

 1.2.    Objectives

 

The proposed study will look at the ways in which marketing strategies are carried out by smallbusinesses in niche product segment like the Hyper-car market and will also set the benchmark for the difference between Hyper-car and Supercar.This research will help to understand, if small businesses in niche markets such as the Hyper-carmarket in the automotive industry stand a chance against renowned manufacturers. It will further help:

 

 

·         To explore how Porter’s Generic Competitive strategy will assist small Hyper car manufacturers to compete against the renowned automotive giants.

·         To discover the advantages that the small Hyper car manufacturers will achieve when they use the Resource-Based View framework to differentiate themselves from each other.

·         To understand the impact that the STP Model will have on the sales of the small Hyper car manufacturers.

·         To analyse the benefits that the small Hyper car manufacturers will accomplish while using the 4 Ps of Marketing Mix model.

Under this broader umbrella, the study aims to meet the following objective

1.3       Target Audience

 

  • Car enthusiasts
    • Start-up and small companies in the exclusive car industry.
  • Small companies in the luxury automotive industry.
  • Small business entrepreneurs.

 1.4       Scope and limitations

 

1.4.1    Scope

 

The dissertation aims at addressing specific challenges or pre-conceptions that renowned manufacturers can overthrow a small business. The digital transformation and networking has built by small businesses is far more advanced as compared to already developed manufacturers and this motivates the small businesses to use all their sources to produce the best products compared to the developed manufacturers. The semi-structured interviews with the small businesses will help understand the challenges faced in relation to the niche market and how they overcome their problems in comparison to their competitors. Through careful analysis we will be able to gain valuable insights into why the adoption of certain marketing strategies have been taken into consideration in relation to the industry and its exclusive customers.

1.4.2    Limitations

            Limited peer content available on Hyper-car industry and its advertising strategies.

            Semi-structured interviews with marketing practitioners in the automotive industry was a challenge considering their busy work schedule and with constant launches in the automotive calendar.

            Traveling to the locations was not a financial option for most of the companies apart from Rimac Automobili in Croatia.

            The industrial data collection has taken into consideration a few influencers in the automotive industry who have different lifestyles and opinions of multiple influencers was not able to be conducted with their working schedule. This approach would have helped to understand the consumer pattern of what products they desire within the niche market.

 1.5       Major Contributions of the Dissertation

 

Based on the research questions and the objectives, this dissertation provides readers with comprehensive insight on the difference between Hyper-cars and Supercars, the core marketing concepts and the two most imperative models in marketing; the Segmentation, Targeting and Positioning (STP) model and the Four P’s of Marketing Mix. For a clearer justification, these models are applied to the small and large Hyper-car manufacturers to understand the various marketing strategies and tools adopted by them and how they are different from each other.

 

 

In addition, as the Hyper-car market is highly competitive, the Porter’s Generic Competitive Strategy and the Resource-Based View (RBV) model are used to understand the competitive strategies adopted by small Hyper-car manufacturers in order to differentiate themselves from each other. And finally, with the problem of flipping cars arising, this dissertation offers readers with viable solutions to the problem.

1.6       Rationale

 

This dissertation will be useful in understanding that in the modern era of globalisation, the firms can avail competitive advantage, irrespective of their history and size, based solely on the uniqueness of the attributes that they can offer. Hyper-car market is considered to be an ultra-premium market, with the industry leaders spending billions of dollars on the product development and promotions. After completing this dissertation, it can be revealed whether the small firms can compete with the big giants for a share in this highly lucrative business Market and particularly which are tools that they can avail to survive and excel in this limited market segment, with immense profit potential. This research will be highly useful in analysing the ways through the small firms can compete with the big companies in a niche market. It was a general notion that only the big companies have the resources and capability to operate for the premium products or in the niche market. But with the facilitation of the cost-effective technologies and effective marketing tools, the small firms and start-ups are also emerging in the niche market segments, which had been exclusive to the big companies till the last decade. 

1.7       Overview of the Dissertation

 

Chapter 1: Introduction

 

 

This chapter provides a detailed explanation of the background of the topic and the problems at hand. Based on these problems, various research questions have been brought to the reader’s mind which are met by the objectives mentioned in this chapter. Finally, the major contributions of this dissertation are pointed out in this chapter for readers to get a clear framework of the topic.

Chapter 2: Literature Review

The Literature Review chapter gives deeper insight on the marketing models and competitive strategies that are used in this paper and their relevance to the investigation of the topic. To substantiate the analysis further, a detailed explanation of the definition of the topic, the core marketing concepts, the marketing strategies adopted by renowned automotive manufacturers and the problems in the Hyper-car market are included in this chapter.

Chapter 3: Methodology

Outlined in this section is an overview of different research philosophies, details of the research method chosen, its justification for its choice, sample data and ethical considerations. It was important for the researcher to carefully consider the various research methods that could have been taken into account in order to decipher which method would be most suited in completing the overall aims of the study.

Chapter 4: Analysis of Findings

This chapter presents the overall data that was obtained from various interview processes. The findings are based on the information obtained from the companies themselves who willingly participated and provided the insightful data which have all been provided by the researcher.

Chapter 5: Discussion

In this section, a critical reflection by the researcher is done based on the insightful information obtained by the participants from chapter 4. The findings are outlined and then supported by points in the literature review. New information is also presented and recommendations for future research is discussed.

Chapter 6: Conclusion and Recommendations

Chapter 6 discusses the overall findings from the primary and secondary research, highlights the important aspects of the phenomena being studied, and provides recommendations for future studies in the similar field.

 CHAPTER 2: Literature Review

2.1 Understanding the market

2.1.1 The Hyper-car market

 

The automotive industry has been undoubtedly one of the biggest and ever-evolving businesses since the industrial revolution. From just being a subject of commutation to being a symbol of status, the cars have evolved over years to meet the changing needs of the consumers. In the modern era of globalisation, the automotive business firms compete on a worldwide platform delivering to the customer a wide array of car models, differentiated by segment and type based on the diversified requirements of the customers. These classes vary from the compact or mini cars, to the coupes or sedans, SUV based on utility; while from street cars to sportscars and super cars based on the performance. Till the last decade, the supercars were considered to be the niche and expensive segment of the cars, catering to performance savvy needs of the rich and elite automotive enthusiasts. However, with the increasing concern of the automotive users towards the environmental impacts, the automaker companies of high performance and luxurious cars models started investing in their Research & Development divisions to develop models which will cater to the customers’ needs for performance, while being environment friendly and futuristic at the same time. Thus, came the era of Hyper-cars. These high-speed vehicles have been designed to operate on the advanced hybrid technology, minimising the emission levels compared to its cheaper siblings (Research and Markets, 2017).

 

The Hyper-cars refer to the premium car models, built with the combination of aerodynamic design, low drag body chassis, ultra-weight light and alternative energy source. The energy sources are the electric motor or hydrogen fuel cells, widely known for improved mileage and efficiency. The integration of the energy efficient systems and automotive technologies has been the prime focus of the automotive firms, contributing to the development of various cars, having high performance and efficiency ratios at the same time. This phenomenon has led to the growth of the automotive industry. While the entire automotive market is expected to grow at a steady pace, the Hyper-car market is forecasted to grow at an accelerated rate in the coming decade. America (specifically north) is expected to have the largest market share of the increasing automotive market due to early adoption of the Hyper-cars, succeed by the European nations, and the Asia pacific, despite being the late adopter, will be having the fastest growing Hyper-car market (Research and Markets, 2017).

2.1.2    Hyper-car VS SuperCar. What’s the difference?

The main question that leaves many people lost for words is what exactly is a Hyper-car? How is it different compared to SuperCars? The development of the Hyper-car segment has caused a huge rift between the two categories of SuperCars and Hyper-cars. People believe that a Lamborghini or a basic Ferrari is termed as a Hyper-car. Well this study will clear out this misbelief and help readers understand the true meaning of Hyper-cars by providing a benchmark that separates a Hyper-car from a SuperCar.

Previous generations of SuperCars such as the McLaren F1, Ferrari Enzo, Porsche 959, etc. have set the boundaries of cutting edge technology in the nineties and were the fastest during their time (Campbell, n.d.). In today’s world, these SuperCars are known for their iconic stance and have gone up in value due to their rarity. But, the car that opened the automotive industry to new strides was the Bugatti Veyron in 2005 (Sorokanich, 2016). With its price tag of more than a million dollars, it was the first Hyper-car to set the record of the highest value production, street legal automobile. As a result, many automotive manufacturers have taken advantage of this new segment and have developed their class of road legal Hyper-cars with innovative technology from their racing pedigrees (Shukla, 2016).

While there is no exact definition of Hyper-cars, one can describe it as “rockets on four wheels with sleek bodies” (Dichoso, 2017). Alex Roy, an automotive journalist, has provided his insight of what the Hyper-car is and according to him, it is simply “an expression of the automotive form of tomorrow being developed today” (Sorokanich, 2016).

Chris Harris, a well-known automotive journalist, mentioned that Hyper-cars are expensive to produce. This is because, Hyper-car manufacturers have to combine intellect and ego to produce a brilliant performance of art, which can only be viewed by many but owned by the lucky few. He went on to say that Hyper-cars are magnetic objects which are extremely attractive, just like space shuttles and fighter jets, and they represent the ultimate expression of what humans can do with the materials that they dig out from the ground (Sorokanich, 2016).

In conclusion, Hyper-cars are known for their forward line of technology, exquisite design and are extremely expensive. However, due to the advancement of SuperCars and their high-end performance, the qualifications for a Hyper-car status have become stricter. As a result, with the help of this background on the difference between Hyper-cars and SuperCars, a clearer investigation can be provided in this dissertation on a benchmark that separates the two. 

2.1.3 Segment of Hyper-Car Manufacturers

 

According to the Hyper-CarsMarket report byResearch and Markets (2017), the worldwide Hyper-cars market is anticipated to increase at a CAGR of above 37% by the year 2021. The increasing concern of the automotive manufacturers towards developing Hyper-cars is clearly depicted from the intensifying investments of the automotive firms (both small and large) into their R&D departments. They are not only concentrating over the performance curve of their models but also focussing towards embedding integrated technologies to develop newer and advanced models which will meet the crucial requirements of the Hyper-car consumers and global automotive enthusiasts. While the Hyper-car segment consists of niche class of customers, who are willing to pay more for the advanced systems and upgraded technologies in their luxurious vehicles.

 

The Hyper-car manufacturing companies can be be divided into two primary segments- one is the well-established and renowned conglomerates like Ferrari, Bugatti, McLaren, Koenigsegg, Lamborghini, etc, while the other class refers to the small firms like Zenvo, Hennessey Performance Engineering (HPE), W Motors, Vanda, Rimac etc (Research and Markets, 2017). The former segment consists of the companies with decades of experience and excellence in the global automotive market, having numerous models serving to the sportscars, supercar and Hyper-carenthusiasts, while the later consist of the startups with technology breakthroughs in the Hyper-cars market. The former class of companies is known to have many models while the latter segment of companies has one or two models (that too only in the Hyper-cars segment). The list below rationalises the two segments of companies in the Hyper-cars segment.

2.2.   Understanding Core Marketing Concepts:

 

In modern era of globalisation, the increasing number of companies from all across the globe competition among themselves for the market share has resulted in intensified level of competition. Therefore, it is quite essential that the companies need to make proper use of the tools available form promoting and marketing their products into the consumer market, and in such a way that the products are able to cater to the needs of the customer, which will result in maximum number of sales. marketing is the vital tool that will bring about prosperity for a company. But before creating an advertisement, understanding the core marketing concepts is essential as it forms the basis of any marketing strategy. The following is an in-depth explanation of the core marketing concepts:

 

 

Marketing:

According to the American Marketing Association, “marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large” (AMA, 2013). In a Hyper-car market, these marketing techniques include exhibitions, email, social media, etc.

Consumer’s Needs, Wants and Demands:

Understanding and examining the needs, wants and demands of the consumers is a compulsion for all organizations. Being in a luxury Hyper-car market however, a lot of other factors of people’s behaviour such as their attitudes, lifestyle, values, etc. should also be taken into consideration since the market is subject to a few high-profile (niche) customers.

As Kotler (2012) points out, a need is something which has and will always exist within consumers. In the aspect of luxury marketing, consumer’s needs are based on reliability and customer service which must be provided by the manufacturers.

The minute the consumer’s individual personality, influences in society or culture begin to shape their need, then these needs turn out to become wants (Kotler, 2012). And finally, when a potential client is willing and able to pay for his/her want, it ends up becoming a demand. The customers of Hyper cars are more than willing to pay premium amount for owning the limited-edition cars, which is not available in abundance for the automotive enthusiasts.  These customers desire to have possession of items, which are not easily available in the market and which will reveal the elite class of their owners.

Products and Services:

A product is an item that can be accessible to a customer to satisfy his/her demand. It can range from a tangible to a non-tangible item. Any additional add-ons or benefits that come with the product such as warranty, is considered as services. (Kotler, 2012). The Hyper-car models are themselves quite unique and limited.

Customer Value, Satisfaction and Total Quality Management:

The usefulness achieved by a consumer after purchasing a product is known as customer value. The purpose of driving a Hyper-car on the streets, rather than only on race tracks, has proved to be quite valuable for customers.Previously it has been observed that the Hyper-cars were the track testing tools or the speed testing machines performing for a lap run in the Nevada desert or aeroplane runways. However, in the recent times, people are getting interested in hanging out with their premium cars in the city streets and highways, revealing their financial status and their nature as performance lover automotive enthusiasts.

On delivering a high value to consumers and surpassing their expectations, a customer obtains satisfaction. In order to maintain customer satisfaction, a repetitious enhancement in the quality of the products, services and marketing processes is known as Total Quality Management (TQM) (Kotler, 2012)

All in all, it is imperative to fully understand the above marketing concepts and to thoroughly research on these aspects in a Hyper-car market as it will bring about prosperity for the Hyper-car producers.

From the above section, it is evident that the Hyper-car segment is a premium segment, with all the characteristics of the niche market, having certain vital characteristics, which results in their pricing being different from that of the larger markets.  

2.3.    Marketing Models

2.3.1.    Segmentation, Targeting and Positioning (STP) Model:

 

In a diverse world filled with billions of consumers, there are only a selected number of people who are truly interested in purchasing a product. To reach out to those people, the STP model can be used. This model is a “value creation and delivery sequence” model as it aims to help marketers segment the potential consumers from the population, target them and focus on marketing the products only to them (Toften and Hammervoll, 2013). Thus, the model involves three processes, namely,

 

1.      Segmentation

The process of partitioning the market based on certain criteria, in such a way that within the narrowed groups, the consumers have similar characteristics, is known as segmentation (Toften and Hammervoll, 2013). The purpose of this market segmentation is to help companies understand the precise needs and interests of their potential consumers (Morritt and Weinstein, 2012). Table 1 shows the various segmentation categories that companies can use to develop multiple segment profiles:

In case of the Hyper-car market, the consumers belong to the elite or upper premium class, consisting of the billionaires with expensive tastes and super rich lifestyles, businessmen or celebrities by profession, residing at exotic locations. The customers have no financial restrictions, when it comes to their requirements, that they desire to possess. These customers hardly care for the price tag. The Hyper-cars are one of the most expensive models of the automotive industry, desired by the rich car lovers. They desire their car to be the best, unique looking and most importantly very limited in availability, so that their vehicle models not common (Featherstone, 2013).  

2.      Targeting

After segmenting the market, the process of assessing each segment in the market and focussing on only one or more essential segments is called targeting (Kotler and Keller,2012). With the help of these target markets, companies can cater to the right audienc



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